Google faces post-Fleetwood Mac comedown
Mountain View in rehab
Fail and You America loves its ballin'. Walk into the shop, ice around your neck, and twist off a hand full of cabbage to buy things - not out of necessity, but out of the joy of buying things.
You would think that a publicly-traded company that's rolling in cheddar would be able to exercise some self-restraint, especially a company staffed with educated people who are convinced of their own superiority, but are far too passive-aggressive to ever admit it out loud. Before the recent economic enema, Google bought a lot of shit it didn't need. They have sent an unfathomable amount of money down the tube, either out of willful ignorance or simply to keep up the corporate baller image.
In October of 2007, Google paid $12 million for Jaiku, a Twitter clone that nobody used. With Twitter being many times the size of Jaiku and still unable to turn a profit, it's unlikely that Jaiku was ever a real business. Last month, Google announced that they were going to port Jaiku to Google App Engine, open source it, and then never work on it again.
You know how an eleven-year-old kid will get really excited over a single Christmas present? How he's practically in tears when he gets it? Them, two weeks later, that same toy is lost somewhere under the bed, and the kid is excited about something else. Yeah, Jaiku was cool to Google for about fifteen minutes. Now, it's on its way to the tag-sale pile.
Oh, and in case you were wondering, twelve million dollars is enough to buy forty eight million doses of a drug to treat malaria.
Jaiku is small potatoes compared to some of Google's other money pits. Their stake in AOL, which recently lost some $726 million in value, is a ripe example of Google's pathological spending habits. For a company with such a massive market cap, wasting $12 million on an also-ran web service is a minor fuck-up. But losing $726 million on a defensive investment? Well, that brings you into fail territory.
When Google bought five percent of AOL in 2005, it was so that they would remain the default search service for AOL subscribers. To Google's credit, AOL subscribers are one of the few online populations that still actually click on contextual ads, but for a billion dollars? For far less than that, you could pay someone with the foresight to know that AOL is at the end of its rope to tell you to save your money.
Oh, and in case you were wondering, $726 million dollars is more than enough money to pay the ten thousand contractors Google recently laid off.
Google's money-wasting skills aren't restricted to equity investments. They can spend it internally too. If there's one thing that Google's liberal-leaning workforce loves, it's a good entitlement. You suffered through more than a decade of collegiate education, partly out of fear of entering the real world, and partly because you'd never heard the word "overqualified" before, so when you landed that job as a Software Engineer in Mountain View, dammit, you were entitled to some free shit.
I want a big salary. I want a stock option grant that will get re-priced when it's underwater. I want free food every day. I want a shuttle bus to cart my fat ass from San Francisco to Mountain View, because I'm young and I deserve to live in the city even though it's an intractable commute for people who don't have chauffeurs.
I want all of this, and if you take any of it away, by golly, I'm going to whine about it on an internal mailing list. If my demands are not met, well, I guess I'll whine some more, but eventually shut up because my parents told me that I don't know how good I have it, and deep down, I'm too much of a chickenshit to go looking for a new job.
I see what Google's intention is: a well-cared-for workforce is a productive workforce. An employee who eats on campus doesn't take long lunches and can get back to work faster. When you work at Google, you call these things "perks." After you've quit Google, you call it "welfare." Google is quickly figuring out what the government already knows: Once you start with entitlement programs, the amount of money you need to spend on it never decreases. While Google doesn't publish this line item, probably out of shame, it's been estimated that they spend roughly $72 million per year on food alone.
Oh, and in case you were wondering, $72 million per year can send more than 2,000 poor kids to Harvard.
From the end of the last dot-com bust until now, Google has been like a 1970s Stevie Nicks: good looking, talented, and on top of the world. This recession, however, is like the coming of the eighties. All the drugs are finally taking back what's owed to them. Sure, there's still some real talent hidden under those dark-circled eyes, but it's going to be at least a decade before we see it again. Until then, though, Google is going to be in rehab, feeling sorry for itself over all of the bad decisions its made.
Of course, Google isn't going to have the same bedside repentance as every other drugged-out musician looking to change her ways. No, admitting fault for Google would mean admitting that they're better engineers than they are businessmen. For a company that quantifies everything, they're not doing a good job quantifying important shit like "return on investment" or "opportunity cost." As long as the magic money machine keeps running, though, they don't have to. Ill-advised ideas will continue to see the light of day until the contextual ad business slows. Maybe then will we see some real innovation out of Google – when there's a bottom line to protect.
Oh, and in case you were wondering, you can't serve AdSense on shareholder reports. ®
Ted Dziuba is a co-founder at Milo.com You can read his regular Reg column, Fail and You, every other Monday.