A Google Brain Drain?

Oct. 24, 2007 8:31 AM ETAlphabet Inc. (GOOG)9 Comments

Yesterday, another executive left Google. This time it was corporate development VP Salman Ullah. He’s off to start a venture fund, which is odd, because as the lad running Google’s (NASDAQ:GOOG) M&A arm you’d figure he wielded more power than most VCs combined. GigaOm has details on where’s he off to.

He’s not alone, and he won’t be the last. The reasons why Google’s best and brightest are leaving are quite simple:

Google a) no longer invents, b) it barely innovates, c) those “10% personal projects” fail to take so it acquires competitors and usually fumbles those, d) ultimately sticking to what it does best: sell ads.

Last time Google invented anything the company was known as BackRub.

Its innovations - we’re being generous with the noun - revolve largely around the black boxes that drive 40% of US online ads: Ad Sense and Ad Words, ultimately two sides to the same coin that represent 99.9% of Google’s bread and butter. The worst part is that invariably, this “trust us blindly cause we’re Google” nonsense wears thin when you expose some cracks in their black box (more on this below).

But first, let’s consider my argument.

Example? Yesteray's earth shattering news about changing ads without changing the html code… oooooooh! Can we call the Nobel Prize Committee?

Ironically, I’m sure that got more push from upper management than anything in that mythic 10-20% of time Googlers devote to special projects because it might affect their bottom line sooner than anything else.

Those projects ultimately don’t get enough resources or mind share and suffer at the hands of the competition, so ultimately Google - you guessed it - drops those initiatives and acquires. Case in point YouTube, Grand Central, Doubleclick, Blogger, Dodgeball etc. Yet apart from YouTube (which has succeeded by not really changing, which I’m not sure is a success if you ask Google’s “media partners” at actual media companies), most of Google’s acquisitions have flopped: Dodgeball, Blogger (relative to Wordpress, Six Apart, etc.).

Google’s Arrogance Makes Microsoft Look Tame

But there’s more to Google’s exodus: Google’s arrogance is so large and staggering that it makes Microsoft (MSFT) look like a pussycat. If any company today gets disparaging remarks, it’s Google (and no, I’m not even going to talk about the fanboys who blog and give Google props but who probably have never had the misfortune of actually spending any money on Google’s black box called Ad Sense and Ad Words).

Google: Take it, Leave it, or Kiss Our A**

Google aspires to organize the world’s data, blah-blah-blah, but senior management alienates potential partners every time they grace the world with their rhetoric and by extension, the company’s workforce has to navigate through ever-increasing rigid systems and end up alienating clients, users, etc.

An example of the legacy of the former, you saw Sunday, was NBC (GE) pulling its content from YouTube. More of the legacy? Viacom’s (VIA.A) $1B lawsuit.

An example of the legacy of the latter: my experience with Google today as an advertiser, which I was not even gonna get into, but the context is perfect.

AdWords: Google’s Black Box

I use Google AdWords to acquire some traffic. I then use Google Analytics to measure the traffic. If Google AdWords is accurate, we get an extremely high percentage of the traffic Analytics gives us credit for AdWords, which is impossible in and of itself because Analytics suggests we get 25%-33% of our traffic from other search engines, over 50% of our traffic from direct referrals and type-in traffic etc.

I can go on and on about how Analytics under-estimates traffic, but I’m not alone in suggesting that. Either Analytics is off (and Google should look into it) or its cash cow Adwords is overbilling - which is highly possible but a bigger problem.

These are manifestations and examples of how Google has lost its way.

When you raise these inaccuracies to Google, all you get is boilerplate corporate speak about how “Google Analytics is right, and you agreed to AdWords’ Terms and Conditions so go pound sand”. That’s like the coatcheck that takes absolutely no responsibility for the loss of your coat because they have put up a sign that says it’s not their fault, it’s yours.

AdSense: Google’s Black Magic

That’s not only arrogant, it’s counter-productive because I rely less and less on Analytics and will spend less and less money on AdWords. Of course, AdWords is “somewhat” transparent (not much, but somewhat), AdSense - those little ads publishers add to their sites to generate revenue - is black magic.

I dare Google to explain how it calculates that revenue, I sold Google Ads as a VP of sales at my old job and even though the NDA has expired and all, I’ll just say that Google itself doesn’t know how AdSense actually makes revenue.

All to say, if you are both an AdSense and AdWords customer, for sure you realize that those numbers don’t jive. You pay an unreasonably high rate to advertise yet your effective revenue per click is abnormally low.

Google’s Economy Makes Money for Google, Mainly

If I were on a law mystery show, I’d conclude that Google keeps an above average and unreasonable cut of ad dollar revenue and it charges rates far greater than what its “perfect economy for keyword” BS would suggest.

I can prove it, and I will. But, who cares what I say.

Google is well on its way to becoming a monopoly of the 21st century. It’s a matter of when, not if, it surpasses MSFT in market cap… and there’s nothing anyone can do about all of this. Mind you, I previously outlined that something was off with Marchex’ numbers… maybe Google needs the same remedy?

So, connecting the dots: why do Google’s best and brightest leave? Because the “Do No Evil” mantra is hypocritical. The company’s HR spin on letting employees spend 10-20% time on personal projects is a hollow one because the company will always remain focused on “little text ads” - much the same way that MSFT kept focusing on software and did not really do much online, and pays for it today.

If I were a Googler and made my money on company stock, the upside of Google’s ever increasing stock is a self-fulfilling prophecy: no matter how good your ideas are, they’ll always play second fiddle to those little text ads, and if that doesn’t feel evil to your best and brightest, I don’t know what does.

This article was written by

Ashkan Karbasfrooshan is Founder and CEO of WatchMojo.com, one of the leading broadband video content creators, with a library of 5,000 high-quality, professional, premium videos spanning the automotive, comedy, fashion, film, health, lifestyle, music, sports, travel and video game categories. WatchMojo.com has served 60M streams since 2006, currently generating over 5M streams each month and reaching 20M consumers each month in the digital out of home signage market. Having funded the company himself, the company has bootstrapped its way to become one of the few new media content companies that commands guaranteed, recurring, licensing revenues from other media companies. Previously, Ashkan worked in the search market in 2000 and then served as AskMen's VP of ad sales from 2000 to 2005, until the acquisition by IGN Entertainment/Fox Interactive Media. A finance graduate from one of the top colleges in the nation. He is the author of Course to Success: Everything You Need to Succeed Beyond School and The Confessions of Alexander the Great: 33 Lessons in Greatness. His articles have been published on MSN, AOL and Yahoo! and has been quoted in, or linked from Forbes, Barron's, Yahoo! Finance, Business Week, CNET, MSN Money, the Wall Street Journal's All Things D., LA Times, Boston.com, PBS, TheStreet.com, Marketwatch, Tech Crunch, Giga Om, Paid Content, the BBC and numerous other publications and programs. Ashkan authors the http://www.HipMojo.com blog which sites at the convergence of technology, media and investing.

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