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Where is Google Going?

Google hates clutter. If the company had a role in Neal Simon’s play The Odd Couple, Google would be the hyper-fastidious Felix Unger, not the sloppy Oscar Madison. So last December when Google engineers redesigned Google’s already sparse search page, there was no surprise when new the design was even sparser. What you now first see are the logo, search box, and a couple of buttons, surrounded by an ocean of white space. To get at the rest of what Google has to offer, you have to move your mouse. The links will then fade in.

The re-design was a classic ⁠Googley⁠⁠ move, and how it was redesigned is instructive. Google engineers tested to observe how actual users would react. They tried some 10 variations of the fade-in. They worried that the whole idea of first hiding the links might slow users down, if only by milliseconds. Or maybe people would use the page even more efficiently than those in the control group. (Yes, there was a control group.) ⁠And sure enough,⁠⁠ said a blog post describing the testing, ⁠that was the trend we observed.”

This redesign exercise is a pretty good metaphor for the company itself. Even as Silicon Valley companies go, Google is highly engineering driven. The company prefers austere front-ends, with plenty of the functionality just below the surface. Among the hyperlinks that fade in on the search page is one that says ⁠more.⁠⁠ The resulting submenu has another hyperlink: ⁠even more.⁠⁠ Keep clicking and you’ll find specialized search tools; Web, PC and mobile applications; developer tools and APIs; online business solutions, website analysis programs and social network services.

Google is a search engine, but it is also an infrastructure company, an online advertising company, a promoter of Web standards, a developer and co-designer of hardware, an voice and mobile applications company, and a cloud computing company. Google has well-known services like Gmail and YouTube, which Google acquired in 2006 for $1.65 billion in a stock-for-stock transaction. But the company also offers lesser known SaaS applications like the Google Reader for RSS feeds; SaaS office applications like Google Docs and Google Calendar. The Google Translate service can translate between 52 languages and is used each week hundreds of millions of times. On many mornings, a truck brings books from Stanford University’s research libraries to a Google scanning facility. The books are digitized and put online as part of the Google Books project, which may become the most significant milestone in academic scholarship since the printing press.

Google is also behind two different open source operating systems that give two different visions of the future. The first, Android, imagines the future as a set of mobile applications. The second, Chrome OS, envisions the online world as a set of SaaS services?the only client app you need is a browser with a media player built in.

So where is Google headed? The company has stayed pretty true to its core mission statement to ⁠organize the world’s information,⁠⁠ including yours. Secrets undoubtedly reside inside the Googleplex headquarters, Google’s surrounding campus, and its international offices, including those in Tokyo and Osaka. But compared with most companies, much of Google’s direction is out in the open. If Apple under Steve Jobs is the Silicon Valley’s archetypical secretive company, Google is the polar opposite: the company’s myriad blogs and lucidly written financial disclosures could keep you reading all day. That’s what I’ve been doing. The following is hardly a definitive analysis of Google’s direction, but it does gather some of the threads about where Google is going.

A quiet ascent into cloud computing

If Google were not so involved with search, you might think of it as a cloud computing company of a certain kind. Google has staked out a place in the cloud, but one that is distinct from others in the industry. Unlike Microsoft’s Windows Azure platform and Amazon Web Services, Google has put more of its promotional effort into SaaS, software-as-a-service, applications rather than emphasizing data storage and development tools. Perhaps for this reason, one of the best known cloud computing companies, Salesforce.com, has regarded Google not as a competitor but a strategic partner, integrating its flagship CRM program with Google Apps, Google’s full suite of SaaS applications.

More recently, Google said it would launch an online store for third-party SaaS applications. Because many of these apps will be integrated with the Google Docs suite of office applications, the move will help Google better compete with Microsoft, whose client-based Office is firmly entrenched. The Wall Street Journal noted that Google sells its suite of SaaS applications to businesses for $50 a user per year, and has signed up some large companies, including Motorola and Genentech. ⁠But many large corporations have been reluctant to migrate from Microsoft for reasons ranging from concerns about storing data online to complaints of missing features.”

Google is also taking on Microsoft’s dominance in office applications by acquiring DocVerse, which provides cloud-based collaboration for Microsoft Office documents. DocVerse was founded by two former Microsoft engineers, who will now come to work in the enemy camp. ⁠Ironically, the acquisition gives Google the authority to let users access full-featured Office files in a Web-based environment before Microsoft does,⁠⁠ wrote CIO.com’s Shane O'Neil. Another recent acquisition, Picnik, shows Google’s continuing interest in expanding Google Docs beyond text. Picnik provides online photo editing tools. The move complements Google’s Picasa Web Album photo-sharing service, while, ironically, eliminating some of the need for the client-based Picasa app itself.

All of these SaaS projects help explain Chrome OS, and its open source development counterpart, the Chromium OS project. Both are notable in that they support just one client-based application: the browser. That’s a radical idea for an operating system. With Chrome OS, Google is assuming that most of the client-based applications you currently run will be replaced by their Web-based equivalent.

Google’s more conventional, though less publicized foray into cloud computing is the Google App Engine, an online Web application development and hosting service which debuted in April 2008. Google App Engine supports Python and Java, with a 10-application limit per administrative account, billing developers for network resources consumed. Echoing how Google bills its advertising customers, Google lets developers set a maximum daily ⁠budget⁠⁠ to pay for outgoing and incoming bandwidth, CPU time, data storage, and email recipients. For applications that consume below a fixed threshold, the price is free.

Google, the phone company?

For years, the mobile phone carriers have been adding text services to their core voice offering. Google is doing just the opposite, adding voice services to its core text offering, while moving aggressively into the mobile phone space. The New York Times described Google CEO Eric Schmidt and Apple’s Steve Jobs as ⁠engaged in a gritty battle royal over the future and shape of mobile computing and cellphones, with implications that are reverberating across the digital landscape. In the last six months, Apple and Google have jousted over acquisitions, patents, directors, advisers and iPhone applications. Mr. Jobs and Mr. Schmidt have taken shots at each other’s companies in the media and in private exchanges with employees.”

Google’s answer to the iPhone operating system is Android, a Linux-based operating system that the company quietly acquired in 2005 from a short-lived startup of the same name. In taking Android under its wing and reaching out to application developers and hardware vendors alike, Google has transformed Android into a serious competitor to the iPhone, while jumping ahead, at least in the public perception, of entrenched competitors like Windows Mobile, even though Microsoft has been after the mobile market for a decade. Last October, the research firm Gartner predicted that Android will actually surpass the iPhone, Windows Mobile and the BlackBerry by 2012, even though Android runs on only two percent of smartphones today.

The forecast seems plausible. Not only is Google’s timing good, with demand for ⁠app phones⁠⁠ growing, but Android is open source and available to any mobile phone manufacturer who cares to use it. So far, 65 companies have joined the Open Handset Alliance consortium that is dedicated to all things Android. Among the members are three Japanese mobile operators: NTT DoCoMo, Kiddi Corporation, and SoftBank. Google has earned praise for giving developers a freer hand in the kinds of apps they develop and how those apps are sold.

Google’s first foray into mobile phone development has so far been less successful. The Nexus One raised eyebrows when covert pictures of it started showing up on the Internet, but the reviews have been lukewarm. Worse, Google’s usual practice of putting up beta software that is largely unsupported does not work for a hardware device. When it comes to customer support, Apple is still the company to beat.

And then there’s Google Voice, another service acquired by Google, which the company is offering for free on an invitation basis. Google Voice is complex enough that Google has created 11 short videos to explain its capabilities, but far-reaching enough that it ought to worry the conventional telephone companies. Google Voice allows you to give out a single telephone number that will ring all your phones, or some of them, depending on the criteria you set. The service gives imperfect, but decipherable, transcriptions of voice messages. You can block callers, provide different voice mail messages, depending on who is calling, and if that person leaves a message, you can listen in while it’s being given?just like an old fashion answering machine. You can easily set up a conferencing call: your Google Voice number can serve as the call-in number. If you call your own Google Voice number and sign into the voice mail system, you can place VoIP calls. Low-cost international calls are also available.

While none of this makes Google a telephone company in the traditional sense, the gap is narrowing. Last year Apple removed Google Voice from the iPhone Store. Now, the service is back on the iPhone, and elsewhere, as a mobile Web application. As with Skype on mobile phones, the service opens the door to callers placing inexpensive VoIP calls over 3G networks?a potential problem for AT&T, the iPhone’s exclusive U.S. carrier, which is already struggling to provide sufficient bandwidth to its customers.

Goodies for developers: Web standards, APIs, and more

The software engineers at Google have dedicated a lot of effort to reaching out to their counterparts in the broader developer community. The company is helping drive open standards and has extended many of its services via APIs. Google also hosts both open source projects and, occasionally, developer conferences.

Google’s influence with open standards can be seen in the HTML5 specification. Google and Apple may be competing on the mobile phone, but they have joined forces in driving the first major revision of the HTML standard since 1997: the W3C Working Draft specification for HTML5 has two authors: David Hyatt of Apple and Ian Hickson of Google. For each company, the motivations appear somewhat different.

For Apple, the Flash plug-in is a no-fly zone. ⁠At its worldwide developer conference in Los Angeles, Adobe said it would be releasing Flash for mobile platforms including Microsoft Windows Mobile, Palm’s webOS and Google Android,⁠⁠ wrote Wired’s Brian X. Chen in Wired’s Gadget Lab last October. ⁠But don’t expect Flash to come to the iPhone’s Safari mobile browser. Instead, Adobe is adding support to its Flash Professional CS5 developer kit to convert software written in Flash into standalone iPhone applications.⁠⁠ What seemed like passive reluctance on the part of Apple has since turned into overt policy. Steve Jobs said explicitly that the iPad tablet will not support Flash.

While Google’s attitude toward Flash is less hostile, the company is still using both its content properties and Chrome browser to encourage HTML5 adoption at Flash’s expense. Last January, the company introduced HTML5-supported YouTube videos via an experimental player. A compatible browser that supports it is required, and Chrome and Safari both work. The resulting display has some limitations, including the inability to show a full-screen image. But Google’s intent here is obvious. If a Flash plug-in is no longer required to watch the massive library of YouTube videos, the industry will take notice.

Google has reinforced its HTML5 support by sounding the death knell for Google Gears applications. In a February 19 blog post entitled ⁠Hello HTML5,⁠⁠ Ian Fette of the Gears team wrote that the company is looking for ways to translate all of its Gears capabilities into Web standards, including HTML5, as well as ⁠new APIs like Local Storage and Web Sockets,⁠⁠ both of which are now included in the Chrome browser. Other facets of Gears, such as the LocalServer API and Geolocation, are also represented by similar APIs in new standards and will be included in Google Chrome shortly.”

In addition to Web standards, Google is promoting other technologies for third-party developers:

Google Web Toolkit (GWT):
An open source toolkit for building Web applications, developed browser-based applications, without the developer having to master browser incompatibilities, or AJAX-related technologies like XMLHttpRequest and JavaScript. GWT includes an SDK with compiler and Java libraries that allow developers to write client-side applications in Java, and then deploy them as JavaScript, as well as a Chrome extension for pinpointing performance bottlenecks and a plug-in for the Eclipse development framework. Google says it has used GWT for its Google Wave collaboration software and Google AdWords advertising program, among others, and claims GWT is also used by ⁠thousands of developers around the world.”
For website developers, Google APIs have become ambassadors-at-large for Google services. These are AJAX APIs for all occasions written to let you implement rich, dynamic web sites entirely in JavaScript and HTML. A few lines of JavaScript code will add Google Maps, Google Earth, Google Translate, Google Book Search, and other services. Developers should expect more of the same.
Open source developer resources:
Google claims to have released more than 500 projects comprising more than 15 million lines of code. The company offers free project hosting, including storage space, version control, wiki pages for documentation, and a search facility for finding current hosted projects.

Google also reaches out to developers in person. The company’s most visible effort is Google I/O, which will be held this year on May 19-20th in San Francisco. (Even as of this writing in late February, the event is sold out.) Topics include Android, Google Chrome, the Google APIs, the Google Web Toolkit and what the company describes as other ⁠open web technologies.”

In the Crosshairs

As Google has grown, it has become the nail sticking out that, to some extent, is getting pounded down. The company’s mistakes are amplified, and its strategic moves are magnified. Google Chief Financial Officer Patrick Pichette recognized this state of affairs when he told a financial conference gathering: "We shouldn't pretend we're not a big company." In other words, part of where Google is going is where Microsoft has been?in the crosshairs of government scrutiny.

That will be especially true in Google’s core area of online advertising. While Google has made more than 60 acquisitions since its founding, its agreement to acquire AdMob, a provider of mobile phone advertising, has gotten the attention of the U.S. Federal Trade Commission. Google has characterized the deal as comparable to those made by its competitors, and claims that in the mobile space, no single ad network prevails. AOL, Microsoft, Yahoo, and Apple may not agree.

Google is also starting to feel the same kind of regulatory heat as Microsoft from the European Union regarding complaints from competing search companies. Google and the Chinese government have clashed over China’s Internet censorship policies. Google first said it would abide by the policies, arguing that some Internet search was better than none in a country notable for trying to stop the free flow of information. But after attacks on Google servers and some Gmail account holders that appear to have originated at Chinese universities with government connections, Google reversed itself. At this writing, the issue is still unresolved.

Google’s size has also raised privacy concerns. Author Ken Auletta spent a couple of years reporting on the company, including frequent visits to the Google campus, researching his book, Googled: The End of the World As We Know It. He came away with a combination of admiration for the company’s innovation coupled with a fear that too much of this innovation is coming from a single company. Microsoft, he said in a radio interview, is run by cold businessmen. Google is run by cold engineers. ⁠Brilliant engineers are at the core of the success of a company like Google,⁠⁠ he wrote in his introduction. ⁠Drill down, as this book attempts to, and you'll see that engineering is a potent tool to deliver worthwhile efficiencies, and disruption as well. Google takes seriously its motto, ⁠Don't be evil.⁠⁠ But because we're dealing with humans not algorithms, intent sometimes matters less than effect. A company that questions everything and believes in acting without asking for permission has succeeded like few companies before.”

Auletta’s fear is that in making the Web more attuned to a user’s preferences, Google has amassed a lot of information on the people who use its services. If you are logged onto the service, the company ⁠knows⁠⁠ what you search for. If you use Gmail, Google ⁠knows⁠⁠ the contents of your email, using that contents to serve you related ads. If you use Google Docs, the company is keeping potentially sensitive information on its servers. If you use Google Reader, it knows something about your online reading habits. Having all that data under Google’s control means you have to trust the company. While Google does not appear to have violated any of these trusts, the company did get seriously dinged for its Google Buzz?by automatically defining a person’s social network on the basis of email activity. That’s a large and obvious mistake that might have been caught through a slower rollout of the service.

In another sphere, the European Union, as well as a group of Japanese scientists and lawyers, has become concerned over Google Street View?which gives a street-eye-view of streets and highways from images taken by cars mounted with a camera. Along the way, the pictures become a record, through faces and license plates, of where people were on some random day. ⁠We strongly suspect that what Google has been doing deeply violates a basic right that humans have," said Yasuhiko Tajima, a professor of constitutional law at Sophia University in Tokyo, in a Reuters interview. "It is necessary to warn society that an IT giant is openly violating privacy rights, which are important rights that the citizens have, through this service."

Whether posting images of public places is truly a privacy violation remains to be settled. The company credibly argues that it has a lot to lose should it ever violate the trust people have put in it. But Auletta is right to say we should be paying critical attention to Google, even as we largely admire what it has accomplished and where it is going.

Sidebar: How Google makes money

Publically traded companies that don’t have a good use for their extra cash will give some of it back to stockholders in the form of dividends. Google doesn’t do that and doesn’t expect to. It invests its surplus can into long term projects, including some $5.7 million in outside research grants announced last February. Google has invested in clean energy initiatives. It plans to test and build an experimental fiber network capable of delivering 100 gigabit per second speeds. The cost of scanning all those books has no obvious immediate payback. Wall Street is often accused of focusing on short-term gains, but Google management is clearly thinking beyond the next quarterly earnings statement.

But something has to fund these research projects, let alone the many services it offers. Where do those funds come from? How does Google amass its $24.5 billion in cash and equivalents as of the end of 2009? Despite all Google’s technologies and initiatives, the answer is surprisingly simple. Google is primarily in the online advertising business. That business has two primary services. AdWords brings in revenue through companies bidding to be listed on the Google search page along with the ⁠organic⁠⁠ search results. AdSense is an ad-serving technology that lets websites run Google-served advertising and share in the revenues.

Advertising revenues made up 99% of the Google’s revenues in 2007; 97 percent in 2008 and 2009. AdWords accounted for roughly two-thirds of that, AdSense the remainder.