Why the future of Google is a question of leadership

Google is right to install an Apple-style leader – he could be a major asset in the fight against its fiercest competitor, Facebook.

Squint quickly at the publicity pictures of Larry Page, newly appointed head honcho at Google, and you’ll spot more than a passing resemblance to the young Steve Jobs. The same Jobs who, last week, took leave as chief executive of Apple – possibly never to return, if gloomy prognoses about his health are to be believed.

The promotion of Page and the departure of Jobs illustrate a curious paradox about some of the world’s leading internet technology companies. For all the beehive complexity of their highly trained workforces, they are ultimately dependent on the vision and energy of the idiosyncratic entrepreneurs who have founded them. Long after those of comparable size in other sectors have gone ’corporate’, technology companies will as likely as not continue to be moulded around a very different kind of leadership: one which is personal, intuitive and – of course – highly vulnerable to shock. Jobs’ own forced departure from Apple in 1985, its rapid descent from grace, his Second Coming and the glorious aftermath, is a fine illustration of the point.

But wait, Google’s leadership is – unusually – a troika. Am I suggesting a kind of corporate parallel with early Apple: that Page is like Jobs going solo, after fellow-founder Steve Wozniak took a back seat; and Eric Schmidt is the benign corporate mentor that Jobs never found in former Pepsi executive John Sculley? Only in the most general terms.

The truth is we don’t know why Google has twisted its leadership kaleidoscope right now. All we have are hints. Page has shaken off the fairy-wheels and emerged as the single most important figure. Schmidt, hitherto the grown-up chief executive, may be about to pursue a political career. For the moment, however, he will as executive chairman confine himself to “deals, partnerships, customers and broader business relationships”. And Sergey Brin? A continuing, but highly influential role, as the Google corporate conscience and ideas man.

Why change now is more speculative. While the issue of personal development shouldn’t be underestimated, nor should the fact that Google stands at a strategic crossroads. Although it still depends on search for 90% of its revenue, it has at last managed to break away from the stereotype of being a one-trick pony. But with variable and as yet unproven results. YouTube might be popular but it’s not a money-spinner. Mobile, by contrast, is very promising. Google has (at last) shown its ability to successfully innovate, with Android. It may even have developed a market-beating strategy; certainly, together with Apple, it is flaying alive the conventional competition in the smartphones cockpit. Yet the rewards, such as they are, could be a long time coming. Mobile marketing budgets may be growing exponentially, but let’s remember where they are. According to Mintel’s latest figures, total UK mobile advertising across all brands amounted to no more than £1.03m in 2009 (MW last week).

What Google just doesn’t get is the fourth internet platform, social. That’s hugely frustrating for all sorts of reasons. First, Google has been cut out of the market’s most dynamic area of expansion by an upstart rival. From zero in 2004, Facebook’s global reach is now approaching 600 million. Dig a bit deeper, and we find another reason for disquiet. Surprise, surprise, people actually find the social interface a lot more interesting than the chillier more business-like search one. Last September, comScore revealed that users were spending on average 9.9% of their web time on Facebook, compared with 9.6% on all of Google’s brands (Gmail, YouTube and so forth) combined.

If the Facebook experience means that consumers have more, and more frequent, reasons for going back, that in turn will have a big knock-on effect for advertisers (display advertisers at any rate).

“2010 was the year that Facebook firmly established itself as a major force not only in social network advertising but all of online advertising,” eMarketer respected principal analyst Debra Aho tells us. “In 2011, its global presence is something multinational advertisers can’t ignore.” That advertising revenue (on which Facebook, just like Google, is overwhelmingly dependent) is growing like Topsy. According to eMarketer, it will more than double to $4.05bn (£2.55bn) in 2011 and reach $5.74bn (£3.61bn) the year afterwards.

But wait: is this Facebook threat all it is cracked up to be? Facebook’s steep growth trajectory has been flattered by the collapse of effective competition elsewhere in the social media sector (notably MySpace, which is now a hollowed-out shell of its former self). And – for all its prodigious growth – it is moving into a highly vulnerable cycle of its growth. Just because investment bank Goldman Sachs has put a fancy £30bn valuation on Facebook – placing it in the same league as Tesco and Barclays – does not necessarily mean it will ever fulfil the money men’s fantasy. The opposite is just as possible.

I come back to the point about intuitive leadership in this sector. Blunt the visionary stimulus, for whatever reason, and the company may founder with terrifying speed. Reaching publicly quoted status can be one such distraction. The insatiable demands of investors, as well as the minute scrutiny of advisers and the media, often cause the company to embark on hare-brained strategies in a break-neck bid for accelerated growth. Public status has, arguably, poleaxed Yahoo and it has certainly had a baneful influence on what has been called Google’s “force-fit ideas culture”. Who’s to say a similar malaise won’t afflict Facebook when (rather than if) it becomes a public company?

Even so, Google would be right to see Facebook, rather than Apple, as its immediate strategic adversary. It may not be an existential threat (certainly not in the light of Google’s stellar fourth quarter performance, just reported). It could even implode, though no one would be wise to bet on that. Yet, what’s undeniable is that Facebook is blocking Google’s access to a key strategic area it should be operating in if it wishes to continue shaping the way we use the internet. Facebook, in short, is in danger of highjacking the internet ’narrative’.