Silicon Insider: Google's Triple Witching Week
Feb. 2, 2006 — -- This has been a triple-witching week for Google.
First, the company announced that it would not provide the U.S. government with traffic information to help the Feds track child pornographers. Then it announced that it would cave in to the demands of the Chinese government to censor information it made available to Chinese citizens … and would refuse to testify at any congressional hearings on the matter.
Finally, like the cherry atop a poisoned sundae, yesterday the company announced earnings that failed to meet Wall Street expectations by a wide margin The stock plummeted more than $50 per share, erasing $20 billion of Google's corporate worth. The stock tumble appeared to be not only a reaction to the company's comparatively weak financials but also to a growing perception that the company has reached a turning point; that for all its success it would likely enjoy in the years to come, the Google we once loved was gone forever.
It is not my intention here to dwell on Google's China scandal -- there are scores of articles in the blogosphere right now analyzing the matter in depth. Longtime readers of this column already know how I feel about American corporations kowtowing to tyrannies for the sake of a few dollars' profit. The question still remains, as it has since Hesh Wiener wrote the Computer Decisions story 30 years ago: "Would You Sell a Computer to Hitler?" We now have Google's answer, as we do Yahoo's and Microsoft's. Each has put profits over people, and made itself an accessory in the suppression of human freedom. Each of us now has to decide whether, in working for these companies, using their services or buying their stock, how much we become accessories as well. Enough said.
What I'm interested in is the process by which Google came to make such a controversial decision, and why it seemed so surprised by the public backlash. Both answers, I believe, teach us something about why tech phenom companies suddenly grow clumsy and lose their way. Google's decision also tells us some disturbing things about the current state of corporate public relations.
Several years ago, I had lunch with one of the founders of eBay. We'd get together every few months and talk about the company, where it was going and possible pitfalls that lay ahead. This time, as always, he asked me what eBay should be worrying about in the near future.
Criminals, I told him, as eBay had now grown so large and so rich that the site was now a plum target for crooks and con men waiting to prey on naïve eBay buyers. I suggested he hire some retired FBI type and crush every bad guy found on the site to the fullest extent of the law -- partly to scare off other bad guys, and partly to show the world that eBay was a safe place to do business.
My friend was astonished that I would even suggest such a thing. Whatever crime there was on eBay, he said, was rare, piecemeal and for very small dollar amounts. Moreover, in keeping with the eBay philosophy, he believed eBayers would be able to police themselves. Bringing in the cops would only frighten people and poison the friendly family atmosphere.
You know what happened. My friend still shakes his head at the company's naiveté. Unlike, say, a cynical newspaper reporter, the top management at eBay just didn't believe that there could be that much evil out there in the world, or that any emerging operations problem couldn't be answered with a technical fix.
Three months ago, I had drinks in the bar of a British hotel with a Google vice president. He made the argument that Google's search paradigm was such a robust business model that it was all but unstoppable, that by simply adding one tool after another to its free site, Google could just absorb one giant market after another, ad infinitum. He believed that before it was done, Google would be the world's biggest tech company.
On its face, that argument was hard to refute. Google does seem unstoppable. But, it will be stopped, I told him. I don't know how, or by whom, but Google will eventually collide with an equally powerful countervailing force: if not a business competitor, then Google's own employees; and if not them, then by society itself. Americans love hot new technology companies, especially when they become corporate superstars. But they don't trust young companies that grow too big, too fast -- and with good reason. Google will hit a wall, I told him, and sooner than you think.
Now it has happened, and far sooner than even I thought it would.
By sheer coincidence, I ran into that same executive last night, and he seemed stunned by the events of the week, and how his company had been so maladroit in dealing with the public's response. I reminded him of our conversation -- and admitted that my prediction hadn't taken any real skill on my part. It was just a matter of tracking Google closely over the last three years, and drawing on my own experience, at the beginning of my career, as a corporate PR person.
Every company changes when it goes public, and Google (as my friends inside the company confirmed for me) was no different. When you are small and fast moving and owned by a handful of founders, employees and investors, you can turn very quickly, convince yourself of your idealism and allow for a considerable amount of eccentricity. Sometimes, you can even say "no" to customers.
But public companies do not have that luxury: They report to the shareholders, and all shareholders really want is perpetual, solid growth. That's why the entrepreneurial risk takers are slowly driven out (happily, often rich) of public companies and replaced by predictable corporate bureaucrats.
That is what has been happening at Google. The company doesn't want to believe it, which is why it clings so strongly to the funky external trappings of its early years. But the change is inevitable. Founders Sergey and Larry may have thought that with the utopian manifesto they appended to the Google IPO prospectus they were establishing the future philosophy of the company. But in fact they were merely celebrating, and embalming, the company's idealistic past. That's why it especially stings these days at Google to have the company's motto -- Do No Evil -- thrown back in the company's face (a reminder to every other company never to write a mission statement you can never live up to).
But the biggest change that takes place in public companies is a shift in the way decisions get made. Small, fast-moving companies typically don't have to worry about the larger cultural and geopolitical impact of their decisions, and when they do, they can actually incorporate ethical analysis into the process. Large corporations rarely do this, partly because the new product or business decision-making is pushed down through the organization and is rarely touched by senior management, and partly because the goal stops being that of changing the world and becomes that of hitting revenue targets. Any contextual advice in all of this is more likely to come from the legal department than from marketing or PR. And that is why big companies often find themselves not only dealing with the devil but arguing that legally it is the right thing to do.
Further working against technology companies like Google is the pervasive belief within those firms that all problems have engineering, or at least logical, solutions. But in the messy world of human nature, and especially human evil, that is simply not the case. I have no doubt that somewhere in Google a PR or marketing executive predicted that all of this would happen, and was told to stay out of the matter and just deal with the consequences in the media. And, given the current supine state of high-tech public relations, that exec probably didn't quit for ethical reasons but instead dutifully drafted a public rationale.
I also bet that someone in the company argued for continuing Google China exactly as it was and forcing the Chinese government to do the censoring -- and was voted down in part because that would be compromise, not an empirically pure solution.
I could make my prediction, with a certain confidence, about the future of Google to that executive back in November because I had already seen the company's new true colors. It happened months ago with the introduction of G-mail, and the resulting public uproar over issues of user privacy. As it happened, G-mail wasn't anywhere near the Big Brother it was feared to be. But Google's handling of its side of the story was so self-satisfied and ham-fisted that anyone could see that this was a company that had lost its ability to publicly articulate its own case. The same thing happened again with the outcry over the Google Library Project. By then it was pretty obvious that, when faced with a major scandal, Google would not be able to explain its actions and would fall back on lame legalisms.
And that is what happened this week. Not that I believe Google can justify its actions in China. But it would have been good to see it try -- the very attempt might have helped the company reach some enlightenment on the matter. Instead, as it stands now, Google will never really be trusted again.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.
Michael S. Malone, once called the Boswell of Silicon Valley, is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury-News, as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, the Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is best-known as the author or co-author of a dozen books, notably the best-selling "Virtual Corporation." Malone has also hosted three public-television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the ABCNEWS.com "Silicon Insider" columnist since 2000.
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