http://www.theverge.com/2012/9/17/33228 ... -a-featureFailure is a feature: how Google stays sharp gobbling up startupsBy Ben Popper on September 17, 2012 12:09 pm
I stepped out of my car in the parking lot of Google’s Mountain View headquarters and, not having a clue which way to go, started following the man ambling down the sidewalk wearing a very odd backpack. A giant spherical camera stuck up behind his shoulders, bouncing above his head like a floating eyeball, capturing everything around us, slurping up oceans of data. We turned the corner and I did a double take as a driverless car slowly cruised by. It was a pair of first impressions that reminded me just how wide ranging and intellectually ambitious Google has become.
Since its early days, Google has looked outside itself for inspiration on new directions its business could take. The search giant’s mergers and acquisitions team set new records in 2010 and 2011 for the sheer number of companies it acquired. Last year alone it bought up 25 companies, one every two weeks. If you count the firms acquired for patents and intellectual property, the total number is a whopping 79. Taking a look at Google’s peers, it becomes clear just how astonishing these numbers are. Facebook bought just ten companies in 2011; Apple, Amazon, and Microsoft only three apiece.
The pace of acquisition has certainly slowed a little in 2012, with only eleven so far, counting the acquisition of Snapseed-creator Nik Software we reported on this morning. But one of the deals which closed this year was the $12 billion purchase of Motorola Mobility, by far the most money Google has ever spent on an acquisition and the largest number of new employees. It’s also a purchase far outside its comfort zone of software.
Google has taken plenty of flack for its extremely broad — some would say lack — of focus. But by and large it’s been the most successful among the massive tech firms when it comes to incorporating new companies. Doubleclick and AdSense, both acquired, are major drivers of Google’s revenue. YouTube dominates online video. Android goes head-to-head with Apple in mobile. And it’s not just companies that are bolted on whole cloth. Premier products like Google Maps, Docs, Analytics, and Voice were also crafted in large part by teams brought in from outside.
Perhaps the most striking fact touted by the Google? In Silicon Valley, the natural order for founders who are acquired is to work in a company for a short period of time while their stock options vest, then leave to start something new. "Holding onto a founder for a year is considered an accomplishment," says venture capitalist David Packman. Yet according to David Lawee, who runs the company’s M&A department, founders from nearly two thirds of the startups acquired by Google are still with the company.
Is there something special about Google’s DNA that makes it particularly adept at buying and integrating other companies? And has this aggressive M&A been key to Google’s success? That was the question I had come to answer.
It’s the data, stupid
“WHAT HAPPENS IF YOU HAVE ALL THE WORLD’S DATA?”
The first person I sat down with was Brian McClendon, a VP of engineering responsible for Google Maps, Earth, and Streetview. Back in 2004, McClendon was the co-founder of the 3D mapping company Keyhole. "We demonstrated the product for Larry and Sergey, they made an offer the next day." This was before Google’s IPO, and the company had not shared details with the world on how it planned to make money. "We really stressed about the offer, because we thought their valuation was just crazy."
Ultimately, what convinced McClendon and his team to join wasn’t the money. "We weren’t sure about the price and the financial opportunity. The reason that Google is interesting is the data, the scale."
Early on in its history, Google learned a valuable lesson. It wasn’t just the index of all the documents on the web which was interesting. It was also the logs detailing how people searched that were valuable. The millions of people typing billions of words into Google’s search bar provided the raw material which fueled the machine learning behind Google Translate, a service which quickly outstripped its competitors.
"Those early lessons they learned about harnessing the power of user data have played a huge role in our success," says McClendon. "Google transformed itself into a platform for all the world’s information. We had big dreams about what Keyhole could be, but opening it up so that it could become this powerful tool for scientists studying the Amazon or emergency workers planning evacuations, we wanted something like that to happen, but we couldn’t really believe it was possible."
Today more data is added to Google maps each day than existed in the entire system in 2006, driven in large part by user contributions. McLendon tells me, "The appeal for founders acquired by Google is that they have an idea which they have narrowed to a startup, a fiscally possible exit, but what they really want to do is something much bigger. Google can pour rocket fuel on that fire. What happens if you have all the world’s data? What happens if you can run a 100,000 CPU Mapreduce on this combination of geo-data and translated street signs. Could you learn something fundamental about humanity? The answer is yes."
McClendon points out that with projects like Google Docs, the search giant was one of the first to acquire companies we now think of as cloud based apps. "The infrastructure here is perfectly suited to young web companies who grew scaling quickly in the cloud. You rewrite for Google’s code base, plug in, and suddenly you’re playing at a global scale."
Visualizing Google's growth
Empower the entrepreneurhttp://assets.sbnation.com/assets/13825 ... mpus-3.jpgPart of what makes acquiring companies so difficult for many corporations is that the same characteristics which make a great entrepreneur — a near lunatic focus and ambition — can become problematic within a large organization full of its own well-established hierarchies and procedures.
"If you are a founder the biggest thing you are afraid of is losing control to a machine. Historically most large publicly traded companies that buy smaller startups, there is a just a cultural mismatch," says Somesh Dash, a principle at the tech investment firm IVP. "Even if the math works in terms of money, startups are more emotional than rational. Google has created an environment that allows these founders to maintain a large degree of autonomy, pick and choose the best elements of Google that give them resources and scale, but still keep that startup lifeblood inside this massive enterprise."
Google’s quirky culture has always embraced risk takers. Take the legend of Wesley Chan, an associate product manager, as told by Steven Levy. He proposed adding a pop-up blocker to Google’s web toolbar, an idea which the founders shot down. So Chan built it anyway, snuck into Larry Page’s office and installed it on his computer. When Page remarked his browser felt faster, Chan told him about the pop-up blocker, saying it was a project he built with his 20 percent time. Rather than fire him, Larry Page approved the project.
Neal Mohan, who played a key role in selling DoubleClick to Google for $3.1 billion in 2007, says the search giant is unique in its approach to integrating these type A personalities. "The obvious move when we joined would have been to set Doubleclick up as a small part of their much larger AdSense business," Mohan explained to me. "Instead they asked me to run them both. That was a big leap of faith. You’ve just brought in this team from the outside and now you’re going to turn over to them the keys to one of the crown jewels of your business. I took that as testament to the way Google does business, which is to entrust entrepreneurs with big responsibilities.
A second part of this trust is allowing entrepreneurs who have been brought in from the outside to guide the strategy in terms of future acquisitions. Mohan was able to take point in a series of big Google buys, including Invite Media, Admob, Admeld, and most recently, Wildfire. Keyhole’s Brian McClendon had a similar experience, leading eight acquisitions across a range of services, everything from mapping, to computer vision to the camera space. Speaking on a the condition of anonymity, a senior Googler pointed out the effect on the company’s leadership structure. "Far more people come to Google through the regular hiring process than through M&A. But when you look at the senior level folks, the ones making decisions about where products and the company is going, it’s clear that entrepreneurs who have come into Google have had an outsized impact."
Keep things moving
As Katelin, my chaperone from the communications department, led me across campus, employees rode brightly colored bicycles by sculptures Googlers have brought back from the annual Burning Man Festival. In line at the cafeteria, I overheard different groups speaking in German and Chinese, and later passed two employees shooting pool, chatting in Hindi, while another one napped on a couch. Google was born as a PhD project at Stanford, and the company’s Mountain View headquarters feels like an international university, not a corporate behemoth.
Like deans at a liberal arts university, Google’s founders wanted their engineers to pursue whatever projects interest them. In the early days, employees could move their desks where they pleased, even if that meant new CEO Eric Schmidt got an unexpected officemate. They could also knock down the walls, literally, to give them a better view of what was going on in other parts of the company. This kind of freedom plays a big role in keeping talent at Google, even when an acquisition doesn’t work out as intended.
In the same way that early Googlers could move their desks where they pleased, a culture of mobility remains. "There are a lot of rotational programs where product managers are cycled through different projects. Even executives are rotating through different functional roles," says IVP’s Somesh Dash. "Because Google was started in a web 1.0 world they have created a company that doesn’t have a star system. You are a Googler working on X. " Compare that to Microsoft, where the "stack ranking" means each division was forced to sort employees into good, average and poor performers, a practice which encouraged top managers to avoid working with the best developer talent.
Illya Grigorik came to Google as the CTO and co-founder of PostRank, a social analytics startup acquired in June of 2011. But he found that the team working on those same problems at Google was already very well established. "Because people here are so used to moving through different positions, there is no stigma about bouncing around and trying your hand at a lot of projects," he explained. Grigorik ended up on the Chrome team, working on an initiative around browser speed. "At a lot of companies it would be seen as a bad thing to always be jumping around, but here that’s encouraged, until you find something you’re passionate about."
You can think about Google’s approach to integrating startups as an extension of the philosophy behind its own technology infrastructure. When the company set out to construct its first data centers, its insight was that it didn’t have to buy high end parts of HP, Cisco, and the like. Rather than pay a premium to trim the failure rate of its servers from ten percent down to four, Google accepted failure as a feature of the system, and built around it. The result was a new breed of datacenters that outperformed the competition.
Nobody’s perfect
Of course founders from companies like YouTube, Invite Media, and Admeld have left after being acquired. Google managed to hire both Evan Williams and Biz Stone through acquisitions, but both ended up leaving the company and founding Twitter together. And in the midst of this success, there have certainly been some glaring failures. Dodgeball, the predecessor to Foursquare, was acquired by Google in 2005, but founders Dennis Crowley and Alex Rainert ended up leaving by 2007, upset over a lack of resources and integration they needed to grow their product.
"The reason it was a missed opportunity was because they ended up in the wrong place at the company," says Brain McClendon. "They didn’t end up here, near the Geo team, they were in New York. They were very small and didn’t get the support they needed. Working across the country is a hard problem. In general we do a better job than any company with communicating across geographies, but it’s still tough, so we missed that opportunity."
It was a costly mistake that has Google still playing catch-up in the local space with the recent acquisitions of old media companies Zagat and Frommers. In the meantime, Foursquare has poached a number of employees from Google.
Google also seemed to be falling behind in the booming social networking space. Products like Wave and Buzz were roundly mocked by the press and failed to catch on with users. "The mission of this company, from the beginning, was to organize all the world’s information," says Brian McClendon. "Well the problem with that is you can rationalize a connection to pretty much every industry."
When founder Larry Page took over in April of 2011, it was clear he agreed. One of his first moves as the new CEO was to re-organize Google so that it was tightly focused around product divisions. Instead of functional divides like Finance, Legal, Marketing, and Infrastructure, Page created seven new structures: Mobile, Social, Chrome, YouTube, Ads, Search, and GeoCommerce.
"I think Google went wider than it perhaps should have and spread itself too thin," says McClendon. "So Larry’s strategy of ‘more wood behind fewer arrows’ has tightened the focus and simplified the product space."
As he refocused Google, Page made aggressive cuts, shutting down newly acquired social projects like Aardvark and Slide. It seemed as if Google was becoming a less accommodating place, unwilling to give the same kind of free reign to incoming entrepreneurs that it once had. "The search company no longer dabbles in exotic ideas," wrote Slate’s Farhad Manjoo. "Now it’s all business."
More wood, fewer arrows
“TO A LARGE DEGREE YOU’RE EXPECTED TO DECIDE WHAT PROJECT IS RIGHT FOR YOU.”It’s an open question if Page’s new structure will continue to appeal to entrepreneurs. In the case of the now defunct Aardvark, both founders have remained with Google and are now working on Knowledge. "You’re not isolated to one pocket and expected to just work on that thing," says Max Ventilla, who helped create Aardvark. "To a large degree you’re expected to decide what project is right for you."
The same dynamic holds true for Slide. Google bought the social app maker back in 2010 for $128 million. Its founder Max Levchin was a PayPal alum who seemed to have a keen understanding of the social space Google was trying to break into. But just one year later, Google shut down Slide and Levchin departed, a result that seemed to exemplify the pitfalls of trying to acquire one’s way into a new market.
Internally, however, nearly all of the Slide employees who joined Google have remained with the company. "I would say 90 percent of the folks stayed on," says Libor Michalek, Slide’s former CTO, who’s now an engineering director at YouTube. "If you think about it in terms of buying Slide as a product, yes it was a failure. But if you think about it in terms of the people, than Google has had great success."
"I think the smaller deals work out really well for them on average. If the product flops, they still keep a lot of talented engineers. It’s like downside protection," said Lawrence Lenihan, a tech investor at FirstMark Capital. "Those kind of great people at a platform like Google can generate millions of dollars in incremental profits when they find the right area."
The hardest question to answer about Google culture is how different things would be if times were tough. Without hefty profits, perhaps Google’s culture would be far less permissive of entrepreneur’s explorations. "If you go back to the early history of Google, this company was making crazy long term bets way before it had the resources," says David Lawee, the head of Google’s M&A department. "A lot happens in the first 200 employees in terms of setting the DNA of a place. And this place was created to change the world."
"Larry and Sergey are scientists and they believe in allowing people to fail," says Ramsey Allington, who heads up integration for the M&A department. "Yes, it costs time and money, but that kind of exploration is what makes us who we are."
http://www.theverge.com/2012/9/17/33228 ... -a-feature
@ totally different plug and at the list of features
