Google at 10: Searching its own soul

As Google recently turned 10 years old, some analysts and investors began to say the company was suffering from early signs of maturity. Google's growth rate, while still brisk, has slowed significantly and is expected to slow more because of the economic slowdown. Eric E. Schmidt, chief executive, said Google was better positioned than other advertising companies to survive a recession.

Schmidt, 53, spoke earlier this week from the company's Mountain View, Calif., headquarters about his plans for managing Google in a downturn, the unraveling of an advertising partnership with Yahoo and his recent public endorsement of Barack Obama. Schmidt is also a member of Sen. Obama's transition economic advisory board.

Q. Google is working hard to rein in expenses. Is that because Google has matured or because of the economic crisis? And how bad do you think the economy will get?
A. The issue we face with the economic crisis is, we don't know as managers how long the crisis goes. So what is a prudent answer? A prudent answer is to watch hiring. We are hiring, but at a slower rate. Last week, we made some number of tens of offers. I suspect that will continue.

The other thing we have done is fairly detailed expense reviews to make sure we are not wasting money.

Q. Given the uncertainty, do you plan for a worst-case situation or something else?
A. It is a judgment call. Google is in a good position over the long term. We have a product that is more measurable, more targetable, and we are the innovator in the space. At some point, people need to sell products, and at some point, they realize that the best advertising is measurable advertising, and they conclude that we do that.

Q. Google is known for investing liberally in projects that don't produce immediate returns. Does the new measure of austerity, such as it is, change that?
A. It is interesting you use the word austerity. It doesn't feel very austere. I think it is better to use the word focus. We are clearly going to be more careful with potential large expense streams which are of uncertain return. But we are also going to continue to invest, certainly, in small teams to do wacky things.

Q. Are there examples of projects you have undertaken in the past--things like Chrome, Google's Internet browser, or Android, its mobile operating system--that you wouldn't do today?
A. The question is, with today's market, would we still have done the things you named? Absolutely. Going forward, maybe we would do fewer ultimately. The problem here is that if you tighten up too much, you eliminate future innovation, and then you set yourself up for a really bad outcome 5 or 10 years from now.

Q. Google is known for its lavish employee perks. Can you rein in expenses without affecting the culture?
A. The people who manage these areas are very, very sensitive to what is really important versus what is an experiment or a waste of money, or what have you. But we have no intention of getting rid of the really important aspects of our culture.

Q. Isn't it less fun to run a company that has to watch its spending more carefully?
A. I think it is actually more fun. The reason is that it is very easy to be a successful executive in high-growth times. It is much more challenging, but in my view much more rewarding, to be a leader in times where you have to make really hard choices.

Q. Earlier this week, Google walked away from an advertising partnership with Yahoo, after the Justice Department said it was planning to block it on antitrust grounds. Yahoo said it would have defended the deal in court and that it was disappointed you chose not to. Was Google less committed to this deal than Yahoo?
A. We were unsuccessful in convincing the Justice Department of something which we strongly feel, which is that providing better value to advertisers would have occurred by virtue of this deal. We concluded after a lot of soul-searching that it was not in our best interest to go through a lengthy and costly trial, which we believe we ultimately would have won.

Q. This is the first time that regulators have gotten in the way of a Google deal. Are you concerned that, as many antitrust experts believe, this will happen more frequently now? And if so, was it a mistake for Google to propose the deal in the first place?
A. We have no regrets about attempting to do the right thing, from our perspective. With change comes risks. This is a risk that we understood. Now, you ask a hypothetical question, which is, given that that event has occurred, is there another scenario? We don't see one right now, but you never know.

Q. Will Google think differently about deals after this incident?
A. Probably not. I think that this was a unique situation.

Q. You publicly endorsed Barack Obama for president, saying, among other things, that you liked his economic plan. Are there other ideas or proposals that you think could help America's and Silicon Valley's economy?
A. The strongest position I have taken from an economic point, with Sen. Obama, now President-elect Obama, has been to try to solve all of our problems at once. And the easiest way to do that, at least in domestic policy, is by a stimulus program that rewards renewable energy and over time attempts to replace fossil fuels with renewable energy.

The Google calculations, which we announced about a month ago, indicate that over a 22-year period, you can save a trillion dollars by investing in these technologies, including plug-in hybrids, and thereby reduce our reliance on oil.

Q. Were you concerned that your personal endorsement of Barack Obama would be seen as an endorsement by Google, especially since the company could benefit from some of Barack Obama's policies on issues like Net neutrality or clean energy?
A. I was, and we debated it internally at great length. I ultimately concluded that since there were so many CEOs who had been endorsing the Republican candidate, it would be OK for a CEO to endorse a Democratic candidate.

Q. Barack Obama has said he intends to name a chief technology officer. Have you had any discussions with his team about being a candidate for that position or another role in his administration?
A. I am extremely happy serving the shareholders of Google as the CEO, so I have no interest in serving as a government employee.