Meet the (Kind of) New Boss: Larry Page Says Hello to Wall Street
If Wall Street was expecting Larry Page to convince it he had the stuff to run the company he co-founded, it may not have gotten what it wanted during Google’s earnings call today.
Page, along with co-founder Sergey Brin and current CEO Eric Schmidt, popped in during the beginning of the call this afternoon to offer a few scripted words. Then the group took a few questions and moved on, handing the bulk of the call over to a trio of Google executives.
So if there’s going to be a public “Larry’s qualified to do this” campaign, it’s going to happen somewhere else. Likewise, no one on the call bothered to ask Page or Schmidt about whether the two men’s vision for Google differed in any way, or about changes Page intends to make under his reign. So we’ll have to wait and see–and in the meantime, the speculation will begin.
To be fair, Schmidt hasn’t been spending much time on Google earnings calls himself over the last quarter. So the company can argue that not having the current or future CEO spend much time on this one is nothing new.
Most important, for now, is that investors seem okay with the new boss. Google shares are up about 2 percent in after-market trading in flat market.
Google is about to kick off its quarterly earnings call, but a whole lot of people are going to more interested in people, not profits, today. That’s because Google is moving Eric Schmidt out of his CEO job, to be replaced by co-founder Larry Page.
So you can expect at least some of the upcoming call to focus on the management shift. It’s possible that Google won’t bring either Schmidt or Page into the call–in recent calls, they’ve been keeping Schmidt off the phone, ostensibly to “focus” the event on financials. But it’s hard to imagine they won’t want to use the opportunity to convince investors that the company will be in good hands under Page’s watch.
I’ll be covering the call live here:
On the call: Schmidt, Page, and the rest of the usual earnings call cast: CFO Patrick Pichette, product SVP Jonathan Rosenberg, and sales boss Nikesh Arora.
Schmidt: Larry, Sergey and I spent a lot of time talking about how to run everything. After a “long series of conversations”, decided to change things up. So this will “clarify” how decisions are made. It will produce “even better success for the corporation”
Page: Lots of praise for Schmidt. “I’ve learned a ton from him over the years”.
Lots of opportunity for Google in days ahead.
Brin: I’ll have things to tell you about soon, too.
Schmidt: I’ll work on strategy, relationships, etc. “I want to say clearly that I believe Larry is ready… I’m sure he’ll do a fantastic job”
Schmidt: So before we do earnings portion of call, let’s do Q&A on the management stuff, then we’ll move on to numbers.
Q: Actually, I have a results question — do you think you’re going to have buy a lot of physical locations — ie your NY Googleplex purchase.
Page: Not really.
Q: Eric, you say you’re going to work on govt outreach. Please talk about that.
A: Schmidt: “The simple answer is that we’re talking to them.” One big problem is that lots of people don’t know what we do, and what we don’t do and “some of our competitors are assisting in that misinformation”[Cough. Cough. Redmond.] Regulators have a job to do and we’re all for that, but a lot of stuff we do is actually pro-competitive.
Q: What’s up with social? What do you think about real-time search, social, etc?
A: Schmidt — Sergey, you and Larry should talk about that.
Brin [I think]: Socials’ very important to search. We’ve deployed Twitter results in search, rolled out social search right in main search results. But “I think that this is really just the tip of the iceberg…expect us to continue to develop those type of capabilities.”
Page: Right. “We’re only at the very, very beginning stages”. Very exciting.
Q: Hearing some complaints from regulators and competitors about search results. Are changes you’re making in response to that?
A: Schmidt “We’ve looked very very carefully” about which ads go where, “and we’re pretty happy with it”.
Schmidt: Time to wrap up this portion. It’s been a great 10 years. Really looking forward to working with “literally my best friends, Larry and Sergey.”
Exit Schmidt, Page, Brin.
And now we’re back to plain vanilla earnings call.
Pichette: Q4 was a “pheomenal ending” to a great year at Google.
[Apologies, call is breaking up]
[Sorry, this is frustrating but Webcast is breaking up. We'll do best here...]
[I would like to know which member of the Google triumvirate is responsible for earnings call audio. Because they need assistance]
[You know how you eventually hang up on a cell phone call when it keeps cutting in and out? This is like that. Except I have to keep trying.]
In summary…. we’re very optimistic!
Now Pichette hands the tin cup over to Rosenberg, to talk about product. Let’s see if the call likes him any better…
[Thanks very, very, very much to AdAge's Edmund Lee, who graciously provided me with a dial-in phone number, because the Google IR YouTube site was a no-go]
Catching up to Rosenberg now, talking up local and commerce
Key to unlocking mobile commerce is to make it easier to search, then buy something from phone. That’s my mantra, and I think this year we make big strides toward that goal.
And now back to Pichette: We hope you paid attention to us during the last 10 minutes [not really!].
Questions and Answers
Q: On mobile – how do you think about difference btw tablet users and smartphone users. Also, what’s up with sales and marketing costs? Those seemed high.
Rosenberg: Let’s talk about how they’re similar. Search peaks on weekend, dips on weekdays. So we assume more personal than business use. That peak is more pronounced on weekends for tablets. Tablet users search more often for news, and shopping-related topics. Anecdotal evidence that they convert a little better than mobile. I think they work more like desktops – easier to enter credit card #s, etc.
Pichette: We’re opportunistic, and sales and marketing #s is a good example. We had a big opportunity. On marketing side, we have big platforms like Chrome and Android that will be incredibly successful if marketed. So “why wouldn’t you do it?”
Arora: On sales #s, we’ve been pushing hard on small and medium-sized advertisers. So lots of the costs are acqusition costs for them. Once you have them they stay in the system for a while.
Q: On local – can you quantify opportunity? What have you seen in last 12 months to accelerate local advertising?
Pichette: We won’t talk about M&A. And local has always been a big deal for our strategy. It’s one out of every 5 searches have some kind of local. So it’s not a small thing for us.
Rosenberg: Right! We’ve always been focused on local. Web should be a mirror of the world at all times. And it’s more useful when you organize things around places in the physical world. Now with GPS and cellphones, and we can now where you are, we can supply you with relevant information about the places you are. What’s changed in last year is that it’s become easier for local businesses to identify themselves in context, on Google, and easier for us to find out where you are.
Q: Why did you need to drop $2B on the NY Googleplex? Why not rent? Also, on local – please talk about the local salesforce you’re building.
Pichette: We have 2,000 employees in NYC. It’s a big engineering center, not just sales. And we’re growing. So very difficult to find, in NY, that number of people in “an environment that fits Google’s needs”. Just a tower with a narrow footprint is bad for Google’s workers [NY Googleplex is a giant, east-west city block long -- Googlers use razor scooters to traverse it]
Arora: On local – we’ve always had local features. Sometimes that’s synonymous with small business, and we’re reaching out to them directly. We’ve also used third-parties to reach out advertisers. We’ll continue to do that.
Q: What’s your organic growth rate, excluding acquisitons? Also, what’s up with social?
Pichette: Nope. But “all of our core properties are growing very well”. Our new businesses, growing too.
Arora: Search for longest time has been performance. So has display. The new players (Facebook) are in display. Right now, bigger shift is offline to online, not shift from search to social, etc. [Translation -- Facebook not eating into our business]
Q: On display biz: Ad networks margins seem to peak out in 20-25% range. Can Google do better than that?
Pichette: Depends on whether it’s your network or someone else’s. For instance – we own YouTube. That’s a big network.
[Sorry, dropped off here, and it's a user error, not a tech problem. Back in a second]
Q: Paid click growth best percentage growth in 2 years. Why is that?
Pichette: Look at a couple factors. But let’s debunk a myth on Google Instant. People think it’s a revenue driver. But it’s neutral. It’s not making any significant impact on click growth.
Again, let me be clear that it’s not about instant search. IT’s not. It’s about people, clicking more often.
Rosenberg: Also, let’s note the new ad formats, which are boosting new click-through rates. And seller ratings, and site links, etc. But “the most significant thing” is “visible url” — where on top ads, we moved advertisers url below creative, so people can see where they go when they click. “It’s by far the most significant change” in ad quality that we’ve made.
[Apologies, missed this one as well but.. Arora talking about strength in large advertisers". But also, like I said, we've been pushing SMB, with a "higher-touch" strategy. We'll talk to them on the phone, and we'll even go visit them in person. [!]
Q: On mobile – last q you saw momentum. What are you seeing w/r/t to pricing? Also, with NFC [near field communcations] – how will that change things?
Pichette: Mobile search grew 4x in last year. It’s cranking. But ad formats still nascent. So we see a lot of upside.
Rosenberg: Click to call ads generating “millions” of calls a month. Extending some desktop formats to mobile. “Advertisers are very excited and engaged”. No specific comments on NFC. Except what I said before – it will be important.
Last Q: You said you’d move more comp to base pay from bonus. How has that broken down historically? Also, please break down growth.
Pichette: Like we said, all salaries up 10% this year. That will impact everyone we bring on this year, too. IN addition, we used to have company multiplier, and non-company multiplier. For non-execs, we’ve moved the company multiplier, which they don’t really have any control over, to their base pay. For execs, company multiplier still applies.
YouTube’s revenue more than doubled in 2010.
Of course, won’t disclose those numbers.
To wrap up: Gotta thank all of our Googlers. They’re great! “We’re just set up for a fantastic 2011 again.”
And we’re done.
Apologies for tech difficulties, which I couldn’t control, and the human error, which is on me.