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Forget the Google (Nasdaq: GOOG ) you know. The search king once known for its ability to fail cheaply is ending Google Labs, long a signature site that helped personify the company's culture of experimentation.
"Greater focus has also been another big feature for me this quarter -- more wood behind fewer arrows," co-founder and CEO Larry Page said, according to remarks posted in his Google+ feed. "Last month, for example, we announced that we will be closing Google Health and Google PowerMeter … Focus and prioritization are crucial given our amazing opportunities."
Listen closely and you can almost hear Page whisper, "real artists ship." Google wants to be Apple (Nasdaq: AAPL ) , and Page, apparently, wants to be Steve Jobs. In at least one respect, that may be a good thing.
Searching for soul
Experimenting hasn't always worked to Google's benefit. Growth has gone inconsistent in recent years as the Big G has struggled to supplement search with new revenue-producing ideas. Precious few Google Labs projects showed enough promise to graduate to become products, and even that list contains its share of failures. Take Google Video, which has long since been replaced by YouTube. But there's also:
- Google Maps, so successful that it's been adopted in the iPhone. I know, Maps isn't necessarily a GPS replacement. But it's good enough to cause huge problems for Garmin (Nasdaq: GRMN ) , which last saw revenue growth in 2008.
- Google Docs and Spreadsheets, which I'm using to write this story and was the basis for the Google Apps online productivity suite. It's taken years of careful shepherding to reach this point, but Apps is now used by some 30 million users and has emerged as a legitimate threat to Microsoft's (Nasdaq: MSFT ) Office franchise.
Other big-name grads on the list include Google Reader for aggregating RSS feeds and the iGoogle portal page. Both are widely used today. So what if its engineers swing and miss from time to time? So did Mickey Mantle. The Mick ended a Hall of Fame career having belted 536 home runs.
Swinging for the fences
I suppose it's the change in philosophy that troubles me most as a rebel investor. Home runs are what I strive for as a member of the Motley Fool Rule Breakers analyst team, because swinging for the fences produces runs. Or, in investing-speak, big returns.
Google used to embrace this same philosophy. From its 2004 prospects, page 28 if you want to look it up yourself:
We encourage our employees, in addition to their regular projects, to spend 20% of their time working on what they think will most benefit Google. This empowers them to be more creative and innovative. Many of our significant advances have happened in this manner. For example, AdSense for content and Google News were both prototyped in "20% time." Most risky projects fizzle, often teaching us something. Others succeed and become attractive businesses. [Emphasis added.]
To be fair, Google isn't ending the 20% program. But without Google Labs, where will the funky experiments created during "20% time" get a chance to breathe? Who will play with them, and how will executives know which is worth "putting wood behind," to use Page’s phrasing? I suppose it's a matter of trust. As investors, we need to believe that Google doesn't need to first validate everything it builds.
You know what? I'm OK with that. As disappointed as I may be to see Google Labs come to an end, recent history tells me that Page and his team understand what they need to do. Just look at Google+ -- few companies outside Apple have ever won 10 million users so quickly.
You're all grown up, Google. I guess it had to happen someday.
Do you agree with Page’s plan to end Google Labs? Please vote in the poll below and then leave a comment to tell us what you think about the future of Google. You can also add the stock to your watchlist for up-to-date analysis as soon as it's published.
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