Google to keep shooting for the moon, founders tell shareholders
SAN FRANCISCO — It's not easy being the world's most powerful Internet company.
Google's stock is lagging. Powerful competitors are encroaching on online advertising dollars as consumers shift en masse to mobile devices. Growth of Google's lucrative search advertising business is slowing. And European regulators are breathing down its neck.
While some are taking potshots, Google says it's going to keep pursuing "moonshots."
That was the message from Google executives at the company's shareholder meeting at its Mountain View, Calif., headquarters Wednesday.
If anything, the company famous for building self-driving cars and high-altitude balloons that beam the Internet to the earth is doubling down on these improbable projects that require copious amounts of cash and even greater leaps of faith. And there is precious little that shareholders can do about it.
Google co-founders Larry Page and Sergey Brin have maintained ironclad control over Google since starting the company in a rented Silicon Valley garage in 1998. A recent stock split that created a class of shares with no voting power guaranteed their continued control.
They set out their unorthodox approach to running the company in a now famous letter to shareholders penned before the company began selling stock to the public in April 2004. In the "owner's manual," Page and Brin pledged to sacrifice short-term financial results to chase technological challenges and spend whatever it takes to attract the world's smartest engineers.
In a note to shareholders ahead of Wednesday's shareholder meeting, Brin echoed that commitment, hailing the potential of increasing computing power to "create the technology that allows people to lead healthier, happier lives."
While Internet search was yesterday's moonshot, Brin said he envisions a bright future filled with advancements such as Google's computerized glucose-sensing contact lenses for people with diabetes.
Google Executive Chairman Eric Schmidt also detailed Google's technological breakthroughs during the shareholder meeting, even screening a highlight reel of them.
BGC Partners analyst Colin Gillis says Google shareholders can choose to be frustrated by the profligate spending or take solace that they can "easily look out and see multiple areas that could reignite growth" when the search business slows.
Google's GOOG shares are up 2.6% for the year, lagging the Nasdaq Composite, which is up 8%.
For years, investors have worried that Google spends too much money and spends too much time straying from its lucrative search advertising business. Epic fails such as collaboration tool Wave, virtual world Lively and most recently Internet-connected eye wear Glass have done little to assuage that concern.
Yet many investments that once baffled shareholders have paid off for Google.
Few on Wall Street envisioned the long-range possibilities for Android when Google bought the tiny start-up in 2005. Now it's the world's largest mobile operating software.
Eyebrows were raised again in 2006 when Google paid $1.65 billion for YouTube. Now the video-sharing service plays a major role in the company's advertising business.
"There are going to be a lot of different monetization opportunities whether in mobile search, Android, serving ads on YouTube or the Play store," Gillis said.
JACKSON, DRIVERLESS CARS
For all its indifference to the short-term demands of Wall Street, Google isn't entirely insulated from the outside world.
On Wednesday, civil rights activist Jesse Jackson, who has led the pressure on Google and other technology companies to increase the diversity of their work forces, took the floor at the shareholder meeting to challenge Google to disrupt not just technology but its own corporate culture.
"Diversity and inclusion is a complex problem. If we put our collective minds to it, we can solve it, too," Jackson said.
Top Google executive David Drummond, a prominent African-American in Silicon Valley, responded that Google sees diversity not just as a human rights issue but as "an incredibly important business issue."
Google this week released data on the diversity of its work force, showing very little change from a year ago.
Google also took some heat from Consumer Watchdog's John Simpson, a frequent critic of the company.
Simpson challenged Google to release accident reports on self-driving cars. Brin responded that Google did not want to release the reports to protect the privacy of the human drivers who caused the accidents.
Recommendations from two proxy advisory firms regarding board members, including Schmidt, were rejected. Proxy adviser Institutional Shareholder Services had called into question the $100 million in restricted stock grants the board gave to Schmidt last year.