Google’s Prabhakar Raghavan, wearing a hoodie with the words “We use Math” on the front, delivered a crucial message to staff at an all-hands meeting last month. But initially, he wanted them to settle in and become comfortable.
“Grab your boba teas,” Raghavan instructed the audience assembled in a theater at the company’s headquarters in Mountain View, California.
Raghavan, who reports directly to CEO Sundar Pichai and oversees important areas such as search, advertisements, maps, and commerce, spoke to Google’s knowledge and information organization, which has over 25,000 full-time employees.
“I think we can agree that things are not like they were 15-20 years ago, things have changed,” Raghavan remarked, according to recordings of the event acquired by CNBC. He was alluding to the search sector, which Google has dominated for the past two decades, becoming one of the world’s most profitable and valuable firms in the process.
Raghavan claimed that Google’s digital ad business has become “the envy of the world.” nearly the past three years, annual revenue increased by nearly $100 billion, surpassing Starbucks, Mazda, and TikTok combined.
Raghavan’s comments serve as the latest warning to staff that Google’s growth is becoming increasingly difficult.
“It’s not like life is going to be hunky-dory, forever,” he told me.
Raghavan sprinkled sports metaphors and rallying cries throughout his reality check speech, which lasted approximately 35 minutes.
“If there’s a clear and present market reality, we need to twitch faster, like the athletes twitch faster,” he went on to say.
He cited increased competition and a more complex regulatory environment. Google faces competition in generative artificial intelligence from Microsoft and OpenAI, however no specific rivals were mentioned.
“People come to us because we are trusted,” Raghavan remarked. “They may have a new gizmo out there that people like to play with but they still come to Google to verify what they see there because it is the trusted source and it becomes more critical in this era of generative AI.”
Raghavan had some tangible changes to report. He stated that the corporation intends to establish teams closer to customers in major regions such as India and Brazil, and that he is cutting the time it takes his reports to complete specific projects in order to move faster.
“There is something to be learned from that faster-twitch, shorter wavelength execution,” he went on to say.
According to insiders familiar with the situation, Google’s cloud company has reportedly encouraged staff to work on shorter schedules despite having fewer resources due to cost constraints.
“With a huge opportunity ahead, we’re moving with velocity and focus,” a Google representative told CNBC when questioned about Raghavan’s speech. The representative emphasized the inclusion of generative AI to search and improvements in search quality, saying, “There’s much more to come.”
In March, Google appointed business veteran Elizabeth Reid as vice president, overseeing search and reporting to Raghavan.
“High highs and low lows.”
In many ways, Raghavan’s tone was nothing new. Google has been in cost-cutting mode since early 2023, when parent Alphabet revealed plans to shed approximately 12,000 positions, or 6% of the company’s workforce. Job losses have continued this year, with more planned for early 2024, and CFO Ruth Porat announced in a memo last week that the company is revamping its finance structure, which would result in significant downsizing.
However, Raghavan makes it apparent that what is happening now is not simply a continuation of 2023. He mentioned that his group’s previous all-hands meeting was three months ago, but for some, it seemed like three years.
“We’ve had a lot go on in these last three months,” comprising of “really high highs and low lows,” he remarked.
At the time, Google unveiled their AI image creator. After consumers found mistakes, which went viral online, the corporation removed the feature in February. Google has been reorganizing to remain ahead of the AI arms race as more people abandon traditional internet searches to find information online.
Wall Street expects Alphabet’s next earnings report on Thursday to show year-over-year revenue growth in the low teens for the second consecutive quarter. While this represents an increase over the previous quarters, the figures nevertheless compare to some of Google’s lowest reports on record.
Even though Alphabet announced higher-than-expected sales and earnings in the fourth quarter, ad revenue fell short of analysts’ expectations, prompting the company’s stock to fall more than 6%. Meanwhile, the AI growth has prompted a fresh focus on investment.
“We’re in a new cost reality,” Raghavan explained. With generative AI, the corporation is “spending a ton more on machines,” he said.
Organic growth is slowing, and the amount of new gadgets entering the market “is not what it used to be,” Raghavan stated.
“What that means is our growth in this new operating reality has to be hard earned,” he went on to say.
Raghavan stated that the corporation is “navigating a regulatory environment unlike anything we’ve seen before.”
He mentioned the European Union’s Digital Markets Act and stated that the corporation is still determining what its obligations will be with the European Commission. The DMA, which went into effect last month, aims to reduce anti-competitive behavior among technology businesses.
“That has an impact on us,” Raghavan remarked.
Raghavan advised employees to “meet this moment” and “act with urgency based on market conditions.”
“It won’t be easy,” he explained. “But these are the moments and the history of industries that will define us.”
120 hours per week.
Raghavan stated that Google must address its “systemic” difficulties and develop “new muscles that we may have let fall off for a while.”
He lauded the teams working on Gemini, the company’s primary set of AI models. He stated that they have increased their weekly workload from 100 to 120 hours in order to correct Google’s picture recognition program on time. That allowed the team to resolve almost 80% of the difficulties in just 10 days, he claimed.
However, Google has not restored the capacity to generate photos of people. Demis Hassabis, Google’s AI leader, stated in February that the tool would be re-released within weeks of being pulled down.
Raghavan highlighted that the failure in image generation was not due to insufficient effort.
“I want to be clear, this wasn’t some case of somebody slacking off and dropping the ball,” he told reporters.
Raghavan stated that the organization has demonstrated the ability to act rapidly on key concerns. As an example, he mentioned an endeavor in 2023 in which the Bard team (now Gemini) and the Magi team, which focuses on AI-powered search, delivered products in a couple of months.
He indicated that the company could not have accomplished this with larger numbers.
“The realization was, ‘Gosh, if we had thrown 2,000 engineers at these projects, we wouldn’t have gotten it done,'” he said, implying that the business would pay particular attention to team size and scope.
Raghavan also responded to criticisms of the company’s bureaucracy.
Employees have been complaining for years that Google’s expanding bureaucracy has hampered their ability to deliver products rapidly. This exacerbated as the corporation aggressively increased its workers during the pandemic.
In 2022, in addition to Google’s yearly survey, Googlegeist, Pichai created a “Simplicity Sprint” to collect staff feedback on efficiency.
“The number of agreements and approvals it takes to bring a good idea to market — that’s not the Google way,” Raghavan went on to say. “That’s not the way we should be functioning.”
Raghavan stated that leaders are aggressively seeking to remove unneeded layers in the system, reflecting previous comments by Pichai.
“We’ve learned a lot over the last few quarters,” Raghavan said. “I can’t say that we’ve overcome all of our difficulties. What counts is how we react and what we learn.
Google search boss warns employees of ‘new operating reality,’ urges them to move faster
