When Mr Pichai took over as chief executive of Google in August 2015, after it became the core of the newly formed Alphabet, the online-search-and-advertising business had annual revenues of $66bn and net income of $14bn. By the time Sergey Brin and Larry Page, Google’s founders, handed him the reins of Google’s parent company last December his division was raking in profits of $34bn on sales of $161bn—and Alphabet was worth almost twice as much as four years earlier.
This enviable track record justifies Mr Pichai’s rich compensation package over several years, of $2m annual salary plus $240m in shares and stock options (depending on performance targets). It would also justify a degree of complacency. Far from it. Mr Pichai realises he inherited an organisation in the middle of momentous change.
As Alphabet has grown—more than 4bn people are thought to use at least one of its products or services—so has the tug of economic and political forces on it.
From the outside, lawmakers and trustbusters are pressing it for explanations over alleged abuses of its market dominance in online-search-and-advertising technology. On July 29th Mr Pichai joined his opposite numbers at Amazon, Apple and Facebook to field angry questions from a congressional committee investigating Big Tech’s alleged anticompetitive practices.
Mr Pichai’s foremost challenge is to prevent Alphabet from becoming what Mr Brin and Mr Page were so bent on avoiding—a “conventional company” that dies a slow death from lack of innovation and declining growth. The task is as delicate as the technology giant is gargantuan.
Every day people make an estimated 6bn search queries on Google and upload more than 49 years’ worth of video to YouTube. More than 300bn emails are said to be sent every day and if only one-third originate on Gmail—a conservative estimate—then a stack of print-outs would be 10,000km high.
“Other bets”, as Alphabet’s financial statements refer to its non-core businesses, now number 11, each with its own capital structure. These include Access (offering fibre-optic broadband), GV (which invests in startups), Verily (a health-care firm), Waymo (a developer of autonomous cars) and X (a secretive skunk works engaged in all manner of moonshots).
Commercially these ventures seem only loosely connected with the core. What links them to the main business is information processing—and specifically these days artificial intelligence (AI), which powers everything from search to Waymo’s self-driving cars.
Like the internet, Google was envisaged as an ever-expanding collection of groups of engineers linked by a common language and common goals, most prominently to “organise all the world’s information”. Alphabet, too, is a network of networks held together by technical standards. It grows horizontally by adding yet more networks.
Google resembled a big open-source project by being an open book, at least internally. Any employee could freely access all internal information except for sensitive user data or company finances. All code, project documents, even a colleague’s calendar, were fair game.
The result is a collection of semi-independent firms with powerful bosses sitting atop each of them: Thomas Kurian at Google Cloud, Susan Wojcicki at YouTube, Rick Osterloh at Google’s hardware division and Hiroshi Lockheimer at the Android operation. In early June Mr Pichai put Prabhakar Raghavan, who already headed Google’s ad business, in charge of search as well, making him Google’s de facto deputy CEO. (Mustafa Suleyman, vice-president of AI policy at Google, sits on the board of The Economist’s parent company.) A company of Alphabet’s breadth would fail if it depended solely on one man’s judgment, Mr Pichai explains. “People have to be able to make their own decisions.”
These decisions are becoming harder. Googlers have always prided themselves on solving the toughest problems in computer science—less so on making money. This may be one reason why some of the company’s hit services generate smaller revenues than they might, like YouTube, or barely any at all, like Maps. Monetisation from the “other bets” has scarcely begun.
It is also becoming increasingly apparent that Alphabet’s organisational setup does not scale well. Even with a workforce of a few tens of thousands Google felt small, notes an employee who left a few years ago and later returned. With the firms’ 120,000 permanent workers complemented by an even more numerous (and less-well- paid) temporary or contract staff, the founders’ original idiosyncratic rules are becoming a drag. Executives grumble that internal promotion by committee is often a time-consuming political exercise. Letting a thousand flowers bloom is leading to an awful lot of compost.
Mr Pichai has an opportunity to prove the sceptics wrong. The covid-19 pandemic offers a convenient pretext to get rid of inefficiencies, such as overlapping products, and cut through Alphabet’s internal red tape. It could result in a new balance being struck between Google’s innovative culture and more systematic exploitation of its products’ and services’ money-making potential. Even the antitrust probes have a silver lining for Mr Pichai. “In some ways, I’m looking for clarity,” he says.
To be a leader in the mould of Mr Nadella, however, he would have to be more daring.