Jan. 21 (Bloomberg) -- Google Inc. is turning to its roots as a Web startup to confront threats from a new generation of Internet companies, led by Facebook Inc.
Google, owner of the world’s most popular search engine, said yesterday that co-founder Larry Page will take over as chief executive officer as Eric Schmidt becomes executive chairman after a decade at the helm.
By elevating a founder, Google hearkens back to the entrepreneurial ethos that helped it create the most used and highly profitable tools for culling information from the Web. Page’s task will be to accelerate a drive into new areas of growth as Web users spend more time on social sites like Facebook, and Apple Inc. poses a threat in mobile advertising.
“Having a configuration where you have somebody as experienced as Eric in the executive chairman role and having the heart and soul of Google in the CEO role makes a lot of sense,” said Stephen Miles, vice chairman of executive consulting firm Heidrick & Struggles International Inc. “They do face challenges and a lot of headwind. There’s nothing like a founder to take whatever hill you need to take.”
Amazon.com Inc., the world’s top online retailer, and Oracle Corp., the No. 2 maker of business application software, are among technology bellwethers that have thrived under the guidance of their founders, Miles said.
Apple Co-Founder Steve Jobs, who retook the helm in 1997 after he was ousted in 1985, has transformed the company from an almost-bankrupt computer maker into the world’s second-most valuable company. Jobs, now on indefinite medical leave, has used an attention to detail, design and marketing to push Apple into new areas including digital music and wireless phones.
Page, 38, along with Sergey Brin, 37, began work on the Web-search project that formed the foundation for Google while they were students at Stanford University. The company, forged in a Menlo Park, California, garage, was incorporated in 1998.
Under Schmidt, who became CEO in 2001, Page was president of products. He honed a penchant for corralling engineers to focus on services that would keep users engaged, said Aydin Senkut, an angel investor who worked directly under Page in 1999 and 2000, during the co-founder’s first stint as CEO.
“He had an amazing product vision,” Senkut said. “The company is going through another phase where product vision is becoming really important.”
Early on, as startups raced to build and lure users to fledgling, competing search tools, Page refused to try to play-catch up in marketing, Senkut said. Instead, he insisted that Google invest in making the search experience better, such as by building a spell-check function that suggests when users may have misspelled a search term.
Google will need to harness engineering resources as it grapples for users and online dollars with Facebook, owner of the world’s most popular social-networking service.
Facebook, based in Palo Alto, California, surpassed Google as the most visited website in the U.S. in 2010, according to New York-based Internet tracker Experian Hitwise. Facebook serves up the most display advertising spots in the U.S., topping Google as well, according to ComScore Inc.
“Google versus Facebook is an order of magnitude more challenging,” said Whit Andrews, a Shrewsbury, Massachusetts-based analyst at Gartner Inc. Competing with Facebook for the attention of Web audiences will require new technology that is different from search, he said.
The change at the top transfers leadership from a scholarly manager who holds a Ph.D. in computer science and worked for more than a decade as a technology executive before joining Google -- to an entrepreneur almost two decades his junior.
Google fell $14.94 to $611.83 at 4 p.m. today in Nasdaq Stock Market trading. The company lost 4.2 percent last year.
Schmidt and Page said in an interview yesterday that they worked closely with each other and co-founder Brin on big decisions. The CEO shift won’t result in major strategic changes, the executives said.
“We really agree on strategy,” Page said. “This is really a way of changing the way we’re making decisions and the way we’re operating. But I definitely don’t think there will be any major changes in strategy.”
Schmidt, 55, said, “We worked as a triumvirate for 10 years.”
The three didn’t always agree, particularly when it came to coping with rules in China that require Web-search providers to censor results that government officials deem inappropriate.
Schmidt tried to persuade Brin and Page to stay in China -- and was overruled by the founders, Bloomberg Businessweek reported in November. Instead, Google now depends on its Web service in Hong Kong for China users.
“You want to have healthy discussion over the data before you make a decision,” John Battelle, author of “The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture,” said in an interview on Bloomberg TV. “That discussion could also be called significant disagreements that lead to yelling matches. There certainly have been those.”
Under the new management structure, Brin will focus on strategic projects, including new products, the company said in a blog post.
While the three earn only a $1 salary, Page has a net worth of $15 billion, according to a September Forbes list of the richest Americans. Brin’s worth is $15 billion and Schmidt’s is $5.45 billion, Forbes said.
Another foe Page will confront is Apple, which vies with Google in mobile software and advertising. Schmidt was on Apple’s board until 2009, when he resigned because of overlap between the companies’ businesses.
The Google-backed Android operating system topped Apple’s iPhone in U.S. smartphone subscribers for the first time in November, accounting for 26 percent of the market, compared with 25 percent for Apple, according to ComScore. Both lag behind BlackBerry maker Research In Motion Ltd., with 33.5 percent.
Reliance on Deals
Still, Apple will get a boost in the U.S. starting next month, when it makes iPhone phones available on Verizon Wireless, the largest U.S. mobile-phone carrier. AT&T Inc. had been the exclusive iPhone carrier. Apple also announced a new mobile-advertising service, called iAd, last year, challenging Google’s leadership for mobile-based advertising in the U.S.
As Apple and Facebook encroach, Google is stepping up its reliance on acquisitions for growth. Google made more than 20 purchases last year, compared with fewer than 10 in 2009.
Google also tried to acquire daily-deals site Groupon Inc. for $6 billion last year. The offer was rebuffed in December by 30-year-old founder Andrew Mason, who wanted to expand the business and weigh an initial public offering this year.
Even as the company scopes out deals, Page can rekindle a spirit of innovation at Google and boost product development from within, said Gil Elbaz, who worked at Google from 2003 to 2007 after his company, Applied Semantics, was acquired.
“He has been in a significant leadership position and is responsible for a lot of the processes at the company already.” Elbaz said. “I don’t think he has lost his kid-like quality in terms of dreaming big.”
To contact the editor responsible for this story: Tom Giles at firstname.lastname@example.org.