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AUGUST 19, 2004
By Ben Elgin Google: Whiz Kids or Naughty Boys? [Page 2 of 2] FOOT IN MOUTH. It wanted investors to treat it as a premium stock, even though Google wouldn't offer as much information as other companies. Surely, this is a contradiction that Google's seasoned hands could have spotted. "If you want to act like a private company, stay a private company. There's a certain set of responsibilities that come with being a public company," says John Tinker, analyst with Think Equity Partners. "Google wanted to have it both ways." In another instance, Google's founders granted an interview to Playboy in April, just before it filed to go public. At such a time, most companies squelch discussions with the press to observe Securities & Exchange Commission rules regarding IPO quiet periods. When the Playboy interview surfaced in August, Google was forced to scramble and update its paperwork, as the SEC weighed its impact on the market (see BW Online, "The SEC Could Slap Google"). Although the episode didn't prompt a delay in the offering, some feel it betrayed a lack of wizened decisionmaking on Google's behalf. "That was someone not thinking through the implications of the [interview]," says David Yoffie, professor at Harvard Business School. The management question becomes even more important when considering the challenges ahead. Google has long prided itself on an unorthodox workplace, nearly devoid of middle management. Engineers are encouraged to spend one day a week pursuing pet projects, no matter how zany. Even back in 2002, as Google chugged past 500 employees, its execs grappled with how to adapt this loose organizational structure to a fast-growing company. WORK EXPERIENCE. Today, this challenge is far greater than ever. Google is growing at a much faster clip than anytime in its history, adding 3.6 employees per day so far this year, vs. 1.1 in 2002. Now at over 2,200 employees, it'll be hard-pressed to remain nimble, creative, and, at the same time, efficient. While Page and Brin have zero experience managing a company through such a pivotal stage, they haven't exactly handed over the operations reins to a more seasoned hand. Some business decisions also have shined a spotlight on management's inexperience. Take, for instance, Google's Mar. 31 launch of its e-mail service, Gmail. It was a groundbreaking event, with Google promising users 1 gigabyte of free storage for their e-mail accounts -- 250- and 500-times more than what was offered by Yahoo and Microsoft, respectively. Few insiders realized that even the timing of the release was flawed. Google, which usually doesn't announce products until they have been tested in trials, had to make an exception with Gmail. In order to test this massive service, the outfit had to bring in thousands of trial users from the outside. It would be impossible to keep such a project secret, so they announced the forthcoming product to the press. With Google threatening to dramatically reshape the Web e-mail market, pundits and journalists buzzed about the groundbreaking developments. STOLEN THUNDER. Trouble is, Google wasn't anywhere near ready to go commercial with the service. Even today, nearly five months later, Gmail isn't available to the general public. And in that elapsed time, Yahoo and Microsoft have both hunkered down and dramatically revamped their e-mail offerings. On June 15, Yahoo increased its free e-mail storage from 4 megabytes to 100, diminishing Google's edge. Meanwhile, Microsoft this summer began ratcheting up its e-mail users from 2 megabytes to 250. If and when Google finally opens up its world-beating product to the masses, its main draw will have largely been defused by competitors seeking to retain their tens of millions of e-mail users. "They shouldn't have disclosed the 1-gigabyte [news] until they were ready to launch," says one Google investor. "It was a strategic mistake." It appears the halo that long adorned Google and its founders has started to fade. To capture the same kind of adulation on Wall Street that it receives from Web surfers, Google will have to address its management shortcomings.
 Elgin is a correspondent in BusinessWeek's Silicon Valley bureau
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