Is Google
"Google has gone from innovative upstart to fat-and-happy industry leader in what seems like record time," writes Computerworld's Preston Gralla. "Put simply, the search giant has lost its mojo."
Gralla's inspiration is a New York Times article that came out last month, detailing the backlash of Google's recent move to hike its on-site day care rates for Googlers with young children. One can only imagine that Gralla would have had a field day with this week's headlines on Google seemingly scaling back its free gourmet cafeteria operations.
The signs of hipster wear don't end there, of course. Between the stagnant share price and the troubling flow of defecting executives, Google is coming off as cool as a summer afternoon hike through Death Valley.
More to lose than teething toddlers
Cutting corners wouldn't make waves if Google hadn't been tapped as Fortune's "Best Company to Work For" in each of the past two years. It's a shiny badge, but it's heavier than it looks.
Now that the "do no evil" company is finding itself more fiscally responsible in how it dishes out perks, it risks blowing its reputation as the cool Internet company to work for. That baton may as well go to Facebook, which has had no problem playing sniper as it picks out key Google executives and executive chefs.
That's dangerous. Like a stingy Ivy League school, Google prides itself on its ability to sift through countless applications before welcoming only the world's sharpest minds. If Big G starts running low on street cred, the flow of job applications will slow as well.
The brain drain at the top is making headlines at Google these days, but what about the rusty spigot at the bottom of this upside-down tub?
The method behind the madness
Google can't win at this point. The media and disgruntled ex-Googlers will play this out as a company paying the price for its relative stinginess.
I don't buy it, and I can't believe that I'm going to be the lone voice in justifying Google's penny-pinching actions. Barring the installment of coin slots on the foosball table, Google has a very good reason for tightening its belt: It's hemorrhaging money.
Buried deep in last month's day care article is that Google was taking a subsidized hit to the tune of $37,000 a year for every child in the program. Employees may be more productive, knowing that their toddlers are being taken care of in the same building that they are working in, but is it worth more than $100,000 to Google when a visit to the fertility clinic results in triplets?
Some may falsely believe that Google is losing key hires because it may skimp on dinner service, but the real culprit is Google's waning share price that makes a pre-IPO company like Facebook so appealing. When stock options lose their perceived incentive value, what's a company to do?
Google knows. It's doing it. Google has missed Wall Street's profit targets in two of the past three quarters. Companies like Apple
Why is Google missing? Well, it's been busted as a poor cost checker. It started last year, when the company arrogantly justified coming up short during last year's second quarter as a result of a hiring frenzy. Google doesn't provide guidance, but the market sure does. As long as Google kept humbling the prognosticators, the $100 milestones kept toppling.
Things don't look so pretty in reverse now.
Shareholders are more sanguine and cynical with Google these days. There won't be any costly sky-high NASA deals these days. Investors may have forgiven paying $1.65 billion for a tricky play to monetize a video-sharing site, or looked the other way when Google threatened to bid on spectrum licenses, but the free passes are over.
If Google is going to prime the pumps of stock options as an employee retention tool, it's going to have to generate the profitability that Mr. Market expects.
It doesn't have to end this way
Keeping operating profits in check is an incomplete equation if you look only at costs, of course. In an ideal scenario, Google would be able to expand its revenue base and make up for any margin contraction in volume. Unfortunately, Google is ultimately a media company.
Marketing budgets dictate Google's fate. Sponsors aren't leaving Google. They can't. However, there's no pressing need to bid up paid search keywords when hungry rivals like Yahoo! and Microsoft
Google hires may not see it that way. They may not realize that bagging lunches or paying up for child care may make them wealthier, via their meandering stock options that will begin to appreciate in the long run. It's a story that no one wants to tell because Google hasn't just apparently lost it mojo, but its megaphone as well.
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