This may be one battle Google can’t win. Surprise! Google can’t defy gravity after all. After beating its competitors to become the dominant search engine, after growing into the biggest force on the Internet, after expanding to become a major player in mobile phones, the economy has finally slowed Google’s growth.
This past January, Google announced it was laying off 100 employees in its human resources division. In March, it cut another 200 employees in sales and marketing, followed by 300 workers at its DoubleClick division. These cuts come on top of earlier reports that the company was terminating several hundred contract workers. Google also announced the closure of its print and radio advertising divisions and the shutdown of several online applications such as Google Notebook, Jaiku, and Google Catalog Search.
It’s clear that Google is feeling the impact of the recession and doing all it can to drive up revenue while driving down costs. This comes as no surprise to anyone working with Google on a regular basis. Google’s agency team has been calling SEM agencies to discuss how specific clients could increase their AdWords spending. These efforts have extended to the point where even small agencies are getting calls. The message has clearly gone out to all Googlers — prove that your job is making money for the company. It is too early to know how much the recession will impact Google. So far, layoffs affect a small portion of its 20,200 employees. If the economy finds bottom soon, things may settle. But if the economy continues to slide and AdWords revenue declines further, it could force dramatic changes.
Google has always been a happy company. You notice this energy and optimism anytime you deal with employees, but it’s easy to be happy when revenues are growing and employee perks include everything from massages to on-site doctors. As anyone who has survived a corporate layoff can tell you, when companies cut workers, corporate culture is one of the biggest casualties. Layoffs trigger shock, insecurity, and managerial distrust among surviving workers. Energy and optimism disappear literally overnight. Culture change may have worse consequences for Google than other companies. Famously freewheeling, unfocused, and engineering-oriented, Google has always been proud not to have a typical corporate face. But the recession and CFO Patrick Pichette may force an end some of its quirkier practices.
Most significantly, layoffs may threaten Google’s much-admired 20% Time policy, where engineers have one day each week to pursue personal projects. Gmail, Google News, AdSense, and Orkut all began as 20% Time projects. Google estimates half its new product launches originate as 20% Time projects. This may be a brilliant policy, but Google can afford it only because of the huge influx of AdWords cash. Can 20% Time be maintained if layoffs reach into the engineering team? As the company cuts its operating fat, a more focused approach to product development may be needed.
This in turn could be the end of the alignment between Google and its most innovative employees. Under 20% Time, Google acted much like a business incubator, letting employees pursue their dreams without the risks associated with a traditional start-up. Without 20% Time, talented employees may leave to form start-ups outside of Google’s orbit. There has been much said about a Google Killer — an innovative start-up that grows into a major rival. If the economy forces deep changes, the ultimate Google Killer may be lurking within its own walls.
Other Silicon Valley companies have survived far worse cuts than Google while preserving a culture of creativity (Apple Computer is a notable example). But among the challenges Google faces, it must find a way to turn itself into a more “normal” company while somehow preserving the things that make it unique.