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Google search chief Raghavan warns employees of 'new operational realities'

Google search chief Raghavan warns employees of 'new operational realities'


Google Senior Vice President Prabhakar Raghavan speaks at the U.S. Conference of Mayors Winter Conference on Wednesday, January 17, 2024 in Washington, DC, USA.

Julia Nickinson | Bloomberg | Getty Images

Wearing a hoodie with “We use Math” written on the front, Google search chief Prabhakar Raghavan delivered an important message to employees during an all-hands meeting last month. But first he wanted them to settle down and get comfortable.

“Drink some boba tea,” Raghavan told a crowd gathered in a theater at the company's headquarters in Mountain View, California.

Raghavan, who reports to CEO Sundar Pichai and leads key groups such as search, advertising, maps and commerce, spoke about Google's knowledge and information organization, which is made up of more than 25,000 full-time employees. .

“I think we can all agree that things are different than they were 15 to 20 years ago, and things are changing,” Raghavan said, according to audio of the event obtained by CNBC. He was referring to the search industry that Google has dominated for his 20 years, and in the process emerged as one of the most profitable and valuable companies on the planet.

Raghavan said Google's digital advertising business has become “the envy of the world.” He noted that over the past three years, annual revenue has increased by more than $100 billion, more than Starbucks, Mazda and TikTok combined.

Raghavan's comments serve as the latest warning to employees that growth at Google is becoming increasingly difficult at a company long known across Silicon Valley for its free gourmet lunches and countless campus perks. It has become.

“Life won't be boring forever,” he said.

Over the course of about 35 minutes, Raghavan peppered his reality check speech with sports metaphors and rallying cries.

“If there is a clear reality in the market, we need to twitch faster just as athletes twitch faster,” he said.

He cited increased competition and a tougher regulatory environment. Although he didn't name specific rivals, Google is facing pressure from the likes of Microsoft and OpenAI in the field of generative artificial intelligence.

“People come to us because they trust us,” Raghavan said. “They may have a new gizmo out there that people want to play with, but they still turn to Google to validate what they see. Because in this era of generative AI, that’s even more important.”

Raghavan had some concrete changes to announce. He said the company plans to build teams closer to users in key markets such as India and Brazil, and is reducing the time required for reporting to complete certain projects in order to move forward more quickly. It revealed that.

“There's something to be learned from doing that faster twitch, shorter wavelength,” he said.

Google's cloud business is also instructing employees to move on shorter schedules, even as cost-cutting efforts have reduced resources, sources familiar with the matter told CNBC.

Asked for comment on Raghavan's speech, a Google spokesperson told CNBC: “We are working with speed and focus because there are huge opportunities ahead.” The spokesperson highlighted the addition of generative AI to search and improved search quality, adding, “There's a lot more to come.”

In March, Google appointed company veteran Elizabeth Reid as vice president, leading search and reporting to Raghavan.

“Highest value and lowest value”

In many ways, Raghavan's tone was not new. Google has been in cost-cutting mode since early 2023, when parent company Alphabet announced plans to cut about 12,000 jobs, or 6% of its workforce. With layoffs continuing this year and further cuts planned for early 2024, Chief Financial Officer Ruth Porat said in a memo last week that the company is restructuring its financial organization. This includes further downsizing, he said.

However, Raghavan is clear that what is happening now is not just a continuation of 2023. He noted that the last time his group met all together was three months ago, but to some it felt like three years.

“There's been a lot going on in the last three months,” he said, adding that it has been made up of “really high highs and really low lows.”

Around that time, Google introduced an AI image generator. The company retired the feature in February after users discovered the inaccuracies and spread them online. Google is reorganizing itself to gain an edge in the AI ​​arms race as more users find information online through traditional internet searches.

Alphabet's earnings report on Thursday is expected by Wall Street to see sales growth in the low 10% range from a year ago for the second consecutive quarter. While this represents an acceleration from numbers from a few quarters ago, it also compares to some of Google's weakest reports on record.

Even though Alphabet reported better-than-expected sales and profits in the fourth quarter, advertising revenue fell short of analysts' expectations, sending the company's stock down more than 6%. Meanwhile, the AI ​​boom has renewed attention to investment.

“We are facing new cost realities,” Raghavan said. Thanks to generative AI, the company is “spending a lot more money on machines,” he said.

Intrinsic growth has slowed and the number of new devices coming out is “not what it used to be,” Raghavan said.

“What that means is that our growth in this new business reality will have to be hard-earned,” he added.

This photo illustration shows a smartphone with Google and Google Gemini in the background on February 8, 2024 in Brussels, Belgium.

Jonathan Ra | Null Photo | Getty Images

Raghavan said further challenges are emerging as the company “navigates a regulatory environment unlike anything we've seen before.”

Citing the European Union's Digital Markets Act, he said the company is still learning from the European Commission what its obligations will be. The DMA became formally enforceable last month and is aimed at cracking down on anti-competitive practices among technology companies.

“It's certainly affecting us,” Raghavan said.

Raghavan called on employees to “seize the moment” and “act with urgency based on market conditions.”

“It's not going to be easy,” he said. “But these are the moments and the history of our industry that define us.”

120 hours per week

Raghavan said Google needs to address “organizational” challenges and build “new muscle where we may have been maybe a little down.”

He praised the team working on Gemini, the company's main AI model group. He said he increased his work hours from 100 to 120 hours a week to fix Google's image recognition tools in a timely manner. This allowed the team to fix about 80% of the problems in just 10 days, he said.

However, Google has not yet brought back the ability to generate images of people. Demis Hassabis, Google's AI lead, said in February after the tool was removed that it would be re-released in the coming weeks.

Raghavan clarified that the failure to produce images was not due to lack of effort.

“I want to be clear: this is not about someone cutting corners and dropping the ball,” he said.

Raghavan said the company has demonstrated the ability to move quickly on important issues. As an example, he highlighted his 2023 initiatives. At this time, the Bard team (now Gemini) and his AI-powered search-focused Magi team launched their products within a few months.

This is something the company could not have achieved with higher numbers, he suggested.

“We realized, 'Oh, if we had put 2,000 engineers into these projects, they wouldn't have gotten done,'” he said, adding that the company paid close attention to the size and scope of its teams. He suggested that he was paying.

Raghavan also spoke to critics of the company's bureaucracy.

Employees have long complained that Google's growing bureaucracy has hurt its ability to launch products quickly. The situation worsened as the company rapidly expanded its workforce during the pandemic.

In 2022, in addition to Google's annual survey called Googlegeist, Pichai launched the Simplicity Sprint to collect employee feedback on efficiency.

“Good ideas require a lot of consensus and approval to get to market, and that's not how Google works,” Raghavan said. “That's not the way we should function.”

Raghavan echoed Pichai's earlier comments and said leaders are actively working to remove unnecessary layers from the hierarchy.

“We've learned a lot over the past few quarters,” Raghavan said. “We cannot say that all the stumbles are behind us. What matters is how we react and what we learn.”

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