Googled

Chapter 9

In the confusion, other media companies maneuvered to achieve their own best balance of power. In tactics worthy of Metternich, Time Warner pursued simultaneous discussions with Yahoo, Microsoft, and Google about either selling off AOL or forming a partnership. The News Corporation schemed to combine with Microsoft to bid for Yahoo and, at other times, with Yahoo to block Microsoft.

Among the more interesting aspects of this drama was witnessing Microsoft cheered on as an underdog. "Microsoft," said Philippe Daumann, the CEO of Viacom, "is the one company that can most effectively challenge Google"s emerging dominance." A victorious bid by Microsoft would provide advertisers with more leverage, Irwin Gotlieb said. "We"re always better off with more than one strong party." He added, "The real concern is that once Google has an eighty percent market share, they can change the auction rules."

At Microsoft"s annual two-day forum for advertisers on its Redmond campus in mid-May of 2008, the company"s new head of advertising, Brian McAndrews, was the first to speak. He described the online advertising opportunities Microsoft was offering, and sketched for attendees Microsoft"s pitch to advertisers: "We seek ongoing input from you." He did not cite Google by name, but his meaning was clear: We seek to work with you as partners, and the other guy does not. On the final day of the forum, Irwin Gotlieb was eating scrambled eggs at a breakfast buffet, greeting people as they came by to shake his hand or lay a palm on his shoulder. Microsoft"s sales pitch, he told those who came to ask his thoughts, is not new. "They"ve been saying it for a while. Microsoft has never been perceived by people like us as someone who is looking to destabilize an existing business model because they feel like it." They were not vying to enter the advertising business the way others were. He, too, did not invoke Google"s name, nor did he have to.

Microsoft intended to close the forum by presenting a new plan to overtake Google, a plan it privately touted as "a game changer." Company executives took care to brief people like Gotlieb beforehand, seeking not just his input but his enthusiasm for a program they hoped would attract more advertisers, more purchases, and more searches. For the unveiling of this plan, Bill Gates, who would step down the next month from his day-to-day duties at Microsoft to concentrate on the work of his foundation, appeared on stage to announce what he called "a milestone." He was tieless and jacketless, his sandy hair uncombed, and he stood at the foot of the amphithe ater and described the program they called Cashback. The idea was that Microsoft would offer a cash rebate to consumers who did their searches on Microsoft and clicked to purchase products from more than seven hundred merchants, including Barnes & n.o.ble. In essence, Microsoft was offering a reward for consumers who used its search engine rather than Google"s. Yusuf Mehdi, senior vice president of strategic partnerships at Microsoft, helped shape Cashback and described it as "maybe a genius idea," a program that would transform Microsoft into "the Robin Hood of the search business." The initiative offered Google "two bad choices," he said: duplicate Cashback and lose income, or don"t and lose market share.

Mehdi and Microsoft were spectacularly wrong. The program did not excite many of the ad agency people in attendance, partly because the Microsoft program already had a name in the advertising community: it was a rebate program. Perhaps it failed to excite because Microsoft didn"t come up with a catchy name and a finely tuned sales pitch-"geeks acting like marketers," muttered one attendee. In the press too, Cashback failed to generate the headlines or excitement Microsoft antic.i.p.ated. Still, the jury was out. "If consumers perceive that the search process on Google and Microsoft are the same," predicted Sir Martin Sorrell, "what Microsoft is offering will be important."

By November 2008, the verdict was in. Cashback had not boosted Microsoft"s search share. Google"s search market share in the United States had risen from 57.7 percent a year before to 64.1 percent. In September, when I asked Eric Schmidt about Cashback, he could not resist: "All attempts by Microsoft to give people back money they paid them is great!" By January 2009, the two executives who headed Microsoft"s advertising efforts, Brian McAndrews and Kevin Johnson, would depart.

Meanwhile, Sorrell, whose WPP steers an annual total of between five hundred million and eight hundred million dollars of his clients" advertising dollars to Google, grew more agitated. What enraged him, he said on a panel at the Cannes International Advertising confab in June, was that Google was now reaching out and talking to his ad agency clients directly, something he claimed Google had vowed not to do. In WPP"s annual report, Sorrell noted that although WPP and the next three largest marketing companies combined had 50 percent more revenues than Google, their combined market value was 75 percent less. He expressed hope that Google was now working "to develop the constructive side of our relationship."

Had he attended Google"s 2008 national sales conference, held June 11 and 12 at San Franciso"s Hilton Hotel, he would have been more alarmed. In the main ballroom, Eric Schmidt and Tim Armstrong were onstage. Below them sat a Google sales force of fifteen hundred people, one-third of whom had been hired in the past year. Why did Google need such an army of salespeople? "Because our customers must talk to someone at Google," Schmidt said.

Many of these new Googlers were account executives, like the people who work for Sorrell or Gotlieb. And their mission, Schmidt emphasized in his remarks, was to share with advertisers the targeting techniques that made search advertising a rousing success. Online, he said, Google was pouring engineering resources into making itself the leader in display advertising on YouTube. In traditional television, he said, they started by "reaching into the long tail" and he expected that "over a five- to ten-year period ... we"ll become a very significant player in traditional television because of our targeting. The same thing when you look at radio or print." Consumers of traditional media, he continued, "are scared. They"re scared of what they"re reading in the paper. They"re scared about what"s happening in their company. You show up and you offer a new message, a message of hope, a message of change and opportunity."

Page and Brin showed up unannounced, and Schmidt spontaneously invited them to join him onstage. The troika sat in oversized armchairs and had a lighthearted colloquy before turning to the audience for questions. The first two were from a sales manager named Seth Barron, and both concerned missing pieces in Google"s effort: "How do we make it easier for agencies to work with us?" he asked first. It was a question that would have pleased Sorrell. The second question would not: "What resources do we need to be able to effectively compete for deals and eventually do bigger and better deals with companies like the Procter & Gambles and Mars of this world?"

"Today," said Schmidt, "we lack the tools. We"ve identified this as a big hole in our strategy, and we"re either going to build them or buy them."

"The piece that is missing is production," said Barron. "The creative execution, the operational execution-those are the factors where we stumble today, and where our compet.i.tion has world cla.s.s solutions." Later, Schmidt said that the "compet.i.tion" Barron referred to was Yahoo and Microsoft and display advertising. But these are not the companies that produce "world-cla.s.s solutions" to the puzzles of advertising. The true answer is probably that Google"s real "compet.i.tion" is WPP and GroupM and their peers-the biggest players in the business of advertising.

THERE ARE THOSE WHO a.s.sUME Google has a master plan for world conquest, as Napoleon did. By early 2008, it was not unusual to encounter a traditional media executive who at the end of an interview whispered, "Have you read Stephen Arnold"s study on what Google is really up to?" Stephen E. Arnold heads a consulting firm, Arnold Information Technology, and starting in 2002 he and a team of researchers spent five years digging into Google"s various patents, algorithms, and SEC filings. Then, for a hefty but undisclosed fee, he sold his voluminous report to various media companies. The t.i.tle of the report, "Google Version 2.0: The Calculating Predator," telegraphs Arnold"s stark conclusion: a.n.a.lyzing "the Google" in a deliberate and focused way, we find that while Google may have started out to "do no evil," it has, to some, morphed from a friendly search engine into something more ominous. Googzilla, fueled by technical prowess, is now on the move.

Where is it moving? The gruff Arnold, who responded to a phone call but refused to speak on the record to anyone who was not paying him, in his book often drops the scientific method in favor of a more fevered tone. Conjuring a monster, he repeatedly refers to the company as "Googzilla," and writes that "Google stalks a market ... then strikes quickly and in a cold-blooded way." Behind Google"s free food and volleyball games he sniffs a public relations scheme to "misdirect attention. Like a good magician, Google is able to get its audience of compet.i.tors and financial a.n.a.lysts to look one way" Meanwhile, "Googzilla is voracious, and it will consume companies presently unaware they are the equivalent of a free-range chicken burrito...."

Arnold and his researchers have uncovered enough information from their study of Google"s patents and algorithms to terrify media companies. As Wal-Mart reshaped retailing, Google, he believes, aims to become a digital Wal-Mart, an online shopping powerhouse that allows consumers to shop for the best price, an essential middleman that offers efficiency and data to advertisers, and shovels revenues to Web sites and services to merchants, including back-office computers that find the quickest and cheapest way to reroute their delivery trucks.

The world would have been better served if its leaders had been more paranoid in the 1930s; media companies would be better served if they were less paranoid and defensive today. If Google is destroying or weakening old business models, it is because the Internet inevitably destroys old ways of doing things, spurs "creative destruction." This does not mean that Google is not ambitious to grow, and will not grow at the expense of others.

But the rewards, and the pain, are unavoidable. When Google Earth started displaying paintings from the Prado in Madrid, allowing users to zoom in and see the art as an up-close digital photo, it was giving many people access to art they would never see, granting them the time to study paintings that security guards in the bustling museum would never allow them. This was a wonderful opportunity to extend the public"s appreciation of great art. But perhaps we"ll learn that it wasn"t so wonderful for the museum"s box office. Just as the invention of the telephone crushed the telegraph, so motion pictures crippled vaudeville, television eclipsed radio, cable weakened broadcasting, and iTunes shattered CD music alb.u.m sales. In some cases, new technologies brought new opportunities. The movie studios, after huffing about television, belatedly discovered a lucrative new platform to sell their movies. Exposure on YouTube has broadened the audience for Sat.u.r.day Night Live. Sat.u.r.day Night Live. If advertisers can sell their ads more cheaply and better target them through Google, should they fret that they are harming Irwin Gotlieb"s business? What we don"t know is whether the new digital distribution systems will generate sufficient revenue to adequately pay content providers. If advertisers can sell their ads more cheaply and better target them through Google, should they fret that they are harming Irwin Gotlieb"s business? What we don"t know is whether the new digital distribution systems will generate sufficient revenue to adequately pay content providers.

David L. Calhoun spent his career at General Electric, where he rose to vice chairman. He left to become chairman and CEO of The Nielsen Company in 2006. When Calhoun joined, Nielsen had long dominated the audience measurement field but was facing a challenge from digital technology, including Google"s. He believes media company executives spend too much time wailing about disintermination. He prefers the word "reintermediate," "reintermediate," because it suggests a company more focused on offense than defense. The companies that "lean in," he said, are those that embrace change; those who "lean out," resist it. Companies that concentrate on defense "are frozen," he said. "If Google"s looking at you, you look like an iceberg. And Google is looking at everybody." because it suggests a company more focused on offense than defense. The companies that "lean in," he said, are those that embrace change; those who "lean out," resist it. Companies that concentrate on defense "are frozen," he said. "If Google"s looking at you, you look like an iceberg. And Google is looking at everybody."

He does not impute sinister motives to Google, though he treats it like a frenemy: "I genuinely think they just want to empower the consumer. Anything that gets in the way, that blocks a perfectly efficient market, is fair game. If there is a moment they can do something to make the consumer more efficient, they will. And you should know that. But they don"t lie, they don"t cheat, they don"t give head fakes." Calhoun seeks to collaborate with Google as well as compete, and in 2007 he entered into a partnership to work with Google TV Ads to provide the demographic data that digital set-top boxes do not now yield.

Of course Google is a frenemy to most media companies. Like all companies, Google wants to grow, and growth usually comes from taking a slice of someone else"s business. Because engineers excel at finding efficiencies in the digital world, Google can often offer a more cost-effective solution than companies less focused on engineering. And with 20 percent of their time to concoct new solutions, Google"s engineers are constantly dreaming up ideas-like the young engineer who entered Marissa Mayer"s office in the fall of 2008.

Mayer has one of the most important jobs at Google: to ensure that all Google products are simple and easy for users. She also has an almost photographic memory, the absolute trust of the founders, and joined Google when it was just a year old, so her memory becomes a virtual library of what has worked and what has not, what the founders would and would not want. Mayer sets aside regular open office hours to encourage Google engineers to stop in and describe the 20 percent projects they are working on; it is where they receive her encouragement, or discouragement. On that fall day, a young engineer sat beside her desk and described the device he was working on to search television digital video recorders. He wanted to know two things. Should he develop this as open-source software that others outside Google could tinker with and improve. (Yes.) Second, he needed clarification about something Larry Page had said when he broached the idea at an engineering meeting. Page, who like Brin doesn"t often watch television, expressed impatience with the idea of still another device in the home. Page told the engineer he was thinking too narrowly. The only useful device, he said, would be hardware or software that would allow Google to sell new forms of advertising on any device in the home, from DVRs to TVs to computers. The engineer came to Mayer"s office to better understand the thinking of the founders. The project was code-named Mosaic, and would let Google partner and share ad revenues with cable or telephone companies.

In Google"s way of looking at the world, she explained, any product that simplifies a task for consumers better delivers "the world"s information" to them. Which is another way of saying: Google engineers should imagine that search can be anything that makes a current system more efficient. Searching for a better way to display ads or a better advertising rate-or a better alternate energy source to reduce costs-are forms of search.

The answer is consonant with the Google culture. Understand this Google bias and you"ll better understand why it is a wave-generating company that other media companies ride, crash into, or are submerged by.

"I think they"re naive, not evil," said CBS"s Quincy Smith. He said his friend Marc Andreessen thinks he"s naive to be so trusting. But Smith doesn"t subscribe to a conspiracy theory because "I don"t think anybody can be that smart." Not that he"d allow Google to take over CBS"s ad sales function-"That would be letting the fox in the henhouse," he said. However, having marinated in Silicon Valley for most of his professional life, Smith approaches Google as a potential partner, not adversary. He wants CBS to play offense. Pacing the floor of his new Menlo Park office, he said that media companies fail to understand that Google is a platform. "CBS has sixty-five thousand advertisers, and only fifteen thousand are core advertisers. Google has millions of advertisers." By placing two- or three-minute clips on YouTube, CBS can sell advertising off those clips. Smith doesn"t believe Google is a content compet.i.tor. He does believe that the more CBS places its content on Internet platforms, "the less chance there is for piracy"; a two-minute CSI clip on YouTube watched by two million people is a fantastic way to enlarge CSFs audience. He is encouraged that CBS CEO Les Moonves wants CBS to play offense. Smith, however, was mindful that he was now a member of the broadcast fraternity-and presumably, though he didn"t say it, that his controlling shareholder was Sumner Redstone. "My objective is to be a little bit ahead of the pack, not a lot," he said.

Eric Schmidt, who admitted in September 2007 that relations with traditional media companies were frosty, was more encouraged in September 2008. "The CBS deal is one" example of detente, he said. "We"ve done a series of deals. They are slowly happening." Of course, he added, "it would be much better if I could point to a billion-dollar new revenue stream." To try to calm advertising agency fears, Google established a forty-person team to visit agencies and a.s.sure them that Google was not a compet.i.tor, just another company that had products their clients would want to use and that could share valuable customer data with them.

To ease the fears of content providers, Google turned to David Eun, vice president of strategic partnerships. A soft-spoken man who displays few rough edges and who once served as a senior executive at Time Warner and NBC, Eun today supervises a staff of about two hundred employees out of New York. He and his partnership team made some deals for YouTube. HBO and Showtime agreed to run a handful of their full programs on YouTube, accompanied by ads; MGM licensed some of its movies, and music companies supplied videos. With a new antipiracy technology they called the Video Identification System (VID), YouTube has now archived the reference file numbers for companies" content and set its computers to scan all uploaded material to determine whether numbers match. If they do, content companies are offered three choices: they can have YouTube take the clip down; let it run and monitor audience reaction; or sell ads against it, as CBS agreed to do in late 2008. David Eun pushed for the third option because he believes content companies, in addition to selling ads off this content, can collect valuable data. "The audience is telling you what they like," he said. YouTube can monitor what content is uploaded and shared with friends, how much time users watch it, or what they click on. "These are like the presidents of your fan clubs. Would you arrest the president of your fan club?

"The headline here," said Eun, "is that there has been a dramatic shift" in traditional media"s att.i.tude toward YouTube. He singled out Quincy Smith as "one of the few people who seems to truly understand so-called new media versus traditional media."

Eun made a larger point about how very different this new medium really is, how control has shifted to users. In the digital world, advertising is not locked into a time and s.p.a.ce. Ads are interactive, allowing users to click to remove them from the screen or to fill the screen, to treat them as information and go deeper to learn more and make a purchase, or to forward the ad to a friend. "Traditional media was about bringing the audience to where you decided the content was going to be," said Eun. Media companies would announce when a movie would open, a DVD would go on sale, a record would be released, a show would be scheduled on television, a book published. "It was about control. This is no criticism. That was the business. They created a huge, multibillion-dollar business. In this medium, the new media, it is not about bringing the audience to where the content is. It"s about taking the content to where the audiences are. And the audiences are all over the Web." Not just YouTube but thousands of sites become potential platforms.

Because this is a very different model than traditional media is accustomed to, and because they have legitimate concerns about giving content away cheaply, "No one wants to be the first to jump into the pool, or be the last," said a Google executive. The old media companies "are all clumped together. And if one breaks out-as Bob Iger did when he put Disney content on iTunes-then all follow. It is an industry that follows."

Google did achieve a dramatic breakthrough when, in October 2008, it reached an accord with the U.S. publishing industry. The industry agreed to drop its lawsuit, subject to approval from the court; and Google agreed to pay $125 million to settle earlier copyright infringement claims, to reimburse publishers" and authors" legal fees, and to establish a system that will permit publishers and authors to register their books and receive a payment when these are used online. Individuals or inst.i.tutions will be able to read up to 20 percent of out-of-print but copyrighted books, and either purchase digital copies or search them using Google, and publishers and authors will receive 63 percent of any sales or ad revenues, with Google taking the rest. Libraries will be able to display these digital copies for free; colleges and universities will, for a subscription fee, allow students to retrieve books online. Book t.i.tles still in print would be available to be purchased or searched, but only if approved by author and publisher. At the time of the agreement, Google Book Search had already scanned seven million of the estimated twenty million books that have ever been published. By winter, Brin said, Google was "able to search the full text of almost ten million books."

There are two potentially momentous shifts here: First, Google had conceded it must pay for some content. And second, Google was not relying on a promise of advertising revenues to reach an agreement; rather, it agreed to an up-front compensation formula of a sort it had refused to make with other traditional media companies, with the exception of the a.s.sociated Press and some wire services. "It"s a new model for us," admitted Google"s chief legal officer, David Drummond.

This new model was lavishly praised by authors and publishers, but it raised new questions. Was Google going to enter the online book-selling business, competing against an early investor, Amazon"s Jeff Bezos? With Microsoft dropping its book search project and no other deep-pocketed compet.i.tor jumping in, did the agreement concentrate too much informational power in the hands of a single company? Did Google have the right, as it claimed, to sell digital copies of books whose copyright had expired? If it is true-as the Internet Archive, a compet.i.tive book digitizer, claims-that the settlement grants Google immunity from copyright infringement, will the courts permit this? What of so-called orphaned books, those whose copyright owners can"t be identified-does Google, as it claims, get to own the digital rights? Will there be any regulation of the prices Google may charge libraries and colleges for access to digitized books? What will be the outcome of new lawsuits challenging this and other aspects of the settlement? And what impact would the publishing accord have on the Viacom lawsuit and Google"s dealings with other media companies seeking compensation for their content?

Viacom was quick to link the book copyright settlement with its own lawsuit. In a public statement released the same day, Viacom said: "It is unfortunate that the publishers had to spend years, and millions of dollars, for Google to honor that [copyright] principle. We hope that Google avoids the wasted effort and comes more quickly to respect movies and television programming." Drummond insisted that his company has never favored free content and has not altered its posture: "There is a difference in wanting to push for access, and wanting to push for free access. There are some folks on the Web who think you should get access to copyrighted material for free. We don"t." Fair use to Google, he said, was to create a card catalogue to open new sources of information-"allowing books to be discovered, not consumed." The book settlement had no impact on the Viacom lawsuit, he added. "The litigation is in full swing."

Why not offer Viacom compensation for their content, as Google has now done with publishers and did earlier with revenue guarantees to AOL and Mys.p.a.ce? Drummond does not oppose an up-front payment but wouldn"t agree to the amount Viacom sought. "A lot has to do with how much they want. They want a lot more, in my perception, than the monetization potential of the content." Having guaranteed Mys.p.a.ce a total of $900 million in ad revenues over several years, and having fallen short of that guarantee, he said of guarantees, "We don"t do them as much as we did before." By the end of 2008, however, Google acknowledged it had a total of $1.03 billion of "noncancelable" guaranteed minimum revenue share commitments through 2012. It was widely expected that Google would cancel, or curb, many of those agreements when the contract period expires.

Google at first said it was not in compet.i.tion with Amazon to sell hard-cover copies, because most of the books they want to sell online are out of print. "We are unlocking access to millions and millions of books," Drummond said. But of course, they could be in compet.i.tion with Amazon-or any distributor-to sell electronic books. (In May 2009, Google announced it would compete to sell e-books.) Might the book settlement apply to newspapers and open a vein of revenue for them? Drummond didn"t think so: "For news, it"s a little different. News has to be current. It doesn"t have the same shelf life as a book. We are thinking deeply about how to help. Now we send newspapers traffic." He knows newspapers want more, but he said Google has found "no silver bullet yet."

NOR, BY THE END OF 2008, had traditional media companies found the silver bullet. With some exceptions-the thriving worldwide game business being one-most media businesses seemed to be falling off a cliff. Their fall preceded the worldwide recession that struck like a category five hurricane in the last half of the year. The dismal headlines were not pretty.

By the end of 2008, daily newspaper ad revenues dropped 17.7 percent, about double the 9 percent decline of the previous year; average daily newspaper circulation among 395 dailies dropped 7.1 percent.

Magazine advertising pages plunged 11.7 percent in 2008, fell 26 percent in the first quarter of 2009, and were projected to fall 10.9 percent for the year.

The number of viewers tuning to prime-time network shows dropped almost 10 percent, and according to Nielsen, this figure includes viewers who later watch the shows on DVRs. Broadcast network television advertising fell 3.5 percent.

Broadcast radio advertising fell 9.4 percent.

Aside from Internet advertising, whose growth rate dipped in 2008 but still rose 10.6 percent, according to Nielsen the only medium to experience ad revenue growth in 2008 was cable television, rising 7.8 percent.

Record alb.u.m sales dropped 14 percent.

The number of people going to movie theaters dipped, but thanks to an increase in ticket prices, box office revenues rose by 2 percent. DVD sales, which had been a revenue gusher, dipped to their lowest level in five years.

Book sales of about three billion books fell 2.8 percent, according to the a.s.sociation of American Publishers (1.5 percent, according to the annual report from Book Industry Trends). And although electronic book sales climbed 7 percent to $113 million, this was a tiny percentage of the just over $11 billion generated by adult books.

Advertising spending in the United States was flat in 2008 at about $162 billion, and was projected by GroupM to fall by 8 percent in 2009. World wide advertising spending of about $450 billion grew just 1 percent in 2008 and was projected to fall by almost 7 percent in 2009, according to ZenithOptimedia, the media-buying arm of Publicis, the world"s fourth largest advertising/marketing company. Although estimates of ad spending differ, the other major firms predicted similar drop-offs. Total marketing spending-direct mail, event marketing, public relations, etcetera-dropped 1.7 percent in 2008.

In a December 2008 report, Morgan Stanley"s Mary Meeker produced a chart that should alarm traditional media. t.i.tled "Media Time Spent vs. Ad Spend Out of Whack," the chart reveals that advertising expenditures don"t conform to where consumers spend their time. Newspapers, for example, consume 8 percent of our time, yet receive 20 percent of advertising dollars. By comparison, the Internet garners 29 percent of our time, yet attracts just 8 percent of advertising dollars. At some point, those ad dollars will shift away from traditional media, probably dramatically. Whether or not one factors in the most severe recession to strike the United States since the thirties, change was slamming into traditional media with new ferocity. Unlike the fog in Carl Sandburg"s famous poem, it did not creep in "on little cat feet."

CHAPTER FOURTEEN.

Happy Birthday (2008-2009).

In September 2008, Google was ten years old, which in Internet years virtually qualifies it for senior citizenship. Yet the company did not slow down and move on "little cat feet." Announcements of fresh initiatives kept rolling out.

In the second half of the year, it was announced that the Google Content Network would employ its AdSense program to identify video-hosting Web sites and sell syndicated programs to them. The first show was a new animation series, Cartoon Cavalcade of Comedy, Cartoon Cavalcade of Comedy, created by Seth MacFarlane, whose credits include created by Seth MacFarlane, whose credits include Family Guy, Family Guy, a hit comedy show on Fox. There was Google Ad Planner, which provides advertisers with digital data free of charge to identify the Web sites their desired audience visits. There was the exchange of employees between Google and Procter & Gamble, with P&G saying it hoped to better understand how its present and future customers use the Internet and Google not saying that it hoped to snare a bigger slice of P&G"s $8.7 billion ad budget. a hit comedy show on Fox. There was Google Ad Planner, which provides advertisers with digital data free of charge to identify the Web sites their desired audience visits. There was the exchange of employees between Google and Procter & Gamble, with P&G saying it hoped to better understand how its present and future customers use the Internet and Google not saying that it hoped to snare a bigger slice of P&G"s $8.7 billion ad budget.

There was Google Maps for transit, an online navigation tool to allow riders to figure out subway routes in New York City and other metropolitan areas, and an announcement that Google News would pay to digitize newspaper archives, place ads next to the search results, and share any revenues with the publications. There was a new partnership with General Electric to improve the efficiency of the electric grid; new investments were made in renewable energy that would be cheaper, and cleaner, than coal.

Larry Page, usually parsimonious with his public appearances, mounted a campaign of speeches to persuade the FCC to set aside an unused block of the radio spectrum (known as white s.p.a.ce) for wireless devices, including Wi-Fi and other high-speed wireless connections to the Internet. Broadcasters and Broadway theater owners protested that the use of that spectrum by these devices might interfere with broadcast signals and wireless microphones in theaters. The FCC voted 5 to 0 to open the spectrum. Google launched Knol, a searchable user-edited encyclopedia, to compete with Wikipedia; Google strayed still deeper into content by signing up Michael Davies, creator of Who Wants to Be a Millionaire, Who Wants to Be a Millionaire, to produce an entertainment-news show called to produce an entertainment-news show called Poptub, Poptub, to be distributed on YouTube and the Google Content Network. to be distributed on YouTube and the Google Content Network.

David Calhoun of Nielsen said Google could no longer claim to be a digital Switzerland. "YouTube crossed the line by a mile. YouTube"s audience competes with other content." If Google hopes to sell display advertising, as it does on YouTube, Terry Semel believes it will have to own content. User-generated content on YouTube "does not feel safe" to advertisers, he reasoned, and to lure ads Google will need to own attractive content in order to attract advertisers.

Eric Schmidt, when asked if Google had gone into the content business, split hairs, saying that YouTube and the Google Content Network were merely "hosts" of the content, "not authors." This is akin to saying that ABC merely "hosts" the programs it chooses to pay for and air. Schmidt"s distinction ignores another salient fact: the more traffic his sites generate, the more data Google gets, and the more dollars it receives for its ads.

And what about Knol?

"Knol is an example of something right on the edge," he conceded. (Not that Knol, which debuted in July 2008, posed a serious threat to Wikipedia. By the following January, it had just a hundred thousand entries and had relatively few page views.) With all these new initiatives, the opportunity Schmidt was most excited about in late 2008 was cloud computing. It was an idea that had animated him since his days at Sun, when he promoted what was called "the network is the computer." Now, he said, the shift from the PC to the Web was "the defining technological shift of our generation." The excess capacity of Google"s data centers, and the variety of applications the company had developed-Gmail; Google Earth; Google Maps; Google Scholar; Google Finance; Google Product Search; Google Calendar; Google Desktop to search all text on a personal computer; Google Docs to do all word processing, spreadsheets, and presentations-offered Google enormous growth opportunities. "Eventually, this will be a very large source of revenue for our company," he said, citing a professor in Africa who had told him his schools had no textbooks but as a subst.i.tute they used Google search. He was aware that South Korea, which has the world"s highest broadband penetration, was already eliminating textbooks and downloading books to laptops.

A Google-invented browser, dubbed Chrome, would provide access to all the applications. Because Google is not in the packaged software business, all of its applications live in the browser. With billions of people around the world on the Internet, increasingly a browser will become their operating system, the host for all applications. "Everything we do is running on the Web platform," Page told reporters on the day Chrome was announced. "It"s very important to us that that works well." When Brin, who arrived at the press conference wearing bright red Crocs, was asked whether Chrome was aimed at Microsoft, he said: "We don"t spend our time thinking about Microsoft." In truth, Google couldn"t abide being dependent on Microsoft"s Internet Explorer, which then had a 72 percent browser market share. Schmidt described Chrome as "the most important product" Google launched in 2008. "The reason is that the browser, like our proposed Yahoo deal, has a defensive as well as an offensive component." Defensively, he said Internet Explorer"s dominant position "allows Microsoft to make arbitrary extensions to the browser and close off the Internet"; Chrome would help Google defend against such a move. The offense comes from speed and flexibility. Schmidt maintains that Chrome is faster and, as an open-source browser, will encourage developers to compete to produce innovative applications. Chrome also grants Google "a platform on which to build better apps" and "to collect more data." The data is important, for browsers produce the cookies that track what users do online. Despite its importance to Schmidt, by mid- 2009, the Chrome browser was still not available to Mac or Linux users.

Google introduced another major product-Android-in 2008. First announced in late 2007, Android was Google"s free, open-source operating system for smart phones. It promised new profits, and new conflicts. With three times as many mobile devices in the world as PCs, Google had ample incentive to jump into this market. They did not fail to notice when Steve Jobs stood up at Macworld in January 2008 and said that four million iPhones had been sold in the United States in the first six months, giving Apple a market share of 19 percent. Since the first 3G phones were sold in July 2008, over the next five months a total of nearly ten thousand applications-among them games and travel and book and finance and social network sites-had appeared for the phone, three quarters of them available to users only for a fee. Every day, Americans send 1.6 billion text messages on their mobile phones, and 10 percent of Verizon"s customers have replaced their wired telephone with a mobile phone, a number that CEO Ivan Seidenberg predicted would soon double. Because his customers use so many more services on a mobile device, including text messages and Internet access, the average monthly Verizon wireless bill is fifty-two dollars, about fifteen dollars more than the average landline bill. In the United States, AT&T and Verizon were each ringing up revenues of more than a hundred billion dollars in 2008.

If the Android phone (as with Microsoft"s Cashback, geeks are not always deft with names) sells well, Google will have some leverage over the telephone companies that sell the hardware and control distribution. And it would ensure that Google"s applications, including text and voice search, would be featured. The Android also opens up new frontiers for search; as Brin noted in the spring of 2009, "almost a third of all Google searches in j.a.pan are coming from mobile devices." Smart phones will yield more data for Google. And they will allow Google to explore ads or services on these devices to generate revenues.

Schmidt, however, was dubious about how Google would monetize Android: "I would love to argue that mobile is the next business for us. I"m not sure it is." Among the reasons for his caution were that neither of the dominant phone companies was eager to jump into bed with Google. AT&T already had a deal with Apple, and Verizon was standoffish. "We"re watching it," said Verizon"s Ivan Seidenberg, who added, "We said we"d be willing to consider something like that"-an open-source Android-but he said he was worried more about maintaining the quality of the Verizon system. "We want an open network where we can ensure quality," he said.

"Google"s vision of Android is Microsoft"s vision of owning the operating system in every PC," Seidenberg said. "Guys like me want to make sure that there is a distribution of platforms and devices. Is it in Google"s interest to disintermediate us? Yeah." He let his voice trail off, not wanting to engage in verbal warfare. But he said his job is to "make sure we are never out-positioned," never a "captive." Neither Seidenberg"s power nor Schmidt"s skepticism deterred Google from plunging ahead. (In late 2008, T-Mobile ordered two million units in the hope that its Google-powered smart phone could rival iPhone.) If mobile"s growth prospects are clear, the data questions are not. Do companies have the right to own, or share, data about their users? Who would own the data, the phone company or Google? Is there a privacy line they cannot cross? Many digital companies and advertisers agree with IAC/ InterActiveCorp CEO Barry Diller that privacy is overrated. "Privacy is a much noisier issue than it is for people," he said. Of course, when it suited Diller"s interests to position his Ask.com search engine as superior to Google"s, his company took out full-page advertis.e.m.e.nts declaring that its AskEraser would purge cookies of data and Google would not. But surveys suggest that the public disagrees with Diller. A March 2008 poll of one thousand Americans by TRUSTe, an organization that monitors privacy practices on the Web, found that 90 percent thought online privacy was a "really" or "somewhat" important issue, and only 28 percent said they were comfortable with behavioral targeting techniques. Even if the survey was flawed-surely the organization that conducted it had a rooting interest in the outcome-in this instance, Google seemed more attuned to the public"s feelings; in March 2009 the company announced that it would allow users to preview and edit the data it had gathered on them and would, as Yahoo has done, allow them to opt out. Because users are automatically opted in, and opting out requires that the user go through an esoteric process of clicks, Google"s announcement did not represent a major policy switch. Google demonstrated this when it was among the first major companies to announce that it would employ behavioral targeting, showing ads to users based on their prior activities online. The fact that Google would couple such a new transparency policy with its new behavioral targeting efforts is another reminder that privacy questions will continue to hover like a Predator drone, capable of firing a missile that can destroy the trust companies require to serve as trustees for personal data. search engine as superior to Google"s, his company took out full-page advertis.e.m.e.nts declaring that its AskEraser would purge cookies of data and Google would not. But surveys suggest that the public disagrees with Diller. A March 2008 poll of one thousand Americans by TRUSTe, an organization that monitors privacy practices on the Web, found that 90 percent thought online privacy was a "really" or "somewhat" important issue, and only 28 percent said they were comfortable with behavioral targeting techniques. Even if the survey was flawed-surely the organization that conducted it had a rooting interest in the outcome-in this instance, Google seemed more attuned to the public"s feelings; in March 2009 the company announced that it would allow users to preview and edit the data it had gathered on them and would, as Yahoo has done, allow them to opt out. Because users are automatically opted in, and opting out requires that the user go through an esoteric process of clicks, Google"s announcement did not represent a major policy switch. Google demonstrated this when it was among the first major companies to announce that it would employ behavioral targeting, showing ads to users based on their prior activities online. The fact that Google would couple such a new transparency policy with its new behavioral targeting efforts is another reminder that privacy questions will continue to hover like a Predator drone, capable of firing a missile that can destroy the trust companies require to serve as trustees for personal data.

Alternatively, if the public is truly less concerned with privacy questions and more interested in trading data for, say, a subsidized service, or is more interested in the trivial, as the late scholar Neil Postman believed, then privacy will be the least of our issues. A former student of Marshall McLuhan"s, Postman taught at NYU for more than four decades and auth.o.r.ed a variety of important books, the best-known of which was Amusing Ourselves to Death. Amusing Ourselves to Death. In that book he argued that the real threat was not the one described in 1984 but one contained in an earlier book, Aldous Huxley"s In that book he argued that the real threat was not the one described in 1984 but one contained in an earlier book, Aldous Huxley"s Brave New World. Brave New World.

Contrary to common belief even among the educated, Huxley and Orwell did not prophesy the same thing. Orwell warns that we will be overcome by an externally imposed oppression. But in Huxley"s vision, no Big Brother is required to deprive people of their autonomy, maturity and history. As he saw it, people will come to love their oppression, to adore the technologies that undo their capacities to think.... Orwell feared those who would deprive us of information. Huxley feared those who would give us so much that we would be reduced to pa.s.sivity and egoism.

This much is certain: neither concerns over privacy nor the issues raised by Postman have slowed the ascendance of smart phones. The attraction is undeniable. They are portable and perform varied functions, including playing movies, music, and games. They enable employees to work from more than one location. They can function just as a desktop or laptop does. They can serve as a key to unlock a car or as an ID at an airport or bank, or become a universal remote for a TV Third World countries that cannot afford a fiber infrastructure can build a low-cost wireless infrastructure that connects cla.s.srooms to libraries, individuals or health care facilities to medical expertise.

The question, of course, is how to monetize not just the hardware but also the services and applications. That"s where advertising comes in. Smart phones provide advertisers with precision targeting, reaching individuals they know are ready to purchase a car and are close to an auto dealer. Irwin Gotlieb, whose demeanor is normally subdued and steady, could barely contain his excitement as he sat in his office in the Garment District and described the Brave New World he envisioned. "It"s a totally different kind of advertising," he said. "You"re in Tokyo. It"s noon. The population density is scary. You have forty-five minutes for lunch, and you go rushing out of your building and already there"s limited restaurant s.p.a.ce. So you flip your phone open and up come six restaurants that have seating availability in the next ten minutes. You click on the restaurant you want to go to, telling them you need three seats, and the table is held for you. Is that advertising? Not the way you and I think of a thirty-second spot. But you better believe that restaurant is paying for it. Or it"s going to be built into the bill."

He took a sip from his second cup of tea. "Let"s take another example," he continued. "I"m standing on Fifth Avenue and I point my phone at a building and on my screen up comes the directory for that building, all the businesses in the building. Some of them are retailers. If I click on a retailer, I may get promotional offers. That"s an ad? There are revenue opportunities there. It"s a service." He paused again, this time to talk about the power of the tiny handheld device: "The average phone today has more computing capacity, and more storage capacity, than the average set-top box does. They are powerful computers."

The consumer has the power to make choices, but Irwin Gotlieb envisions that he will help steer the consumer to those choices and cash in on them. And if Gotlieb were to deliver the services, Google and Verizon would be excited by the prospect of serving as his facilitator. And maybe one day taking over the delivery of those services themselves.

THERE WAS, HOWEVER, a more pressing concern for the media: the colossal economic recession that struck in the second half of 2008. With advertising and other revenues plummeting, traditional media businesses accelerated their cost cutting. With less revenue and sinking market values, debt obligations became ticking bombs. For the Tribune Company and other newspapers, that bomb exploded. Faced with end-of-year debt obligations, Sumner Redstone was compelled to frantically sell Viacom and CBS shares and to propose the sale of National Amus.e.m.e.nts, his movie theater chain. He has since vowed not to cede control of his media empire, and renegotiated one of his debt obligations, but by the summer of 2009 it was still not certain he would eventually succeed. The recession pinned down most traditional media companies, hampering their ability to write the next chapter. Their core businesses were declining. It was tough for them to sell a.s.sets. They lacked resources to acquire new media ventures, and debt obligations loomed.

The gloom extended to Silicon Valley; at the November 2008 Web 2.0 Summit in San Francisco, there was clearly a dark cloud overhead. Welcoming the thousand attendees, the popular Tim O"Reilly, whose O"Reilly Media cosponsors this annual event, appealed to the evangelical heart that beats in the Valley. Borrowing a campaign slogan from Barack Obama, he began his presentation by chanting, "Yes we can! Yes we can!" He paused, then continued, "It"s true in the campaign! And it"s true in Silicon Valley!" But even this enthusiasm couldn"t appreciably lighten the mood. O"Reilly conceded that "these are tough times." A number of other speakers agreed, including John Doerr. In his radio announcer"s voice, Doerr bellowed that venture capital funding would fall from thirty-seven billion dollars in 2007 to ten billion or even as little as five billion in 2009. "Google is not going to buy these Internet start-ups now," he said, and no one else would either. He advised the executives in the hall to make cuts, to make sure they have eighteen months of cash on hand (and the rest in Treasury bills), to renegotiate contracts, and to be honest with employees but "keep up their hope."

There were some at this conference, like Mary Meeker, whose optimism about the Web was unwavering. Although Meeker gave an unremittingly bleak a.n.a.lysis of the American economy at large, she offered a euphoric a.n.a.lysis of the tech world"s "opportunities," expressing her faith that YouTube would be able to make the abundant ad sales that had so far eluded them.

To Doerr and others in the Valley, Meeker"s optimism seemed at odds with the facts on the ground. Layoffs spread even here, fueling talk of another dot-com bust. Intel and Cisco would report that their sales were heading south. Nokia predicted that global mobile phone sales would fall 10 precent in 2009, reversing a long trend. With PC sales slumping, Microsoft would cut five thousand jobs, 5 percent of its work force. Twitter, which attracts users but not yet profits, pared employees and installed a new CEO. Sequoia Capital, the venture capital firm that backed Google and Yahoo, convened a fall meeting of the Valley companies it was supporting and began its presentation with a slide that read, "RIP good times." Unless the start-ups had a pool of venture capital and other monies, as Facebook, Linkedin, and Twitter did, investors had become less enamored of the Google mantra: The rise of Google had contributed to another article of faith in the Valley: Information wants to be free, and advertising would pay for it. The recession would, slowly, teach that the new media had fallen into an old trap of relying on a single source of revenue, advertising.

Where once optimism had ruled, rancor and incivility began to rear their ugly heads. Michael Arrington, the editor of TechCrunch.com, an influential arbiter of technology, began to feel firsthand the desperation of tech employees or investors who felt their companies had been victimized by bad press. He wrote a blog in January 2009 about an encounter he had had in Munich. As he was leaving a conference, a stranger "walked up to me and quite deliberately spat in my face." He did not know why. All he knew was that the environment had become rancid: "I can"t say my job is much fun anymore. Start-ups that don"t get the coverage they want, and competing journalists and bloggers tend to accuse us of the most ridiculous things.... On any given day, when I care to look, dozens of highly negative comments are made about me, TechCrunch, or one of our employees in our comments, on Twitter, or on blogs or other sites. Some of these are appropriately critical comments on things we can be doing better. But the majority of comments are among the more horrible things I can imagine a human being to say."

Worse, he told of how "an off-balance individual threatened to kill me and my family" Because the individual had a felony record and carried a gun, Arrington hired a personal security team at a daily cost of two thousand dollars. He hid out at his parents" house. "I write about technology start-ups and news," Arrington wrote. "In any sane world that shouldn"t make me someone who has to deal with death threats and being spat on. It shouldn"t require me to absorb more verbal abuse than a human being can realistically deal with." To "get a better perspective on what I"m spending my life doing," Arrington said he would take a month off.

GOOGLE WAS NOT IMMUNE to the downturn. Signs of the downturn were apparent on Google search. During the fall, travel travel was no longer among the most popular search words or phrases, but was no longer among the most popular search words or phrases, but home safes home safes was; by early 2009, searches for was; by early 2009, searches for bankruptcy bankruptcy had jumped 52 percent. The "most significant thing that happened at Google" in the past six months, Bill Campbell said in November 2008, "was the realization that there was a flattening of the business." This realization, he said, was driven by Schmidt, who began reviewing "expenses relative to revenue every Monday." Another senior executive at Google credited not Schmidt but the new senior vice president and chief financial officer, Patrick Pichette, "for forcing, for the first time, the company to focus on priorities" and to "allocate capital based on whether there are returns." The founders" push to expand into a mult.i.tude of businesses was, for the first time, subjected to a budget a.n.a.lysis and scaled back, this executive said. "While Google"s success is hard to dispute, I don"t think they are a particularly well-managed company," Mary Meeker said. "Part of the problem was that Larry and Sergey didn"t need to care about the numbers because growth was so steady and the company"s compet.i.tive position was so strong they didn"t feel they had to. The downturn in the economy gave the new CFO help in imposing some cost discipline." had jumped 52 percent. The "most significant thing that happened at Google" in the past six months, Bill Campbell said in November 2008, "was the realization that there was a flattening of the business." This realization, he said, was driven by Schmidt, who began reviewing "expenses relative to revenue every Monday." Another senior executive at Google credited not Schmidt but the new senior vice president and chief financial officer, Patrick Pichette, "for forcing, for the first time, the company to focus on priorities" and to "allocate capital based on whether there are returns." The founders" push to expand into a mult.i.tude of businesses was, for the first time, subjected to a budget a.n.a.lysis and scaled back, this executive said. "While Google"s success is hard to dispute, I don"t think they are a particularly well-managed company," Mary Meeker said. "Part of the problem was that Larry and Sergey didn"t need to care about the numbers because growth was so steady and the company"s compet.i.tive position was so strong they didn"t feel they had to. The downturn in the economy gave the new CFO help in imposing some cost discipline."

Pichette had come over from Canada"s foremost telephone company, Bell Canada, where he was credited with slashing two billion dollars from its operating costs. A thin man of modest height, he comes to work lugging a backpack and wearing jeans, a b.u.t.ton-down shirt with sleeves rolled up, and a ready smile. Told that he has come to Google at a bad time, he quickly disagrees. "You can argue that I came at a good time," he said. "When everything runs well and works perfectly, at least according to financial results, you don"t take the time to ask tougher questions because you don"t have to. When you"re growing so fast that you"re running out of desks, if you talked to people about waste and inefficiencies they wouldn"t have listened to you. It would have been the wrong question to ask at that time."

In a March 2009 Morgan Stanley conference interview with Mary Meeker, Eric Schmidt said, "Patrick is particularly good at business reviews, so we"ve been going through systematically business after business. In our hypergrowth period, we did not have the necessary systems in place..." Pichette was well rewarded; he received a bonus for 2008 of $1.2 million, though he had only worked six months; it was the highest bonus granted by Google. (Schmidt and the founders, as is their custom, take no bonus.) For the first time, Google was contracting. It slowed its hiring, adding only 99 employees in the fourth quarter of 2008, fewer than it added in a week at the start of the year, bringing its employment total at the end of 2008 to 20,222. It laid off some of its 10,000 outside contract workers, sliced 300 jobs at DoubleClick, reduced by one-quarter its 400 job recruiters, and scaled back some of its engineering teams. Taking a closer look at management, Google decided that management was not Dr. Larry Brilliant"s forte, and gave him a new t.i.tle as chief philanthropic evangelist, replacing him with Megan Smith, who would retain her position as vice president for new business development. It delayed the opening of its Oklahoma data center by eighteen months, and closed its office outside Phoenix, which had two dozen full-time employees. After Pichette discovered that in some cafeterias-most buildings have one-a third of the food was thrown out at the end of each day, cafeteria hours were reduced and menus pared. Google also curbed some free services and, according to a longtime executive, engaged in a "hot debate" over whether to continue to offer water in plastic bottles or switch to less expensive filtered tap water. (By 2009, Google was serving filtered water out of plastic cups, which were soon to be replaced by reusable and renewable cups.) Google also eliminated a few sites, including Lively, its virtual world, and began to welcome ads on such formerly ad-free sites as Google Finance and Google News. Although Tim Armstrong boasted in September that Google Print Ads had "70 percent of newspapers in the U.S. as clients," the program had been encountering resistance from newspapers reluctant to cede control of big clients or sales staffs; as a result, it wound up selling mostly remnant ads, and often for below-market rates. Just months after Armstrong"s announcement, the program was terminated. In its day-care program, Google jacked up both the level of services and the cost-from $1,425 per month to $2,500, reported Joe Nocera of the New York Times. Times. This elite offering-and its elitist price-seemed at variance with Google"s egalitarian ideals, and many employees were irate. This elite offering-and its elitist price-seemed at variance with Google"s egalitarian ideals, and many employees were irate.

These cuts probably displeased two Google audiences, one external, the other internal. For talented young engineers, who look to join companies that are rockets, Google"s actions might suggest a company that had reached cruising speed and might be descending. And as Google coped for the first time with saying no, there was frustration among Google employees accustomed to hearing yes. The founders had sold Google"s mission as making the world a better place, not just making money. While the Google rocket soared, hard choices could be avoided; now they would have to be made.

Soon after Google shuttered its office outside Phoenix, the closing was raised at the September 19, 2008, TGIF session. The complaint came in a text message from an employee in London, which Brin read aloud to the a.s.sembled Googlers. It said, "What of people in Phoenix who can"t relocate? If we don"t take care of them, shame on us as a company!" Brin allowed Alan Eustace, senior vice president, engineering and research, to answer. Google, he said, would strive to find openings for those wishing to relocate; for the others, Phoenix was "a robust area for jobs." Brin and Page said nothing, but a.s.sociates said they were increasingly distressed by Google employees" sense of ent.i.tlement. This was a company, not a socialist paradise, and the Phoenix question-like the grumbling when Google pared cafeteria hours and no longer allowed employees to cart home dinners for the entire family-troubled them.

With a cash h.o.a.rd of $14 billion, Google was better positioned than most companies to withstand the economic shocks, but this did not stop its stock from plunging from nearly $700 per share at the start of 2008 to $307 at the end. The value of Brin"s and Page"s stock holdings reduced their net worth to about $12 billion each, which they said did not faze them. Although the downturn hit most media companies hard, online advertising continued to rise. Google now claimed 40 percent of all online ads. Revenues and profits climbed more slowly, though, and the company warned in its year-end 2008 filing to the FCC, "We believe our revenue growth rate will generally decline" as the search market matures.

Despite the downturn and its own difficulties, in many ways Google remained a company apart. It did not slash its investment spending on research and development or its data centers, investing a total of $2.8 billion on these in 2008. Its fourth-quarter profit margin grew to a fat 37.6 percent. While much of the Valley was contracting, Google decided to set aside $100 million to start a venture capital fund, Google Ventures, to invest in start-ups. Yes, it pared free snack choices from about one hundred to fifty, but that was still fifty more choices than most companies offer.

YouTube was not contracting. "Display advertising and YouTube will be big in the next twelve months," Schmidt predicted. He was encouraged that a combination of cost cutting and new advertising formats would slash YouTube"s 2009 losses from a projected $500 million to $100 to $200 million, according to a knowledgeable Google executive. He believed the unusual traffic YouTube generates will become a magnet for advertising. In March 2009, according to Nielsen Media Research, two-thirds of all Web videos were watched on YouTube, and that month ninety million viewers came to the site, streaming a total of 5.5 billion videos.

Schmidt also believed that Google"s Android investment would produce many more Google searches and provide opportunities to play a dominant role in all portable devices. He remained bullish that cloud computing would take off, particularly with the advent of four-hundred-dollar (and dropping) netbook laptops that could be powered by Android and store their data in a Google server rather than Windows. Between YouTube, Android, and cloud computing and its Chrome browser, Schmidt remained hopeful that Google was still on its way to becoming the first hundred-billion-dollar media company.

For its employees, Google did something else that defied the bleak economic times. The company had awarded a total of $1.1 billion in stock-based compensation in 2008; by the end of the year, those stock options had declined below the current Google stock price. So Google announced that any employee whose st
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