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Larry Page's Google 3.0

The company co-founder and his star deputies are trying to root out bureaucracy and rediscover the nimble moves of youth

(Corrects Salar Kamangar's degree on fourth page.)

(Corrects company name, Search Engine Land.)

Every Monday afternoon at the Googleplex in Mountain View, Calif., more than a dozen of Google's (GOOG) top executives gather in the company's boardroom. The weekly meeting, known as Execute, was launched last summer with a specific mission: to get the near-sovereign leaders of Google's far-flung product groups into a single room and harmonize their disparate initiatives. Google co-founder Sergey Brin runs the meeting, along with new Chief Executive Officer Larry Page and soon-to-be-former CEO Eric Schmidt. The unstated goal is to save the search giant from the ossification that can paralyze large corporations. It won't be easy, because Google is a tech conglomerate, an assemblage of parts that sometimes work at cross-purposes. Among the most important barons at the meeting: Andy Rubin, who oversees the Android operating system for mobile phones; Salar Kamangar, who runs the video-sharing site YouTube; and Vic Gundotra, who heads up Google's secret project to combat the social network Facebook. "We needed to get these different product leaders together to find time to talk through all the integration points," says Page during a telephone interview with Bloomberg Businessweek minutes before a late-January Execute session. "Every time we increase the size of the company, we need to keep things going to make sure we keep our speed, pace, and passion."

The new weekly ritual—like the surprise announcement on Jan. 20 that Page will take over from Schmidt in April—marks a significant shift in strategy at the world's most famous Internet company. Welcome to Google 3.0. In the 1.0 era, which ran from 1996 to 2001, Page and Brin incubated the company at Stanford University and in a Menlo Park (Calif.) garage. In 2001 they ushered in the triumphant 2.0 era by hiring Schmidt, a tech industry grown-up who'd been CEO of Novell (NOVL). Now comes the third phase, led by Page and dedicated to rooting out bureaucracy and rediscovering the nimble moves of youth.

Although Google recently reported that fourth-quarter profits jumped 29 percent over the previous year, its stock rose only 13.7 percent over the past 12 months, disappointing investors and lagging the Standard & Poor's 500-stock index. Google is being outpaced by rivals such as Facebook in social networking. In 2010, Facebook served up more display ads than either Google or Yahoo! (YHOO)—and was visited by more U.S. Internet users. And Apple (AAPL) is setting the pace in mobile computing, with beloved products that use a proprietary operating system that can be closed off to Google's services if the company so chooses.

On top of all that, there are antitrust inquiries in Washington and Europe, the defection of some top Google executives for opportunities elsewhere, and perhaps the most serious rap against the company: that its loosely organized structure is growing unwieldy and counterproductive.

The creative chaos inside Google's halls—a decentralized jungle of innovation, as one prominent venture capitalist puts it—once empowered employees to make bold moves, such as creating Gmail, the search-based e-mail system. Other than Android, the culture has recently produced a string of flops, such as Google Buzz, a Twitter clone, and Google Wave, a wonky service that let people collaborate online.

Page doesn't explicitly blame those missteps on the company's loosely knit management or the famous troika at the top. Yet he concedes, "We do pay a price for [shared decision-making], in terms of speed and people not necessarily knowing where they go to ask questions." His elevation to CEO, he says, "is really a clarification of our roles. I think it will help with our speed."

Former Google employees are encouraged. "Larry is a visionary, the kind of person that inspires people to do more, be better, reach farther," says Douglas Merrill, Google's chief information officer until 2008. "He would walk around the engineering department and, with just a word or two, guide or redirect projects and leave the developers feeling great about the coaching."

The Google alums also acknowledge that Page is not a natural chief executive. An introvert, he avoids public speaking and hates having a strict daily schedule. He's no frontman—and that's where the deputies at the weekly Execute meetings come in. They'll increasingly become Google ambassadors to the world. Page says one of his goals is to take the decisive leadership style they have shown within their product groups, spread it across the company, and apply it to major decisions. "We've been inspired by a lot of the people who have been operating with more autonomy and clear decision-making authority," he says.

To get a sense of the emerging leaders at the technology giant, Bloomberg Businessweek spent time with six of Google's top product people, from one of the chiefs of the advertising technologies unit, to the head of the new Chrome operating system, to one of Google's czars of search. These deputies don't encompass all of Google's top talent, but they do have Larry Page's ear, and in some sense they represent the company's future. The executives—some of whom have been with Google from the beginning—made it clear that they still believe in the company. Google, they say, can succeed in markets where it has so far shown little aptitude. Together, their mandate is to help the company move more quickly and effectively—to keep it from becoming yet another once-dominant tech company that sees its mantle of innovation stolen away by upstarts.

The Field General

Google periodically invites celebrities to give talks at the Googleplex. Last May, Conan O'Brien came by. Interviewing the comedian in front of several hundred employees was not Schmidt, Page, or Brin but Vic Gundotra, the engineering vice-president and one of Google's fastest-rising stars. Gundotra, 41, is known as a smooth operator. Not this time. For nearly an hour, O'Brien derided him and his attempts at humor. "[This is] the most condescending man I've ever met," O'Brien said. The YouTube video has been viewed more than a million times.

Gundotra stands out at Google for more than his ability to absorb ridicule. He's Google's field general on two fronts: against Apple for the hearts and minds of mobile developers and in a new conflict with Facebook to control the next set of social connections on the Web.

That's a measure of how much has changed since Gundotra joined the company in 2007. He was hired away from Microsoft (MSFT) at a time when that company was considered by Googlers to be their biggest rival. As Microsoft's "chief evangelist" in the 1990s and early 2000s, Gundotra reached out to software makers and was considered "something of a legend," according to Ashish Gupta, a former Micro soft marketing executive, for helping to persuade them to write programs for computers running Windows and its emerging cloud services framework, dubbed .net.

Gundotra's defection was inspired by his young daughter. Over lunch in 2005, he says, a question came up and she asked why he didn't just "Google" the answer. "It was a defining moment," he says. "I like to have the wind at my back." He came into the new job, colleagues say, like a tornado whipping through a Midwestern town—making the rounds of the Googleplex, asking questions designed to provoke, such as "What were Google's revenues last year?" Most staffers had no clue. Even his allies say the initial relationship was rocky. "Google and Vic had to feel each other out," says Matt Waddell, Gundotra's chief of staff.

Schmidt and the co-founders soon put Gundotra in charge of Google's effort to create applications for mobile devices. Under his watch, Google cranked out a much faster mobile search engine, a more useful Google Maps, and Google Goggles, which lets phone owners get information on things around them by pointing the camera at them. He also became point man for dealings with software developers, racing Microsoft and Apple to persuade programmers to write for Google's cloud services and its Android platform for phones.

In Silicon Valley, that kind of evangelism usually involves firing insults at the competition. While that hasn't typically been Google's style, Gundotra hasn't shied away. As he says, "It's an art to create a sense of inevitability." In a keynote speech at a Google event for developers last year, he even took aim at Steve Jobs and "a draconian future where one man, one company, and one device would be our only choice. … That's a future we don't want."

Gundotra has also sparred with Apple behind the scenes. As Android became a threat to Apple in 2008, Apple began resisting Google's claim to valuable location data gathered whenever an iPhone owner used Google Maps. His negotiations with Apple marketing chief Phil Schiller grew so heated that Schmidt and Steve Jobs had to intervene to settle the matter, according to two people familiar with the incident. (Apple announced earlier this year that it had developed its own location-monitoring system. Gundotra and Schiller both declined to comment on the incident.)

In October, Gundotra assumed joint command of a secret SWAT team to add social elements to Google's array of services. The company hopes the effort will help it combat Facebook and rebound from botched social networking forays such as Buzz and OpenSocial, a failed 2007 attempt to forge an alliance of social networks other than Facebook. Gundotra and a former Yahoo executive, Bradley Horo witz, run the effort from a shared office in Building 2000 on the Google campus.

Gundotra won't say much about the initiative. Two sources familiar with it, who asked not to be named because the project is not yet public, confirm that it is tentatively called Google +1 and that it is designed to cull data about relationships among users from current services such as Gmail and YouTube. Google will then let users share material through those connections, while using the information to make other products more social. Search results may be skewed toward pages that your friends found useful—for instance, a Google Maps query for nearby Italian restaurants could return one that was positively reviewed by someone you know.

Gundotra won't comment, but Page hints that Google's social network plans will offer more refined privacy protections. "You see tremendous controversy around [social networks] today, with people being worried: Am I sharing stuff with the right people or not?" Page says. "I think there's a long, long way to go to make these systems do what people need."

The Inventor

Andy Rubin is a tinkerer, as adept at creating mechanical marvels in his home as he is writing the software that runs tablets and mobile phones. His latest invention, produced with several Google colleagues, is "Java the Bot," a wheeled two-armed robot that can roll up to an espresso machine and perform all the steps needed to make a decent cup of coffee. (It's still in development.) "From a computer science perspective, it's an unsolved problem," he says, emphasizing that he has no plans to put Starbucks' (SBUX) baristas out of business.

Since Google acquired his eight-person startup, Android, in 2005, Rubin has expended most of his entrepreneurial energy within the Googleplex. His Android platform has pulled off arguably the fastest land grab in tech history, jumping from also-ran to market leader with 26 percent of the smartphone market, vs. 25 percent for iPhone, according to research firm ComScore (SCOR). (BlackBerry (RIMM) was first, with 33 percent, but is losing ground.) Android's success has made Rubin a model inside Google for how executives can run units autonomously. "We need even more of those," Page says of Android.

Because Rubin's mission to create a mobile operating system was so distinct from the rest of Google's goals, he was given unique leeway in managing his division. He can hire his own team and even controls the landscaping around his office building, which he decorates with supersized ornaments of the desserts (éclair, cupcake) that give versions of Android their name. Google "did a very good job of giving us autonomy," Rubin says. "We can move really, really quickly."

Rubin has his share of challenges. His best partner in the U.S., Verizon Wireless (VZ), goes into business with Apple on Feb. 10, when it starts selling the iPhone. That could slow sales of Android phones in the U.S., though Rubin prefers to emphasize success around the world and in places such as Japan. "I don't think any specific carrier in any one region is a big game changer for us," he says.

Inside Google, Rubin has been expanding his domain. Android software powers the company's fledgling (and thus far poorly reviewed) Google TV. A new version of Android called Honeycomb will run tablet devices made by Motorola (MOT) and others that are designed to compete with the iPad.

He has also assumed leadership of digital music. The company's efforts in the field were long marked by overlap, with different divisions, such as search and online storage, working on separate projects. Rubin felt Android needed better music features to compete with the iPhone, so he wrested away that project last year, according to a former executive, and is now working with a former YouTube lawyer, Zahavah Levine, to acquire licenses from the four major music labels. His group has developed a service that will let users upload their music collections to Google's servers and then synchronize them with any mobile device, according to three people familiar with Google's plans. The offering could be unveiled as soon as next month. Representatives of the music labels with knowledge of the talks caution that no deals have been signed. As one of them says, however, Google's music effort has more credibility now that Rubin is running it.

The Veterans

Page, Brin, and Schmidt deserve much of the credit for Google's success—but not all of it. "The key to making Google viable was the people they hired in the early days, many of whom are still there and are super-rich," says Steven Levy, author of the forthcoming book In the Plex: How Google Thinks, Works, and Shapes Our Lives. "They are part of the inner circle that makes the big decisions."

Salar Kamangar and Susan Wojcicki fit into that group. Kamangar, employee No. 9, runs YouTube from an office 30 miles north of Google's campus. Wojcicki, recently promoted to senior vice-president, runs a 100-person team focused on the future of advertising. Google's first headquarters was her garage—she rented it out to Brin and Page in the early years and later became employee No. 16. A decade ago, Kamangar and Wojcicki shared an office and, often, a laptop power cord.

Kamangar's ascent has been particularly remarkable. An Iranian-born Stanford graduate with a degree in biological sciences, he started as Page and Brin's factotum, then became the driver behind AdWords, the system that ranks ads alongside search results based on the price advertisers pay and the performance of each ad. The system accounts for the vast majority of Google's $29.3 billion in annual sales and may be the largest generator of revenue ever devised on the Web.

Kamangar was also a force behind Google's $1.6 billion acquisition of YouTube in 2007. Under his stewardship, the site—which generates more than 2 billion video views per day and doubled its revenues in 2010—is finally becoming a retort to those who call Google a one-trick pony. Citigroup (C) analyst Mark Mahaney expects total sales on YouTube to exceed $1 billion for the first time in 2011. Kamangar "has a gift of monetization," says David Hirsch, managing partner of investment firm Metamorphic Ventures and a former Google sales executive.

Recently, Kamangar shifted his approach to expanding the YouTube catalog. Instead of acquiring professional shows from cable and broadcast outlets (which wasn't going well), he's pursuing high-quality amateur material. "We don't think it made sense to try to compete with TV on getting the same content people are already paying subscription fees for," he says. "We want to be the platform for the next set of channels."

Wojcicki's career has mirrored her colleague's. A Harvard graduate with an MBA from UCLA, she was a primary creator of AdSense, the partner program to AdWords that syndicates Google's search ads across the Web. She's also close to Google's founders—Brin is married to her sister—and she helped drive the acquisitions of the display-ad pioneer Double Click, for $3.1 billion, in 2007 and mobile advertising firm AdMob in 2009, for $750 million.

Now her group is plotting Google's next moves in advertising. She's developing tools that meld offline and online commerce, such as a new service that lets users search the inventories at local stores. Mindful of the threat posed by Groupon, the coupon site Google tried and failed to acquire for $6 billion late last year, she is working with Google's local and e-commerce teams to develop ad services for local businesses. Like

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