Surprise: Google Cofounder Larry Page Takes Over As CEO

It was no secret that Google cofounder Larry Page hankered to be CEO at some point. (I should say, again–he was the founding CEO–but it always seemed from what I heard that he wanted another shot at the appropriate time.) Today, he got his wish, as Google just announced that he will take over from Eric Schmidt as CEO, focusing on product development and technology strategy. Schmidt will be executive chairman, handling deals, partnerships, government outreach, and other external matters, as well as serve as internal adviser to Page and cofounder Sergey Brin, whose title will be simply cofounder. He will focus on special projects, while Page’s key jobs will be product development and technology strategy.

Currently, Page is president of product and Brin is president of technology. By design, the trio was a single executive office that made decisions jointly–an arrangement that apparently wasn’t working as well as they wished for a company that now has more than 24,000 employees. Google has been slow to respond, at least with winning products, to key developments such as social networking.

More on the implications after the following comments at the start of Google’s earnings call. Here’s Schmidt on the call (edited after listening to the call again):

We’ve had a very strong quarter and a very strong year, and I think as our results show our future looks very, very bright.

Larry and Sergey and I spent a lot of time talking about how to run everything. … How can we run the company even better? After a long series of conversations, we decided to make some changes in the way we are structuring, the way we actually operate things. Historically, we always were running the decisions together. Ultimately, it adds delays in the way we make decisions. It’s actually better to clarify it. So, elevating me and having Larry runs things day to day and Sergey doing what he’s going to talk about. Starting in April.

Larry praises Schmidt to the heavens, not surprisingly. We’re really only at the beginning, and I can’t wait to get started.

Brin comes on to say he wants to spend more time on “personal passions,” though he declines to announce anything to avoid charges of vaporware. He has been president for technology at Google, so presumably he will double down on technology-related matters, but the Google blog post says it’s “strategic projects,” especially new products.

Schmidt: I will take a more strategic view of things… external issues more than the internal issues I’ve spent most of my time on. I want to say I believe Larry is ready. (Or as Schmidt tweeted: Day-to-day adult supervision no longer needed!) It’s time for him to have a shot at running this. … I’m quite sure this partnership will continue. We tend to agree on almost everything. I don’t anticipate any material change in strategy.

Questions from analysts:

Q: Any new strategy with regulators planned? Schmidt: We’re talking to them. People don’t understand what we do and don’t do, so a lot of what we’re doing is educating them. … So far, we’ve been quite successful just by taking the time to help people understand. … We try to stay well within the safety zone of the legal issues we deal with.

Q: How are Google’s efforts in real-time and social going? Brin: Both of those are very important to search. Have rolled out functionality along those lines–Twitter search, social search. This is really just the tip of the iceberg. There’s far more opportunity. Page: We’re only at the very very early stages.

Q: Lots of changes moving Google services down the purchasing funnel, with regulatory pushback and advertiser complaints–how are search changes affecting growth and how are regulatory concerns entering in? Schmidt: Extraordinary results are partly coming from algorithmic improvements. Some competitor complaints. Doesn’t anticipate regulatory problems.

Schmidt’s closing comments: A decade is a long time to be a CEO. I’m very much looking forward to my new role, a strategic role.

My connection to the call, or YouTube’s feed, is cutting out, so I won’t be liveblogging the earnings part of the call, which many others presumably will manage to do.

But that’s secondary to the management shakeup anyway. My initial take: It’s significant that one of the cofounders is taking the reins, that longtime technology visionary Schmidt will be focusing even more on external activities that increasingly could determine Google’s future, and that the other cofounder will be focusing on key strategic projects. Bottom line: They’re all sticking around, but with more segmented roles that arguably are needed given both Google’s rapidly increasing scope of products and the many outside forces–regulators, partners, competitors, rapidly rising new trends. Those forces are becoming much more important to Google’s fate than simply how much better it can make its search and advertising algorithms.

I sense, admittedly without firsthand knowledge of why Google is doing this now, two overriding reasons behind the switch. For one, as Schmidt himself acknowledged (CORRECTED), the company clearly has been slow to make decisions on developing new products, in particular social networking. Some inside the company say that’s partly because the triumvirate executive structure made it tougher for exciting new projects to get support quickly enough to stay in the game with nimble startups–which can grow large so quickly that “following fast” isn’t good enough for established companies like Google.

You have to credit Google with moving faster than almost any company so big, save perhaps Apple, but it hasn’t been good enough to avoid losing ground to companies such as Facebook and Twitter. So making it clearer who makes the decisions at the top should be a step in the right direction.

As for Brin, the title change may mask the reality that, pretty much as before, he’ll be doing whatever he’s interested in doing–he’s a founder, after all. But it appeared from comments on the call that in the short term, Brin will be handling Google’s drive into making its products more social. That kind of focus from a founder on what could be Google’s key product challenge has to help.

For another, Google needs someone like Schmidt to focus much more tightly on external matters, especially partners and regulators. As Google keeps growing larger and broader, while maintaining its commanding position in search and online ads, regulators are trying to find ways to make sure it doesn’t get even more dominant to the point that it stunts industrywide innovation or invades people’s privacy.

Moreover, other industries such as entertainment and advertising have big issues with Google, and the company needs someone who can spend more time up close and personal with leaders in Hollywood and Madison Avenue that in some cases (most recently Google TV, for example) are pushing back on Google’s ambitions. Despite some toe stubs, Schmidt is clearly better than either Page or Brin at publicly articulating Google’s goals and positions and stands a better chance at acting as an ombudsman with regulators, moguls, and marketers.

Update: It seems that the tenure of Schmidt’s role could be shorter than he made it sound on the call today. According to the New Yorker’s Ken Auletta, who literally wrote the book on Google, Schmidt last year was growing weary of the job, especially after he lost a battle with Brin and Page over Google’s decision to leave mainland China. Auletta thinks after a year, Schmidt will move on to other things (perhaps in Washington D.C. depending on how the political winds are blowing by then?). Update 2: Or not. Either way, I think the extent of Schmidt’s presence depends on whether Page steps up to the job.

And that’s my big question: How well will Larry Page do in the inevitable spotlight as CEO? He’s a notoriously stiff speaker, quite unlike Schmidt, who has a velvet-smooth style. Clearly that doesn’t matter as much internally, but no matter how much Schmidt is apparently willing to handle external affairs, Page will be called upon as its undisputed leader to articulate Google’s position and direction. I don’t doubt that he can be effective internally, even if some insiders say he can taciturn and tough to work with. But we’ll have to see if he can step up to the more public challenge of serving as lightning rod for every issue that Google faces.

I also wonder, as do many: Why the change right now? Here’s where I’ll hazard some sheer speculation. One gets the sense from Schmidt’s words–he mentions the trio spent a lot of time talking, and had long conversations–that there wasn’t immediate agreement on how precisely to address the central challenge that Schmidt alluded to: how to keep Google innovating fast as it grows. I’m not sure where any disagreement, if any, may have come, since each man retains considerable influence–and considerable latitude in their duties–in the new setup.

It’s hard to find much fault with Schmidt’s performance, so moving into an active chairman role seems like a role that suits him, and leaves him with a lot of power and visibility. Brin clearly has a less prominent role on the surface, and he seems more at ease in public, so you might wonder if he wanted a bigger role. I don’t know. But I wouldn’t be surprised if this new structure isn’t entirely cast in stone. Perhaps it’s a bit of a test to see if Page can handle the big job, while leaving Brin with an extremely important job that keeps him steeped in technology, which he seems to like.

Of course, you have to put all this in context, namely: Google is still doing quite well. It easily beat analysts’ expectations with its fourth-quarter earnings, even if the results were lost in the surprise of the management shakeup. Its shares are up 2% in after-hours trading. For all the challenges Google faces, the best time to shake things up is before it absolutely must.

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