June 20, 2005 7:55 AM PDT
Google vs. Yahoo: Clash of cultures
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Called Project Guru, the initiative is meant to encourage staff to scout for experts in various fields such as search algorithms and Internet communities.
All about the computer science
Google hired Eric Schmidt, the chief executive at the troubled software company Novell, in 2001 to run the show. But as the prospectus for the company's initial public offering states, Google is run by a triumvirate. Schmidt may be the boss on paper, but he clearly shares authority, industry insiders say.
Google's $2.5 billion war chest and freedom let employees throw many new services against the wall to see what sticks. But critics question whether Google has an efficient process for managing innovation. The free e-mail service Gmail, for example, is still in beta testing after nearly two years.
"It's like the Wild West at Google. They have enough money and enough disregard for the status quo," said one industry insider who asked to remain anonymous.
When it comes to acquisitions, Google rarely spends big. Often, it acquires upstarts in growth markets that no one saw coming, such as the Stanford search project Kaltix, the advertising technology company Applied Semantics and the blogging software provider Pyra Labs.
The biggest arrow in Google's quiver is its engineers. Google's research and development budget was nearly $80 million in the first three months of 2005, more than twice the previous year, and it continues to attract some of top talent in the country, such as Adam Bosworth, a programming guru who spent years at Microsoft and BEA Systems. Yahoo spent roughly $119 million in a category called product development.
"You won't find any bored engineers at Google," the company's Web site says. "You will find friendly colleagues, fascinating projects and the opportunity to make life better for tens of millions of people every day."
Google execs seem well aware that they have to continue to innovate to maintain their edge. It's widely expected that Google will unveil a Web browser and possibly a thin-client operating system, and Microsoft will be a formidable competitor when or if this happens. Google is also building a payment system for video consumption, a major deviation from the company's traditional business.
So who wins?
Though Google is bigger, Yahoo appears to have the upper hand when it comes to warm relations with Madison Avenue. After the dot-com bust, Yahoo ate crow and approached marketers with a more humble, bottom-line pitch. Under direction from advertising veteran Wenda Millard, Yahoo's sales team now focuses on traditional partnerships and handholding with ad agencies. Yahoo also runs an internal telemarketing group whose sole responsibility is to call small agencies and companies to work with Yahoo.
In contrast, Google's approach relies on classified advertising that is based on technology rather than relationships.
"Yahoo has a big branded advertising business. Google is all search. To the extent that brand advertisers want to participate in the Internet, Yahoo's a better bet," said Rob Sanderson, a financial analyst at American Technology Research.
"Yahoo hand-holds you everyday. They look to (be) a strategic partner," said Sarah Fey, president of Isobar, one of the largest interactive agencies.
Financial analysts and industry watchers say there's room for both companies in the Internet economy. But they worry that Google, just like Yahoo, will at some point have to go through its awkward years.
"I do believe that Google will hit a wall eventually, and it will hit it spectacularly," said the book author Moore. "The real question is: What will it do then?"
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