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Innovation

Google echoes Cisco by committing to core areas

Google invests the "vast majority" of its resources into its core businesses of search and advertising, its chief executive has said, seeking to dampen shareholder fears that the company is over-extending itself.Google's co-founder and recently installed chief executive, Larry Page, took to the stage at the company's 2011 annual stockholder's meeting on Thursday to update investors on the web giant's strategy and stress its commitment to its core businesses.
Written by Jack Clark, Contributor on

Google invests the "vast majority" of its resources into its core businesses of search and advertising, its chief executive has said, seeking to dampen shareholder fears that the company is over-extending itself.

Google's co-founder and recently installed chief executive, Larry Page, took to the stage at the company's 2011 annual stockholder's meeting on Thursday to update investors on the web giant's strategy and stress its commitment to its core businesses.

"At Google we've had a philosophy that we don't want to choke innovation," Page said on Thursday, "So we want to make sure that we've got a lot of things going on at the company that are maybe speculative... [but] we spend the vast majority of our resources on our core businesses, which are search and advertising."

Page is not the only executive stressing their company's commitment to their core business. John Chambers, leader of networking company Cisco, is in the process of retrenching the company around its central switching and routing products and trimming down products in market adjacencies, such as the consumer Flip video division.

Page said he hopes to keep the company flexible by creating multiple small business units within it so that small projects can develop internally.

"My goal has really been to have Google feel like it was a smaller company... I think if we're organised in the right way that those efforts can execute as if they're smaller and have the soul and kind of space of a smaller company within them...that's something I'm really pushing hard on."

He pointed to the Android mobile and the Chrome operating system (OS) initiatives as examples of launching major products out of smaller, internal teams.

Android is the dominant smartphone OS in America, according to figures Comscore released on Friday, with a share of 36.4 percent of all handsets in April 2011, up five percent from the 31.2 percent share it had in January.

Initiatives like Android and Chrome OS were classed by venture capitalist Bill Gurley as a "defensive moat" around the company's core products in March, designed to increase the likelihood of people being exposed to Google's money-making search and advertising business by spawning products that they used every day.

"Android, as well as Chrome and Chrome OS for that matter, are not 'products' in the classic business sense. They have no plan to become their own 'economic castles'," Gurley wrote. "Rather they are very expensive and very aggressive 'moats,' funded by the height and magnitude of Google’s castle. Google’s aim is defensive not offensive. They are not trying to make a profit on Android or Chrome. They want to take any layer that lives between themselves and the consumer and make it free."

In his speech, Page alluded to this. "[Google] want to be like a toothbrush, something you use every day and that's really important to you," he said.

Beyond Android and Chrome, Google is in the process of developing further technologies in non-core areas, such as self-driving cars, as a strategy of "not cutting off future [business] possibilities," Page said, before stressing that "the actual effort and resource that goes into these things is very small."

"We're very careful stewards of shareholder money...we started, remember, as a startup in a garage."

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