In a letter to Google CEO Larry Page, CNIL head Isabelle Falque-Pierrotin said she’s reviewed Google’s response to its questions and found them to be sorely lacking — in clarity and specifics.

Answers, too.

“For a large number of questions, the elements provided do not give a precise, clear and comprehensive response to our questions,” Falque-Pierrotin wrote. “While in some cases the questions themselves may have been misunderstood or not clearly expressed, many answers merely provide illustrative examples without describing the exact [processes], procedures or systems Google actually operates.”

In other words, Google’s answers to CNIL’s questions were often incomplete or approximate. And while Falque-Pierrotin generously offers that this might be the result of poor communication, it’s hard to accept that as a legitimate explanation. At this point, the CNIL has clarified its questions to Google twice — once in writing, and a second time during the in-person meeting with Google executives that evidently preceded her letter. During that same meeting, Google was given a third version of the questionnaire, and a June 8 deadline to answer it.

Are we really to believe that Google — a company that prides itself on hiring PhDs, that once sought out cream-of-the-crop engineers with a “mind-bending” Google Labs Aptitude Test, whose mission “is to organize the world’s information and make it universally accessible and useful” — can’t properly answer a few questions about its privacy practices and handling of consumer data?

Because that’s about as likely as Larry Page faking his Master’s degree in computer science.

A more reasonable explanation: Google not only doesn’t want to answer these questions, it doesn’t even believe it is obligated to do so. Indeed, it essentially said as much back in April, when it specifically questioned the authority of the CNIL and the Article 29 Data Protection Working Party to even investigate it. From Google’s April 5, 2012, response to the CNIL:

1) What is the legal basis for the Working Party to act as a regulatory body, or to mandate the CNIL to conduct a regulatory review on behalf of 26 other independent DPAs?
2) What law is being applied to this review?
3) Could the Working Party explain the process being followed and the ultimate aim of the review?

Questions respectfully asked, certainly. But they clearly reflect an uncooperativeness and, more to the point, an overweening arrogance that’s so prevalent these days that it might as well be one of Google’s hallowed “10 Things We Know To Be True.” As Christian Sandvig, a researcher in communications technology and public policy at the University of Illinois, recently told the New York Times in an article on that very subject, “Google doesn’t seem to think it ever will be held accountable. And to date it hasn’t been.”

Google did not respond to a request for comment.

Talking to Google partners at the Zeitgeist event in London yesterday, Page’s big message was that he is focusing Google while also making big bets. The day before, Page announced Google would donate New York office space to the CornellNYC Tech university project and appeared on the Charlie Rose Show.

“I’m trying to give you a very positive world view,” he said at the Zeitgeist event. “Anything you can imagine is probably doable; you just have to imagine it and work on it.”

If the world could get a little better organized and more productive — something Google is actively working on — “I think we could easily double human progress and the rate at which we’re developing,” Page said.

Google’s current big bets are autonomous cars and augmented reality glasses, which Page was wearing on stage at Zeitgeist. (Page goofily warned the audience to call them Google Glass — singular — because the device sits in front of one eye, not both.)

Those projects might seem ridiculously far-reaching, but Page said Google’s previous big bets that are now reality include Android, Chrome, YouTube and language translations.

For instance, YouTube might have seemed like a crazy big acquisition back in 2006, but it has now doubled revenue every year for four years. (That’s a new stat, confirms our resident media hack extraordinaire Peter Kafka.)

Page didn’t specify what YouTube’s actual revenue is, but he noted that doubling anything “starts to add up pretty quickly, no matter where you start from.”

Meanwhile, Google Translate now translates between each of 64 languages instantly and for free. Last week, the Chrome browser had more usage than Microsoft’s Internet Explorer for the first time ever, according to one measure.

As for Android, “I think it’s pretty clear that everyone in the world is going to have a mobile device that’s connected to the Internet,” Page said.

In a rare moment of personal relatability, Page explained part of his rationale for developing self-driving cars. “I have young children — I’m sure many of you do as well. Think about your children — by the time they’re old enough to drive, there’s no reason we can’t have technology that helps teach them.”

As an aside: Though Page might not get out much, he can be trusted to go on anecdote autopilot. Have you heard the one about how Search Plus Your World helps him disambiguate various people named Ben Smith? Page used it yet again, in both the Charlie Rose interview and at Zeitgeist.

Here’s the Zeitgeist talk, which was titled “Beyond Today”:

And here’s The Charlie Rose Show:

And on top of it all, it’s May 14 — Mark’s 28th birthday.

Aside from the intense scrutiny of the company by the tech and financial press leading up to the IPO, Zuckerberg is doing all right. Especially when stacked up against some of the biggest names in tech that came before him.

Consider Steve Jobs. He was zooming along just fine in his twenties. Until, that is, in his 28th year he recruited the man who would eventually become his — and Apple’s — undoing (temporarily, of course). That man was John Sculley, then CEO President of Pepsi-Cola, who traded the position to be the CEO of Apple Computer after intense courting from Jobs. Of course, Sculley would eventually play a part in Jobs’s ouster from Apple; Sculley would also oversee the company in what proved to be the darkest years in its 36-year history. Jobs was also in the process of launching the Lisa when he was 28, one of the biggest commercial computer hardware failures the company has ever released. In other words, 28 wasn’t the greatest year of Jobs’s career.

Amazon luminary Jeff Bezos’s best years were yet to come. At 28, he was still at his hedge fund gig, where he first saw the opportunity in the fast-growing Internet use around the country. Two years later, he would go off on his own to start Amazon.

Bill Gates, on one hand, had founded Microsoft in 1976 — then known as “Micro-Soft,” begun in a small Albuquerque office in partnership with Paul Allen — at the ripe age of 20. It’s the same age Zuck was when he officially founded Facebook in his Harvard dorm room. At 28, Gates was certainly upwardly mobile — the year before his 28th saw him begin to license MS-DOS — though his best years were yet to come: In two years, Gates would launch the first retail version of the Windows operating system.

Larry Page and Sergey Brin were still three years off from Google’s IPO when they turned 28 (Page in March of 2001, Brin in August). It was that year in which the two — who had run Google since they co-founded it in 1998 — decided to turn the reins over to Eric Schmidt, a learned executive well versed in leading technology companies. Unlike Zuckerberg, who retains full control over Facebook with his majority of voting rights, Page and Brin let a seasoned Valley veteran guide Google through its early days.

In all, it seems Zuck is doing just fine. Still two years off from the big 30, he’s number 35 on Forbes’ Billionaires List with an estimated net worth of $17.5 billion. Better still, he’s got a longtime live-in girlfriend and an adorable floor mop of a dog, “Beast.”

Happy birthday, Mr. Zuckerberg. And enjoy a quiet moment of reflection while you can; Friday isn’t too far off.

In advance of a formal unveiling in Seattle later today, Planetary Resources sent over a much fuller description of what it does: Mine asteroids for raw materials including platinum and water. It is also building its own spacecraft (pictured is the Arkyd-101 space telescope).

The release is below, and here’s a write-up by Wired and interview with the chief engineer on Discover.

ASTEROID MINING PLANS REVEALED BY PLANETARY RESOURCES, INC.

Expanding the resource base of humanity to include the solar system

Seattle, Wash. – April 24, 2012 – Planetary Resources, Inc. announced today its plan to mine Near-Earth Asteroids (NEAs) for raw materials, ranging from water to precious metals. Through the development of cost-effective exploration technologies, the company is poised to initiate prospecting missions targeting resource-rich asteroids that are easily accessible.

Resource extraction from asteroids will deliver multiple benefits to humanity and grow to be valued at tens of billions of dollars annually. The effort will tap into the high concentration of precious metals found on asteroids and provide a sustainable supply to the ever-growing population on Earth.

A single 500-meter platinum-rich asteroid contains the equivalent of all the Platinum Group Metals mined in history. “Many of the scarce metals and minerals on Earth are in near-infinite quantities in space. As access to these materials increases, not only will the cost of everything from microelectronics to energy storage be reduced, but new applications for these abundant elements will result in important and novel applications,” said Peter H. Diamandis, M.D., Co-Founder and Co-Chairman, Planetary Resources, Inc.

Additionally, water-rich NEAs will serve as “stepping stones” for deep space exploration, providing space-sourced fuel and water to orbiting depots.  Accessing water resources in space will revolutionize exploration and make space travel dramatically more economical.

“Water is perhaps the most valuable resource in space. Accessing a water-rich asteroid will greatly enable the large-scale exploration of the solar system. In addition to supporting life, water will also be separated into oxygen and hydrogen for breathable air and rocket propellant,” said Eric Anderson, Co-Founder and Co-Chairman, Planetary Resources, Inc.

Of the approximately 9,000 known NEAs, there are more than 1,500 that are energetically as easy to reach as the Moon. The capability to characterize NEAs is on the critical path for Planetary Resources. To that end, the company has developed the first line in its family of deep-space prospecting spacecraft, the Arkyd-100 Series. The spacecraft will be used in low-Earth orbit and ultimately help prioritize the first several NEA targets for the company’s follow-on Arkyd-300 Series NEA swarm expeditions.

Chris Lewicki, President and Chief Engineer, said “Our mission is not only to expand the world’s resource base, but we want to increase people’s access to, and understanding of, our planet and solar system by developing capable and cost-efficient systems.”

“The promise of Planetary Resources is to apply commercial innovation to space exploration.  They are developing cost-effective, production-line spacecraft that will visit near-Earth asteroids in rapid succession, increasing our scientific knowledge of these bodies and enabling the economic development of the resources they contain,” said Tom Jones, Ph.D., veteran NASA astronaut, planetary scientist and Planetary Resources, Inc. advisor.

Planetary Resources is financed by industry-launching visionaries, including Google CEO Larry Page and Ross Perot, Jr., Chairman of Hillwood and The Perot Group, who are committed to expanding the world’s resource base so that humanity can continue to grow and prosper:

• Eric E. Schmidt, Ph.D., Executive Chairman of Google, Inc. (NASDAQ:GOOG) and Planetary Resources, Inc. investor: “The pursuit of resources drove the discovery of America and opened the West.  The same drivers still hold true for opening the space frontier.  Expanding the resource base for humanity is important for our future.”

• K. Ram Shriram, Founder of Sherpalo, Google Board of Directors founding member and Planetary Resources, Inc. investor: “I see the same potential in Planetary Resources as I did in the early days of Google.”

• Charles Simonyi, Ph.D., Chairman of Intentional Software Corporation and Planetary Resources, Inc. investor: “The commercialization of space began with communications satellites and is developing for human spaceflight. The next logical step is to begin the innovative development of resources from space.  I’m proud to be part of this effort.”

The company’s advisors include film maker and explorer James Cameron; General T. Michael Moseley (Ret.); Sara Seager, Ph.D.; Mark Sykes, Ph.D.; and David Vaskevitch.

Founded in 2009 by Eric Anderson and Peter H. Diamandis, M.D., Planetary Resources, Inc. is establishing a new paradigm for resource utilization that will bring the solar system within humanity’s economic sphere of influence by enabling low-cost robotic exploration and eventual commercial development of asteroids.  For more information, please visit www.PlanetaryResources.com.

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Today, Google published another “spring cleaning” list of products it is purging, but at this point it seems to be running low on clear and easy things to cut. For instance, patent search is now being included in regular search, with the same options plus some speed improvements. While any particular product’s death will probably piss off someone somewhere, this list doesn’t seem terribly controversial.

It includes:

• The non-starter One Pass program for publishers that launched only a year ago
• A toolbar to help browse content called Google Related that was introduced only last August
• The Google Flu Vaccine Finder, a former “20 percent” project from 2009 that’s being passed onto HealthMap
• Older software to support BlackBerry and Picasa, and the mobile web version of Google Talk

Plus, this isn’t a product cut, but Google said it will move toward shorter “deprecation policies” for many APIs, meaning it will support older versions for less time.

The testimony came on the third day of the companies’ intellectual property trial in San Francisco. Oracle has accused Google’s Android mobile software of infringing the patents and copyrights protecting Oracle’s Java technology. Software company Oracle is seeking some $1 billion in damages. The trial is expected to last about two months.

Read the rest of this post on the original site »

The parties are the software giant Oracle and the Internet concern Google. At issue is Java, the software platform Oracle became owner of when it acquired Sun Microsystems in 2010. And the witness list will be interesting: Both Google CEO Larry Page and Oracle CEO Larry Ellison are expected to take the witness stand during the trial; as will former Sun CEO Jonathan Schwartz and Andy Rubin, the Google senior vice president who runs its Android and mobile operations.

The allegations are fairly simple, but the case could have some significant impact if Oracle prevails in some of its arguments. Oracle sued Google in the summer of 2010, alleging that the Android mobile operating system violated seven different Java patents.

Five of those patents have since been tossed out since they were reexamined, leaving two. That reduces the potential amount of damages that Oracle might be entitled to, should it prevail. Google even went so far as to offer to cut Oracle in on Android and $2.8 million in damages, in the event that it prevails. Oracle declined.

The other issue, and the one that has the potential for more lasting impact, is over copyright. Oracle will argue in court that Google violated copyrights on Java. Specifically, Oracle alleges that when Google was creating Android, it copied a lot of material — more than 37 Java application programming interfaces (APIs), and 11 lines of Java source code — and that these are subject to copyright protection like other intellectual property.

This is a new and controversial legal argument that has software developers watching the trial closely. Google has argued that APIs shouldn’t be subject to copyright protection, because they’re more akin to tools and techniques that programmers use to build software. I may be simplifying it a little too much here, but one way of thinking might be to ask if it’s possible to copyright the technique and instructions for hammering a nail or fitting a door.

Google has argued that APIs and programming languages aren’t entitled to copyright protection, for exactly that reason: You can copyright a given program because it’s unique, but you can’t copyright the language it’s written in. Perhaps I’m straining my skills at analogy here, but the way I understand Google’s argument, as put forth in an April 12 brief, is that you can copyright “So What?” but you can’t copyright “jazz.”

As Google puts it in that brief, which is the first two of two legal filings I’ve embedded below:

“That is a classic attempt to improperly assert copyright over an idea rather than expression.” And earlier in the brief, it argues: “Without a computer programming language, the set of statements or instructions cannot be understood by the computer. As such, a computer language is inherently a utilitarian, nonprotectable means by which computers operate. … The protectable material is the computer program (the set of statements or instructions); the unprotectable material is the method or system (the language). So understood, original computer programs may be protected, but the medium for expression in which they are created is not.”

For its part, Oracle outlined its position on the issue in a trial brief filed on April 5, which is the second of the two documents embedded below. Here’s a meaty paragraph summing it up:

“Allowing copyright protection for computer interfaces makes sense because original expressions in software are innovations of an incremental sort that Congress meant to encourage. Trade secrecy law cannot achieve this goal because interfaces can be reverse-engineered. Patent law, because of its novelty and non-obviousness requirements and examination process, protects those substantial innovations, claimed as broadly and generically as possible, and in return gives strong protection against even those who independently develop the same technology. Copyright law protects innovations at a much finer level of detail (where original expression can be found) than patents ever could, but only offers protection against the copyist.”

Obviously, it’s going to be an interesting trial, provided the parties don’t find some way to settle before it’s all over. They tried settlement talks once. It didn’t work.

Google Brief

Oracle Brief

How much does the Wall Street establishment dislike Google’s proposed share split plan announced Thursday alongside its first quarter earnings report? Apparently, a lot.

The plan essentially calls for Google stock to split two for one, and all shareholders will receive a share in a new class of stock that will have no voting power. The net effect will over time preserve the roughly two-thirds majority that CEO and co-founder Larry Page, co-founder Sergey Brin and Executive Chairman and former CEO Eric Schmidt have over Google’s proxy voting structure.

Shareholders expressed their opinion with their wallets, sending the price of Google shares down by more than four percent on a day when the broader NASDAQ exchange was down by only one percent. The drop reduced Google’s market capitalization by nearly $8.6 billion, which is not a trivial amount, even for a company with a market cap north of $200 billion.

At least one shareholder advisory firm, Philadelphia-based Egan-Jones, has come out strongly in opposition to the plan. “We strongly oppose governance structures, such as currently exists at Google and as proposed, in which the holders of one class of common stock have voting rights with fewer votes per share,” the firm said.

Also on the record in opposition? CalSTRS, the $145 billion California State Teachers’ Retirement System, which owns $400 million worth of Google shares, told Reuters that it’s not happy about the proposal and intends to let Google know about it.

You can expect more fireworks from the likes of Institutional Shareholder Services and Glass-Lewis after Google files its preliminary proxy statement, which will contain a lot more detail about the plan, with the U.S. Securities and Exchange Commission, which it said it will do sometime this week.

In the end, however, even shareholders as large as CalSTRS will have little they can do but vote against the proposal at Google’s next shareholder meeting. The proxy authority Page, Brin and Schmidt already have ensures that the measure will pass. Part of the deal of investing in Google when it first came public in 2004, was putting a lot of faith in management, as the company reminded shareholders this week.

That includes those moments when it puts money and time into seemingly weird things like self-driving cars and computerized eyewear. Those things may not make sense to outsiders, Page argued during a conference call with analysts, but there’s a method to the madness, and as a shareholder you’re kind of expected to roll with it.

Clearly, many with skin in the game aren’t so sure. Sean Egan, president of Egan-Jones, spoke up for that camp in an appearance on Bloomberg TV Friday. I’ve embedded the clip below.

Just kidding about the losing control part — he’s not a Pointer Sister. But Page does like to talk about how excited he is.

Having noticed the Google CEO’s fondness for using variations of “exciting” and “excited” when discussing his company’s products and businesses, we at AllThingsD had a bit of fun with the transcripts from his recent earnings calls.

Since Page reassumed the CEO role last year, he hit an all-time high of 16 mentions of “excited” on last year’s third-quarter call. His company’s performance made him both “incredibly excited” and “amazingly excited.”

This quarter, Page was a bit more muted: only eight mentions.

Not that we’re claiming to be scientific — at all — but Page does seem to be more effusive when Google beats analysts’ estimates for Google’s earnings per share.

Here’s an interactive chart of Page’s stated excitement.

(Thanks to Beth Callaghan at ATD and Daniel Hom from Tableau Software for making this happen.)

We don’t know, and we should be wary of people who say they understand why the market moves in any particular direction, on any particular day. That said: The day after Google announced its Q1 earnings, Google is trading down about 4 percent. Meanwhile, the Nasdaq is down about 1 percent.

To recap: Google’s Q1 came in around where Wall Street thought it would — revenues were just under consensus, and earnings were a bit above.

The company’s cost-per-click trend continued to decline, dropping 12 percent year over year, and I’ve seen some reports where analysts are wringing their hands over that. But the stock-watchers I follow don’t seem overly concerned about that — they assume that as long as Google’s overall ad volume increases, it can afford to sell its stuff for less.

The other news item, of course, was that Google is creating a new, non-voting class of stock that effectively creates a 2-1 split. This has no bearing on the way the company does business — it will still run, effectively, as a privately controlled company whose shares happen to trade on the open market. Hard to see investors getting excited one way or another about it. But you never know.

But Google is still taking fliers on oddities like self-driving cars and computerized eyewear, and that’s not going to stop.

The challenge, Page said today during the company’s earnings call, is figuring out which of those fliers to take. Google has plenty of money to throw at this stuff, but a limited amount of time.

Here’s his answer to an analyst question about crazy projects the company might have up its sleeve, and whether it is still committed to its 70/20/10 plan, where employees are supposed to spend a tenth of their time on far-out stuff.

We’ve got a limited number of things we can do. As I’ve been saying, we’ve been trying to focus. So [we're] trying to make sure that we have the right speculative bets, as well as the right bets we’re making on our core products, and so on. I’m pretty excited about our ability to do that.

I think it’s hard coming from the outside. Because as I mentioned in the letter I published today, Android took three years plus three years, kind of, to get to really where it is today. That’s six years. And you all haven’t seen Android for those six years. We’ve seen it for the six years, and we really invested in it.

It’s not so much money in the earlier stages but attention. And that’s an important discipline for the company to have.

Shorter answer: We know what we’re doing, and that includes the stuff that looks nutty to people who don’t work at the Googleplex. Hence the not-exactly-a-stock-split, which is supposed to let Page use Google stock to pay employees and to pay for acquisitions, without losing control of the company.

Here’s how Page and his deputies explained it on their quarterly earnings call:

Page said his three main priorities as CEO are velocity, execution and focusing on the future with big bets. Major launches this quarter included Chrome for Android and Google Play.

Responding to criticism of Google+ usage numbers, Page called this “confusion over metrics” and acknowledged that Google+ actually has two parts. One, it is a “social spine” for all of Google; and two, it is a “social destination.” The social spine has 170 million users, and the social destination is “growing very fast … with very healthy growth,” Page said, with all the clarity in the world.

As for Google creating a new class of shares and awarding equivalent stakes to existing investors, Page read out the letter he’d already posted. “We don’t have an unusually big acquisition planned, in case you were wondering,” he said.

Chief Legal Officer David Drummond assured his listeners that despite the effective stock split, all existing Google stockholders will essentially be treated equally and everyone will retain same voting interests, including Page, Brin and Eric Schmidt, who will agree to a “transfer restriction agreement.”

Onto the quarter at hand. CFO Patrick Pichette repeated those three big goals, with a slight twist: “velocity, focus and optimism.” As for perceived dips in numbers, “The most important thing to understand is that our business is healthy,” he said.

It was up to Nikesh Arora to cover the various business units (Susan Wojcicki, who usually helps out, is on spring break with her kids). He talked up YouTube’s progress to become a “key buy” for advertisers, and bragged about new Google Apps customers like Roche and the State of Colorado, accelerated growth in Asia, an underwater Google Hangout from the Great Barrier Reef and Google Street View in Russia.

Onto the analyst questions:

• Headcount growth seemed slower (Google now has 33,000 employees) — why? Pichette said this is just “short term variability.”
• Page said it would be reasonable to expect coming Google+ integrations in products like Wallet, Offers and Maps.
• Success of YouTube advertising shows growth of brand advertising online, said Arora. Page expects that mobile cost per click will improve over time because of local transactions and communication.
• Most resources are still going to core businesses, said Page — still following a 70-20-10 split among core businesses and near-term and long-term bets. Android took six years to get to where it is today, much of that before the public saw anything, he noted.
• Pichette declined to break out U.S. and international cash balances.
• Arora wouldn’t break out traffic acquisition costs for mobile, but said it’s not any different of an arrangement than on the desktop, with OEMs and carriers sharing revenue from Google Play and search, etc.
• Page said social does improve search. He gave yet another shout-out to that Ben Smith guy, who is now highlighted when Larry searches for his name because he’s Larry’s friend.
• As for tablets, Page talked up their media capability. “We definitely believe there’s going to be a lot of success at the lower end of the market as well,” he said.
• Pichette talked again about how lumpy growth and spending is good, and investors shouldn’t be worried.
• How do you account for the value of Android, an analyst asked. Page asked him to think longer-term. “We don’t get very many new operating systems. Only a few in my lifetime, and they’re very important.” He continued that Android is in its early stages, but it’s about the pace of innovation and improvements in user experience, and money will be a part of it, too.
• Page didn’t want to say tablets will eventually be more important than any other device, as an analyst asks him to do.
• Advertisers are interested in ROI — they don’t care about platforms, said Pichette. Google is working toward “dynamically allocating” advertising across its products in order to maximize ROI.

Despite more than a couple repeat questions in there, I don’t think I heard a single analyst ask about the new class of stock. Either they don’t really care, or they were surprised by the announcement and hadn’t prepared for it.

The cost-per-click number, which freaked out Wall Street last quarter, was down another 12 percent. That’s a bigger drop than many analysts had predicted.

Meanwhile, Google is creating a new class of non-voting stock, which it says will end up creating a 2-1 stock split. Here’s a brief explanation via CEO Larry Page’s Google+ page:

Effectively a Stock Split: And a New Class of Stock

Today we announced plans to create a new class of non-voting capital stock, which will be listed on NASDAQ. These shares will be distributed via a stock dividend to all existing stockholders: the owner of each existing share will receive one new share of the non-voting stock, giving investors twice the number of shares they had before. It’s effectively a two-for-one stock split — something many of our investors have long asked us for. These non-voting shares will be available for corporate uses, like equity-based employee compensation, that might otherwise dilute our governance structure.

So is Google planning on another big, Motorola-sized deal that’s planning on using stock? No, Page says: “We don’t have an unusually big acquisition planned, in case you were wondering.”

This is technically a “proposal,” but since Page, Sergey Brin and Eric Schmidt effectively control Google already, it’s a foregone conclusion — which is exactly the concentration of power the move is supposed to sustain. It should go into effect later this summer.

My colleague Liz Gannes is live-blogging the earnings call here; you can also listen in for yourself via YouTube.

Here’s Citigroup analyst Mark Mahaney’s “cheat sheet” to help you interpret the numbers:

And here’s the entire text of Page’s Founders’ Letter, followed by a statement from chief legal officer David Drummond:

FOUNDERS’ LETTER 2012

Introduction

Throughout our evolution, from privately held start-up to large, publicly listed company, we have managed Google for the long term — enjoying tremendous success as a result, especially since our IPO in 2004. Sergey and I hoped, though we did not expect, that Google would have such significant impact, and this progress has made us even more impatient to do important things that matter in the world. Our enduring love for Google comes from a strong desire to create technology products that enrich millions of people’s lives in deep and meaningful ways. To fulfill these dreams, we need to ensure that Google remains a successful, growing business that can generate significant returns for everyone involved.

Corporate Structure

When we went public, we created a dual-class voting structure. Our goal was to maintain the freedom to focus on the long term by ensuring that the management team, in particular Eric, Sergey and I, retained control over Google’s destiny. As we explained in our first founders’ letter:

“We are creating a corporate structure that is designed for stability over long time horizons. By investing in Google, you are placing an unusual long term bet on the team, especially Sergey and me, and on our innovative approach…

We want Google to become an important and significant institution. That takes time, stability and independence…

In the transition to public ownership, we have set up a corporate structure that will make it harder for outside parties to take over or influence Google. This structure will also make it easier for our management team to follow the long term, innovative approach emphasized earlier…

The main effect of this structure is likely to leave our team, especially Sergey and me, with increasingly significant control over the company’s decisions and fate, as Google shares change hands…

New investors will fully share in Google’s long term economic future but will have little ability to influence its strategic decisions through their voting rights…

Our colleagues will be able to trust that they themselves and their labors of hard work, love and creativity will be well cared for by a company focused on stability and the long term…

As an investor, you are placing a potentially risky long term bet on the team, especially Sergey and me. …. Sergey and I are committed to Google for the long term.”

I wanted to quote all that because these were the clear, well-publicized expectations we established for investors in 2004. While this decision was controversial at the time, we believe with hindsight it was absolutely the right thing to do. Eight years later, these statements are still remarkably accurate, and everyone involved has realized tremendous benefits as a result. Given Google’s success, it’s unsurprising that this type of dual-class governance structure is now somewhat standard among newer technology companies.

In our experience, success is more likely if you concentrate on the long term. Technology products often require significant investment over many years to fulfill their potential. For example, it took over three years just to ship our first Android handset, and then another three years on top of that before the operating system truly reached critical mass. These kinds of investments are not for the faint-hearted.

We have protected Google from outside pressures and the temptation to sacrifice future opportunities to meet short-term demands. Long-term product investments, like Chrome and YouTube, which now enjoy phenomenal usage, were made with a significant degree of independence.

We have a structure that prevents outside parties from taking over or unduly influencing our management decisions. However, day-to-day dilution from routine equity-based employee compensation and other possible dilution, such as stock-based acquisitions, will likely undermine this dual-class structure and our aspirations for Google over the very long term. We have put our hearts into Google and hope to do so for many more years to come. So we want to ensure that our corporate structure can sustain these efforts and our desire to improve the world.

Effectively a Stock Split: And a New Class of Stock

Today we announced plans to create a new class of non-voting capital stock, which will be listed on NASDAQ. These shares will be distributed via a stock dividend to all existing stockholders: the owner of each existing share will receive one new share of the non-voting stock, giving investors twice the number of shares they had before. It’s effectively a two-for-one stock split — something many of our investors have long asked us for. These non-voting shares will be available for corporate uses, like equity-based employee compensation, that might otherwise dilute our governance structure.

We recognize that some people, particularly those who opposed this structure at the start, won’t support this change — and we understand that other companies have been very successful with more traditional governance models. But after careful consideration with our board of directors, we have decided that maintaining this founder-led approach is in the best interests of Google, our shareholders and our users. Having the flexibility to use stock without diluting our structure will help ensure we are set up for success for decades to come.

In November 2009, Sergey and I published plans to sell a modest percentage of our overall stock, ending in 2015. We are currently halfway through those plans and we don’t expect any changes to that, certainly not as the result of this new potential class. We both remain very much committed to Google for the long term.

It’s important to bear in mind that this proposal will only have an effect on governance over the very long term. In fact, there’s no particular urgency to make these changes now — we don’t have an unusually big acquisition planned, in case you were wondering. It’s just that since we know what we want to do, there’s no reason to delay the decision. Also note that there will be no immediate change in votes, because everyone will still have the same number. In addition, Eric, Sergey and I have all agreed to “stapling” arrangements so that, above set thresholds, if our economic interest in Google were to decline, our votes would as well. We also have provisions to ensure all shareholders are treated fairly from an economic perspective.

For more details on all of this, please see the postscript below from our Chief Legal Officer, David Drummond, and the preliminary proxy statement we will file with the SEC next week.

Conclusion

We have always managed Google for the long term, investing heavily in the big bets we hope will make a significant difference in the world. Some of these bets have been tremendous, funding our activities and generating significant gains for our shareholders. Others have been less successful. But the ability to take these kinds of risks has been crucial to Google’s overall success and we aim to maintain this pioneering culture going forward.

The proposal we announced today is consistent with the governance philosophy we articulated when we took the company public, as well as the trend for newer technology companies to adopt strong dual-class
structures. We believe that it will provide great competitive strength — insulating Google from short-term pressures, whatever the source, for a long time to come, while also giving us more flexibility around equity grants.

Investors and others have always taken a big bet on us, the founders, and that bet will likely last longer as a result of these changes. We are honored that so many of you have put your trust in us and we recognize the tremendous responsibility that rests on our shoulders. We think this is a good thing because users rely on Google to produce and operate amazing technology products and to safely and responsibly store their data. This is our passion.

Sergey and I share a profound belief in the potential for technology to improve people’s lives and we are enormously excited about what lies ahead. I couldn’t write a better conclusion to this founder’s letter than what we wrote in 2004… so here goes: “We have a strong commitment to our users worldwide, their communities, the web sites in our network, our advertisers, our investors, and of course our employees. Sergey and I, and the team will do our best to make Google a long term success and the world a better place.”

Larry Page
CEO and Co-founder

Sergey Brin
Co-founder

April 2012

Postscript from David Drummond, Chief Legal Officer, Google Inc.

This is not the usual yada yada… so please read on.

Although we’ll be filing a comprehensive proxy statement soon, I wanted to share some details about today’s proposal to create a new class of stock and the process our board of directors followed to approve it.

As Larry and Sergey note above, the stock dividend we are announcing today will have the basic effect of a two-for-one stock split. Each holder of a share of Class A or Class B common stock will receive one share of the new non-voting Class C capital stock. So after the dividend, a stockholder who currently owns one Class A share with a single vote will continue to own that share plus one Class C share without a vote.

The Class A shares will continue to trade under the “GOOG” ticker symbol, while the Class C shares will trade under a different ticker symbol, so stockholders will be able to trade these shares, just as they can with Class A shares today. Except for voting rights, the Class C shares will have the same rights as the existing Class A and Class B shares. As is typically the case with stock splits, the Class C stock dividend will be tax-free.

One thing to keep in mind is that immediately after the Class C dividend, all stockholders, including Larry, Sergey and Eric, will retain the same voting interest they hold prior to the dividend. In addition, Larry, Sergey and Eric have agreed to subject their shares to a Transfer Restriction Agreement. This agreement will maintain the same link between their voting and economic interests that exists today, even if they sell some of their non-voting Class C shares. If the founders or Eric wish to sell or transfer their non-voting Class C shares, a “stapling” provision in the agreement requires them to either sell an equal number of Class B shares, or convert an equal number of Class B shares into Class A shares. No other stockholders
will be subject to these restrictions upon the transfer or sale of their shares. The stapling requirement will terminate as to the founders when their collective ownership falls below a certain threshold, and as to Eric when his ownership falls below a certain threshold. Further details of the Transfer Restriction Agreement will be included in our proxy, but it’s important to note that the stapling provision is designed so that, subject to the thresholds, the votes held by the founders and Eric will be reduced proportionally as their economic interest in the company declines.

Our board of directors carefully considered this proposal to create a new class of stock before reaching a decision. In January 2011, the board established a special committee, comprised of independent, non-management board members to consider a new class of stock, or other alternatives. This committee retained its own financial and legal advisers to assist with its deliberations, and met on numerous occasions over the 15 months that the special committee considered the proposal separately from the board. The committee recommended, and the board unanimously approved, today’s proposal.

The proposal is subject to the approval of a majority of the voting power of Google’s common stock, voting together as a single class, at our annual meeting on June 21, 2012. Given that Larry, Sergey, and Eric control the majority of voting power and support this proposal, we expect it to pass. The Board of Directors has not set a record date for the issuance of the Class C dividend and currently expects to set the date following the annual meeting.

Next week, we’ll file a preliminary proxy statement with the SEC, which will contain further details regarding today’s proposal.

David Drummond
Chief Legal Officer, Google Inc.

But if last quarter’s earnings call is a guide, we’ll end up hearing a lot about CPC — the cost that Google charges search advertisers for every click.

Wall Street freaked out three months ago because Google’s CPC declined for the first time in years. And the same thing could happen this time out, as well — several analysts are predicting a 10 percent CPC drop for Q1 earnings today.

And if that does happen, Google executives will end up making the same argument they made last time: Chill out! If our prices have gone down, that’s no big deal, because we’re selling a lot more stuff. Microsoft has yet to slow Google’s growth, and Facebook doesn’t seem to be doing that, either.

This is a pretty persuasive argument, and this is what it looks like in chart form: A couple years’ worth of real and estimated search advertising growth, via Nomura analyst Brian Nowak. That growth doesn’t all accrue to Google, but as long as Google gets the lion’s share of it, it’s hard to get freaked out about pricing. You really can make it up on volume.

Speaking of volume:

But the memo does sync quite well with Page’s public words and actions for the last year, so it works as a pretty good summary.

Most important is the amount of time Page spends explaining and defending his obsession with creating an answer to Facebook — though he never mentions that company by name — which includes jamming “social” into search results.

And if you’re into tracking Google’s fuzzy Google+ metrics, you should note that Page says “well over 100 million users are active” on the service, which isn’t really a service but a social layer, etc., etc.

Page also takes on critics/competitors/potential regulators, in a section entitled “Love and trust.” “We have always wanted Google to be a company that is deserving of great love,” he writes, adding “We have always believed that it’s possible to make money without being evil.”

Want a live version of this? Check back in a week, when Google reports its quarterly earnings.

Original photo by Andy Hertzfeld

Photo illustration by AllThingsD

During a lecture Wednesday evening at the U.K.’s Royal Institution, Isaacson took issue with Page’s remarks, stressing that Jobs was hardly kidding around when he threatened to destroy Android, which he lambasted as a stolen product.

“[Apple's iOS] is almost copied verbatim by Android,” Isaacson said as reported by Macworld UK. “And then they licence it around promiscuously. And then Android starts surpassing Apple in market share, and this totally infuriated [Steve]. It wasn’t a matter of money. He said: ‘You can’t pay me off, I’m here to destroy you.’”

It would seem, then, that Page in his comments to Bloomberg really is attempting to rewrite history here and downplay the contention between Apple and Google over Android. Which is a silly exercise given all the related litigation and Jobs’s original comment, which totally defies Page’s interpretation.

To refresh, here’s what Jobs told Isaacson:

“Our lawsuit is saying, ‘Google, you fucking ripped off the iPhone, wholesale ripped us off.’ Grand theft. I will spend my last dying breath if I need to, and I will spend every penny of Apple’s $40 billion in the bank, to right this wrong. I’m going to destroy Android, because it’s a stolen product. I’m willing to go to thermonuclear war on this. They are scared to death, because they know they are guilty. Outside of Search, Google’s products — Android, Google Docs — are shit.”

That’s a rant uttered for show? A little anecdote to give Apple employees an “obvious competitor … to rally around”?

Hardly.

If you want to talk about turns of phrase that are for show, Larry, here’s a good one: Don’t be evil.

Our soul is the same.

– Larry Page to Businessweek’s Brad Stone, on his belief that Google hasn’t really changed since it made its motto “Don’t be evil”

Speaking to Bloomberg Businessweek’s Brad Stone, Page said he didn’t think former Apple CEO Steve Jobs really meant what he said about going to “thermonuclear war” with Google over Android because it was a stolen product.

“I think the Android differences were actually for show,” Page said.

Page, in fact, is above the fray of mere earthly competition, he said.

“For a lot of companies, it’s useful for them to feel like they have an obvious competitor and to rally around that. I personally believe that it’s better to shoot higher. You don’t want to be looking at your competitors. You want to be looking at what’s possible and how to make the world better.”

Page did comment a little more directly on his competitors. He argued that Facebook declining to allow Google to import its friend lists — what’s been called “contact reciprocity” — is “completely unreasonable.” He also said Google+ is exceeding all expectations, and bragged that he has two million followers. And he said that suing people over patents is “a sad thing.”

Stone asked, why aren’t big tech companies like Apple, Facebook, Google and Amazon working together these days?

Because it’s hard and doesn’t often turn out that well, Page replied. For example, integrating Google Talk and AOL Instant Messaging was “a tremendous amount of technical effort” that he no longer believes was worth it.

Please see the disclosure about Facebook in my ethics statement.

Though the companies technically have until April 9th to continue negotiations, their differences are evidently so profound that the presiding judge, U.S. Magistrate Judge Paul Grewal, feels it would be fruitless to use the extra week. And so he’s concluded the negotiations.

“Despite their diligent efforts and those of their able counsel, the parties have reached an irreconcilable impasse in their settlement discussions,” Grewal said in an order filed Monday. “No further conferences shall be convened.”

So come Monday, April 16, the two companies will square off in court with Google doing its damnedest to defend itself against Oracle’s claims that the Android operating system infringes its Java patents. At stake is potentially billions of dollars in damages and no end of gloating if Oracle should win.

You might not have liked all that change. I know I found it jarring, to put it nicely — and I still bristle at some of the things I liked better the old way (gahhh, Google Reader).

In fact, a major overhaul is something Google’s designers had wanted to do for a long time and had previously failed to persuade the company to do, they said on a panel at SXSW today.

In 2007, designers from multiple Google products put together a set of unified redesign proposals code-named Kanna (Icelandic, meaning to explore, examine or investigate) that was never released.

Among other reasons, the designers think Kanna failed because they presented then-CEO Eric Schmidt and other leaders with a set of four different concepts, with themes like making Google more like desktop clients, or differentiating products by color. It sounded like there were too many options and not enough conviction.

(Above is a picture that shows a thumbnail of one of the Kanna designs. I’ll add the full screenshots if I can get them.)

By contrast, the 2011 project went from some slides to release in a period of a few months, in part because Google’s designers — who are embedded in product teams across the company — have become more strategic about how they manage their roles.

Here’s the basic chain of events. In January 2011, Larry Page IM’ed a couple of people at Google’s internal Creative Lab, asking for some ideas for a company-wide redesign, said Creative Lab member Chris Wiggins. The group quickly put together a “straw man” presentation, printing out before-and-after slides on paper.

“This time was different because the world had a changed a lot, and Google had changed a lot, and design across the industry was ratcheting up,” Wiggins said.

On April 1, Page became CEO and told the team the redesign was approved, and that he wanted it released before the end of summer.

The redesign project was code-named Kennedy, for JFK’s mandate in 1961 for the U.S. to figure out a way to get to the moon before the end of the decade.

Divisions across the company accelerated to a sprint, with Google+, for instance, completely overhauling its design before its launch on June 30.

Members of the design team — including Wiggins, Jon Wiley of Google Search, Nicholas Jitkoff of Google Chrome, Michael Leggett of Gmail and Evelyn Kim of Google Maps — went into detail at SXSW today about how they got everyone on board.

They said they often used the justification “because Larry says so” to push things through, joking that they tried to get him to sign a Post-it note so they could re-use his approval.

More seriously, they built live internal prototypes for Google’s engineers so that people across the company could more easily include the new style, navigation and UI elements in their own products.

They conducted qualitative and quantitative user testing and released internal versions that generated lots of criticism. (The above image is from employee complaints after a release of redesigned Gmail. See, at first Google people hated it, too!)

And so, the redesign was a success story, at least from a company politics point of view. I would say the jury’s still out on whether the redesign is good, though obviously it makes sense for Google to try to make its products more consistent.

The Google designers said today that the new design was still being modified — for instance, a hover-over product menu has been pulled back — and there are many projects that are as yet uncompleted, like the creation of a Google-specific font.

And yes, they know how we hate the huge new font size and massive spacing in Gmail — but that, they said, was a purposeful decision to make the product readable by the largest possible audience.

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In fact, its last acquisition was the restaurant-recommendation app maker Clever Sense, which was announced Dec. 13. A Google spokeswoman confirmed the company hasn’t bought anything since then.

Sources at Google said the main reason for the dearth of deals is CEO Larry Page’s focus on streamlining his company around key products. Plus, there’s “seasonality” around the turn of the year (but c’mon, it’s March; that would be an incredibly generous winter holiday break!).

Sources also maintained that new acquisitions are in the pipeline, and should be announced in the coming weeks.

Page reorganized Google last year around seven areas, like Android, Google+ and YouTube. New acquisitions are supposed to fit into that larger structure, sources said. So, in addition to having a dedicated sponsor within the company, each deal also has to be advocated for by the head of one of the product divisions.

That’s a change from the Eric Schmidt era (though perhaps a deferred change, given Page took over in April 2011). In recent years, Schmidt seemed to make continual pronouncements that Google was stepping up the pace of its acquisitions.

Another cause for the slowed pace of acquisitions could be a string of departures from Google’s corporate development team, which has been led by David Lawee since 2008.

Last year, Groupon hired Jason Harinstein, Facebook lured Amin Zoufonoun, and Neeraj Arora went to mobile messaging start-up WhatsApp.

There’s also the distraction of Google’s massive $12.5 billion acquisition of Motorola, which hasn’t officially closed yet, but presumably will soon.

It’s not like there’s an industry-wide acquisition dry spell. In recent months, newer buyers like Groupon and LinkedIn have been particularly active on the talent acquisition front. Facebook even acquired a company on the same day it submitted papers to go public, and disclosed that fact (but not the name of the company) in its S-1 filing.

(Image courtesy of BustedTees)

But those numbers mask what’s really going on at Google+.

It turns out Google+ is a virtual ghost town compared with the site of rival Facebook Inc., which is preparing for a massive initial public offering. New data from research firm comScore Inc. shows that Google+ users are signing up — but then not doing much there.

Read the rest of this post on the original site »

Google’s very first employee, Craig Silverstein, is leaving the company to join the high-profile online learning phenom, Khan Academy.

News of the departure first appeared yesterday in a line in a newsletter on education-tech entrepreneurship EdSurge, and the search giant confirmed the departure to me.

[UPDATE: Here's a statement from a Google spokesperson -- and not CEO Larry Page (classy and appreciative of others as ever!, Larry!) -- on Silverstein's leaving: "Craig's been with Google since the early days. He was instrumental in the development of search and made numerous contributions to Google over the years. We wish him all the best at the Khan Academy and know that he will do great things to help them promote education around the world."]

Silverstein, who was actually Google’s No. 3 employee — that would be after its pair of founders, Page and Sergey Brin — has had a variety of technology jobs at the company over the years since it was founded in 1998.

But his first — helping them build the famed and lucrative search engine itself — was perhaps his most important. An experienced techie, Silverstein worked with Brin and Page on Google, from their dorm rooms as Ph.D. students at Stanford University, to their garage days, to the giant and diversified behemoth it is today, with tens of thousands of employees.

Currently, he has been working on a variety of projects, including mentoring engineers.

Having spent some time with him over the years, I can tell you that he’s a lovely and adorkable guy, whose infectious enthusiasm and joy of tech has always embodied what I always refer to as “Good Google” (as opposed to, well, you know).

Silverstein will simply be a developer at Khan Academy’s Mountain View, Calif., offices, but I have emails for more details in to all parties.

Speaking of party — IMHO, Larry and Sergey should throw him a really nice one. Really nice — it’s well-deserved.

Here is Silverstein’s cute goodbye email to staff that I obtained (natch!):

[I couldn't possibly remember everyone who I should be sending this mail to, so please feel free to spread the word to anyone I missed!]

It is with decidedly mixed feelings that I announce, after more than 13 years, that I’m leaving Google. My last day will be Feb 10. I’ll be joining the Khan Academy as a developer.

Some of you thought this day would never come (as one person once put it: “Will you die at Google?”), and it was an extremely difficult choice. I am as passionate about Google’s mission now as I’ve ever been, and as proud of the work we’re doing to achieve it. While a lot has changed at Google over the years, I think we’ve done a remarkable job of staying true to our core mission of making the world a better place by making information more accessible and useful. I am looking forward to pursuing that same mission, though in a slightly different way, at Khan.

I’m extremely grateful to have had the opportunity to work with such smart, passionate, and interesting people — not just a few, either, but (almost :-) ) everyone I worked with. I’m grateful not just that I had so many co-workers I could respect, but even more that I had so many that I could count as friends. I will miss that most of all, and I hope you will continue to be in touch. I also accept lunch invitations!

When I write my massive 4-volume autobiography, “Craig Silverstein: the Man Behind the Legend,” I will devote an entire volume to my years at Google. I can’t emphasize enough how meaningful my time at Google has been, and how meaningful all of you have been to it. I mean it literally when I say: all the best,

craig

And here’s the video of a speech Silverstein gave at the University of North Carolina in 2008, about Google’s origins:

Please see this disclosure related to me and Google.

Sometimes I feel like it would be easier to find the Fountain of Youth than get apples-to-apples metrics about Web site and app usage.

Here’s what Google CEO Larry Page said: “Plus users are very engaged with our products. Over 60 percent of them engage daily, and over 80 percent weekly.”

I tried all sorts of nice ways to persuade Google spokespeople to clarify what exactly that means in terms of active users of the Google+ service. They told me that the text of Page’s remarks and an accompanying post by Google’s head of social, Vic Gundotra, spell it out exactly.

That is to say: Over 60 percent of Google+ users use Google products on a daily basis. Over 80 percent of Google+ users use Google products every week.

Gundotra worded his version of that stat slightly differently. He said in a Google+ image post that the same numbers refer to Google+ users who “sign in” to use Google products on a daily and weekly basis. (See image above.)

So, if you registered for Google+ any time since it launched this summer, and you used any other Google product — say, search! — in the past day or week, while signed into your Google account, you got counted in those percentages.

The thing is, Google envisions Google+ as a binding layer between all its products, rather than a discrete entity. While Gmail may have 350 million active users, as Page disclosed today, it’s not so easy to split out Google+.

The blurry numbers do make some sense. For instance, Google+ content will now show up in an increasing amount of search results for signed-in Google users. How do you count that?

The unspoken reference here is that Facebook has said for years that half of its active user count is composed of people who log in on a daily basis. (I can’t remember a time when Facebook ever gave out a registered user count. Those hundreds of millions of people you hear them talk about all log in at least once a month.)

So nope, no apples to apples to see here.

Would you like to read about foreign currency exchange and hedging programs? I know.

But Google would like Wall Street to think a bit about those topics, since it is blaming them for part of its Q4 earnings report shortfall. Google insists it had a great quarter, but both its revenue and earnings numbers came in well below the consensus.

One reason for that, Google says, is fluctuating currency rates: “Had foreign exchange rates remained constant from Q3 2011 through Q4 2011, our revenue in Q4 2011 would have been $239M higher,” the company says. Which means the company would have been much closer to investors’ revenue estimates, for starters.

But analysts on the earnings call didn’t want to spend time talking about FX — they wanted to talk about CPC. That’s “cost-per-click” for Google’s core search ad business, and it dropped 8 percent over the quarter. Google insists that is a number that they shouldn’t obsess about, since it will fluctuate based on changes Google makes to its ad products, and as long as overall revenue is going up, it’s not a problem.

That answer, which they gave over and over, didn’t take, though. And at one point, Larry Page asked, semi-seriously, for analysts to stop asking about CPC. The next question was about CPC.

————–
EARLIER
First look at Google Q4 earnings: $8.13 billion and earnings of $9.50. Wall Street was expecting much more — something like $8.4 billion and $10.50 a share.

Investors are behaving the way you might expect — they’ve dropped the company’s share price by 9 percent, to $581, in after-hours trading. Earlier today, GOOG was trading as high as $640.

“Google had a really strong quarter, ending a great year,” CEO Larry Page says, in a statement that doesn’t seem to acknowledge any weakness or slowdown. He also says Google+, the search giant’s answer to Facebook, is now up to 90 million users.

Google hired more than 1,000 people in the last three months of the year. It now employs 32,467 full-time workers.

If you’re looking for a positive spin on today’s numbers, Google is happy to help. Q4 revenue was up 25 percent over the past year, it notes, and 9 percent more than Q3.

Here, again, is Citigroup analyst Mark Mahaney’s guide to interpreting the numbers:

Google streams its earnings call (via YouTube, of course) but in case you’d like to spend your time doing something else, I’ll be listening in and taking live notes here at 4:30 pm ET:

4:30 pm: Good afternoon. Waiting for Google execs to come online to chat about Q4. Meanwhile, Google investors are shoveling shares out the door, and the stock is lurching, down more than 9 percent.

4:31 pm: Call is starting. On the line, the now-usual lineup: Larry Page, CFO Patrick Pichette, product head Susan Wojcicki, sales boss Nikesh Arora.

4:34 pm: Larry talking about “blowing past $10 billion” in revenue. Also the fact that David Beckham engaged in a Google+ “hangout” recently.

Larry talking about last week’s Google+ search revamp, “which I’m really excited about.” “To make a real impact in the world,” we need to shutter some stuff. We’ve turned off 12 projects in the last quarter, so we can double down on things like Chrome, Android, YouTube.

Android: 250 million devices, up 50 million in last quarter. Over 11 billion downloads from Android Market. “Wow.” (That’s from the script.)

“Chrome is on fire, too.” “People thought we were crazy. Who wants another browser?” But we were right!

Display (perhaps you’ve seen our piece in The Wall Street Journal just now). Now on a $5 billion run rate. DoubleClick up 130 percent year over year.

“Very pleased” with ads on YouTube.

That display ad run rate, by the way, is up 2x from October 2010.

4:40 pm: Now CFO Pichette. He’s also very pleased with the quarter. Walking through numbers:

Pichette talking up negative effects of foreign currency moves, which the company also stresses in its pullout slides. We’ll see if investors go for that (curious if analysts feel they have decent visibility into FX for GOOG).

Skipping most of these numbers, since you can get most of it from release and also via supplementary slides.

Pichette warns that Google will keep spending a lot on capex, and that that spend will be “lumpy.”

4:45 pm: Arora to talk about sales. “Strong performance across the portfolio.”

Arora lays in a series of numbers that don’t really register with me, in part because Page and Pichette just mentioned some of them. That display ad number is still quite amazing, though we would of course love to know how that’s split up between “regular” Web ads, YouTube and mobile.

Another shout-out for David Beckham. (Who I assume is still a big international star, even though I’m pretty sure the U.S. has moved on after a brief flirtation.)

An actual “shout-out”! To international business teams.

4:51 pm: Wojcicki, who starts by explaining/defending “Search plus Your World” changes rolled out earlier this month. More personalized results: Pictures friends have taken, article mom had shared, etc. Just like Facebook, which is the point.

Sorry, lost the string here. But really, this is the part that you can always skip during the call: A number-free brochure.

4:57 pm: Q&A:
Q: Did you see a big shift in mobile use over the holiday?
A: Larry: Nikesh, you answer. Nikesh: “Mobile growing by leaps and bounds.” “So yes, we are seeing tremendous usage, and we also saw uptick during holidays,” when people were looking for stuff.

Q: So is CPC decline because more people went through mobile?
A: Nikesh: Susan, you answer that. Susan: Two biggest factors were FX and changes we’ve made, which increase paid clicks — better for everyone — but those clicks may have a lower cost.

Q: What’s in that $5B display number? Same as the $2.5B number from October 2010?
A: Pichette: Yep — take out text, count mobile, count YouTube. Apples to apples.

Q: How did Europe affect numbers? Also, can you give us a sense of “blended TAC rate” for that $5B?
A: Not talking about $5B breakout. On the economy: “Quite a solid Q4 performance.” Separate from FX issues, Europe was “quite healthy, despite the environment.”

Q: YouTube. Can you give us a little more insight there? Are you seeing signs that TV ad budgets are coming to YouTube? Where are YouTube monies coming from?

A: Pichette: “YouTube is doing absolutely terrific.” Larry on YouTube ads: “Tremendously excited about our growth … but it’s not significant compared to the overall video space.” TV advertisers not thinking about it. (Which is the point of the channel strategy.)

Missed Q on Android. Here’s Larry Page’s answer: Early stages of monetization. We do make money on it via ads, and some people are buying apps, too (most downloads are free). “I’m very, very optimistic.”

5:06 pm: Q: More on CPC being down. Question involves “rank order,” so my head hurts.
A: Pichette: Panda search changes will show up next Q. FX changes we can’t do anything about.

[Missed next exchange]

5:09 pm: Q: Another CPC question. Talk more about this, please. Also, your traffic acquisition costs are up. Why?
Pichette. TAC increase is “just a mix issue.” (Mobile mix or partner mix? “Yes,” says Pichette.)
Wojciki: Like I said, FX and changes we made to ad quality are the reason that CPC is down. This quarter, we made a lot of changes. Quarter before, we did a lot, too. Some Q3 changes show up in Q4. “But not any one big one — it was the sum of many other changes.”

Oh, Google earnings call. You are defeating my powers of concentration.

Q: Discussion of hedging program. “Is this working the way you want?” Also, CPC seems to be going the way you want, even though it costs you money. Please talk about that.
A: Pichette gives answer about hedging that is 100 percent jibberjabber to me, because I can barely master a checking account.

Larry Page on CPC: “I do think that CPCs do vary a fair amount, and we’re not surprised by that.” Some changes we make will push it up, others down. Not that big a deal.

Q: Are you happy with the results over the quarter? A: Larry: Like I said, yes.

Wojciki: Instead of focusing on CPC decline, you should note that paid clicks are up 34 percent.
Page: Can the next question not be about CPC?

Q: Nope, it’s a question about CPC.
A: Pichette: Overall, you’re seeing more clicking, and we’re getting a better overall result. If CPC goes down for some reason, “that’s just the nature of experimentation.”

Q: Google+ question for Larry. Please describe how G+ can increase engagement on all properties.
Larry: Engaging with users, really deeply; really, really important. G+ really important part of that effort. Notion of identity really important. With “other big companies that work on social data … we’ve seen a general data to wall that garden off.” We like to partner with third parties. “But in general, companies have been walling that data off,” and we’d love to use it. (Here I would like to see the facial expressions of Dick Costolo and Mark Zuckerberg.)

Q: Do you need more markets for e-commerce play? Thirty markets right now.
A: Wojciki. Yes, we’re good. We’ll expand, but we need to learn from the places we’re in right now.

Q: Last year, in Q4, you talked about big changes “on the quality side.” Talk about that. Also, you hired less people this Q than in other Qs. Trend?
A: We talked about it last year, because it was a big deal. As far as hiring, Larry already said we were growing very fast — Larry interrupts here: “The edge of what was manageable” — so now we’ve slowed.

Last Q: More on Google Wallet, please. Are you going to double down on that? Also on Motorola: Given $12.5B size, won’t that affect “growth and margin profile”? So please talk about mobile philosophy.

A: Wojcicki: Like Larry said, we’re focusing on core products that people use every day, and you use you wallet every day, so it’s a big deal for us. “Very excited about Wallet, and will continue to invest in it.”

Larry: We’ll break out Motorola so you can see the results separately from the rest of the business. We’ve been clear that we will run it as a separate business, and won’t favor it compared to other OEMS (again, so why keep it?). Shows our commitment to Android, and how we want to keep “our freedom to innovate” (Translation: We need those patents.)

Pichette: Remember, for Q1, lots of resets every year at this time. So you won’t be surprised at the end of the quarter.

Alrighty, we’re done. Thanks for sticking around.