Alphabet Investor Relations

Imagine you are catching up with an old friend 15 years from now. She wants to go out for a coffee. So you hit a button and within seconds a self-driving car pulls up outside your apartment. You both get in, say your destination, and are whisked away. On your journey, you talk, play games and catch up on news, while the car effortlessly navigates the roads. It merges onto a freeway and gets into a high-speed lane where self-driving cars flow faster, more smoothly and use less of the road (their precision driving allows them to travel much closer together). You look around and all sorts of people are in such cars – the young, the elderly, and people with disabilities. Within minutes you arrive at a nearby park and cafe where parking lots used to be and people are now enjoying themselves in this green, open space.

It’s these kinds of ideas – which have the potential to transform lives and communities – that make me excited about coming to work every day. Will these dreams become reality? Will Google play an important role? Will these technologies ultimately be good for the world? There is no way to answer these questions with certainty. Nonetheless I am optimistic that if we choose important problems – transportation in this case – work in partnership with others, and have a vision we believe in, the odds are on our side. On a year-by-year basis, progress may seem slow and success dubious, but over a longer time period technological change is often abrupt and revolutionary.

For example, when Larry and I started the company less than 15 years ago, we afforded ourselves the rare luxury of having a cell phone.

Back then they were brick-sized devices, used solely for making calls that only the privileged few could have. Over the next 15 years, the phones became pocket-sized and more powerful than the computers we started Google with. Most importantly they are now in the hands of billions of people, making them nearly ubiquitous throughout the world.

This transformation has made a huge difference to people’s lives. In 1998, meetings had to be prearranged, travel had to be carefully planned, a paper map was in order to get to a new place, and knowledge was contained in your mind. Today, it takes a minute on a street corner to catch up with a friend, book a holiday, find your way in almost any corner of the world, and find out almost anything about almost anything.

Of course it’s important to recognize that sometimes change is positive – forging closer connections, making life easier, improving productivity. Sometimes it is negative – increasing distraction and stress levels, as well as overwhelming us with choice. I am optimistic that on balance technology will make the world a better place. Still, we need to continue to work hard to ensure that our contributions are decidedly beneficial – helping people to lead easier, richer, and more fulfilling lives.

Velocity, execution and focus

Sergey and I founded Google because we believed that building a great search experience would improve people’s lives and, hopefully, the world.  And in the decade-plus that’s followed, we’ve been constantly delighted by the ways in which people have used our technology—such as making an artificial limb using old designs discovered online.

But we’re always impatient to do better for our users.  Excellence matters, and technology advances so fast that the potential for improvement is tremendous. So, since becoming CEO again, I’ve pushed hard to increase our velocity, improve our execution, and focus on the big bets that will make a difference in the world.  Google is a large company now, but we will achieve more, and do it faster, if we approach life with the passion and soul of a start-up.

Last April, I began by reorganizing the management team around our core products to improve responsibility and accountability across Google.  I also kicked off a big clean-up.  Google has so many opportunities that, unless we make some hard choices, we end up spreading ourselves too thin and don’t have the impact we want. So we have closed or combined over 30 products, including projects like Knol and Sidewiki. In addition, we gave many of our products, such as Google Search, a visual refresh, and they now have a cleaner, more consistent, and beautiful look.

A beautifully simple experience across Google

Creating a simpler, more intuitive experience across Google has been another important focus. I have always believed that technology should do the hard work—discovery, organization, communication—so users can do what makes them happiest: living and loving, not messing with annoying computers! That means making our products work together seamlessly. People shouldn’t have to navigate Google to get stuff done. It should just happen. As Sergey said in the memorable way only he can, “We’ve let a thousand flowers bloom; now we want to put together a coherent bouquet.”

Think about basic actions like sharing or recommendations. When you find a great article, you want to share that knowledge with people who will find it interesting, too. If you see a great movie, you want to recommend it to friends. Google+ makes sharing super easy by creating a social layer across all our products so users connect with the people who matter to them.

When you sign up for Google+, you can use Circles to group people into different categories, such as “Friends,” “Family,” or “Rocket Scientists,” and then engage with them just like in real life. You can recommend great news articles, websites, and videos to specific Circles, or share photos with “Family” straight from your Android device. And the photos are even uploaded for you automatically! To follow people with shared interests, such as photography, just add them to your Circles. And you can share your own ideas with the world, or a smaller group, via the Google+ Stream and have others respond.

It’s still early days, and we have a long way to go. But these are tremendously important changes, and with over 120 Google+ integrations to date (including Google Search, YouTube and Android), we are on the right track. Well over 100 million users are active on Google+, and we’re seeing a positive impact across the Web, with Google users being able to recommend search results and videos they like—a goal we’ve had ever since we started the company.

Activity on the Google+ Stream itself is increasing too. We’re excited about the tremendous speed with which some people have amassed over one million followers, as well as the depth of the discussions taking place among happy, passionate users—all evidence that we’re generating genuine engagement. When I post publicly I get a ton of high quality comments, which makes me happy and encourages me to keep posting. I strongly encourage all of you to follow me on Google+—I love having this new way to communicate and share with all of you!

Next-generation search

Understanding identity and relationships can also help us improve search. Today, most search results are generic, so two strangers sitting next to each other in a café will get very similar answers. Yet everyone’s life experiences are unique. We are all knowledgeable about different things; we have different interests and our preferences—for music, food, vacations, sports, movies, TV shows, and especially people—vary enormously.

Imagine how much better search would be if we added… you. Say you’ve been studying computer science for awhile like me, then the information you need won’t be that helpful to a relative novice and vice versa. If you’re searching for a particular person, you want the results for that person—not everyone else with the same name. These are hard problems to solve without knowing your identity, your interests, or the people you care about.

We have an old-time Googler called Ben Smith, who is a good friend of mine. It turns out that he isn’t the only Ben Smith in the world! Today, it’s tough for Google to find the right Ben for me. Many people share only their public profiles, not their posts, photos, or connections. And privacy considerations certainly limit the information that can be shared between platforms—even if the third parties hosting it were willing to work with Google, which hasn’t always been the case.

Google+ helps solve this problem for us because it enables Google to understand people and their connections. So when I search for Ben Smith, I get the real Ben Smith (for me), right there in my search box, complete with his picture. Previously, the search box would just have had the series of letters I had typed, with no real understanding that I was looking for a unique person. This is a huge and important change, and there’s a ton more work to do.  But this kind of next-generation search in which Google understands real-world entities—things, not strings—will help improve our results in exciting new ways. It’s about building genuine knowledge into our search engine.

Taking actions

In the early days of Google you would type in a query, we’d return ten blue links, and you would move on fairly happily. Today you want more. If you search for “weather san francisco”, chances are you want… the weather in San Francisco right there on the results page, not another click or two away. So that’s what we now provide. In fact, before you’ve even finished typing “weather” into the search box we give you the weather because we’ve learned that’s most likely what you’re looking for.

Truly great search is all about turning your needs into actions in the blink of an eye. There is a huge amount of data in the world that isn’t publicly available today.  Showing it in our results involves deep partnerships across different industries in many countries. It’s very similar to the work we did to get Google Maps off the ground.

Last year, for example, we welcomed ITA Software to the Google family. They have strong relationships with the airline industry, and using that data we can now provide more relevant results for travel queries. This means that if you search for “flights from chicago to los angeles”, you get a list of the most relevant flights with prices, and you can book directly with the airline—or click on an ad for an online travel agency. We’re also experimenting with a feature called Hotel Finder, which enables you to compare prices and book a hotel room right from the results page. It’s all about speeding things up so users can get on with the things that matter in their lives.

From desktop to mobiles and tablets, oh my

Getting from needs to actions lightning fast is especially important on smaller devices like mobile phones, where screen size is limited and context really matters.  That’s why I’m so excited about Android. Take Google Maps, one of our best-loved services.  With it, you can search for something, perhaps the nearest bookstore, find it, and be shown the way straight there.  And you can now turn your phone into a wallet using… Google Wallet.  So you can tap, pay, and save while you shop.  No more claiming you left your credit card at home when your friend asks you to pay for lunch!

It wasn’t always that easy. I remember first meeting Andy Rubin, the creator of Android, back in 2004. At the time, developing apps for mobile devices was incredibly painful. We had a closet full of over 100 phones, and we were building our software pretty much one device at a time. Andy believed that aligning standards around an open source operating system would drive innovation across the mobile industry. At the time, most people thought he was nuts.

Fast forward to today. Android is on fire, and the pace of mobile innovation has never been greater. Over 850,000 devices are activated daily through a network of 55 manufacturers and more than 300 carriers. Android is a tremendous example of the power of partnership, and it just gets better with each version. The latest update, Ice Cream Sandwich, has a beautiful interface that adapts to the form of the device.  Whether it’s on a phone or tablet, the software works seamlessly.

As devices multiply and usage changes (many users coming online today may never use a desktop machine), it becomes more and more important to ensure that people can access all of their stuff anywhere.  Constant downloading is a terrible experience, so I am excited about products like Gmail and Google Docs that work well across Android and desktop. With Chrome now recently available on Android, switching devices becomes painless, too, because all of your tabs are just there across your desktop and Android.  You can even click the back button on a different device, and it just works! And with Google Play, movies, books, apps, and games are all accessible from the Web or an Android device—no cables, downloading, or syncing required. I think there is a theme here!

In August, we announced plans to acquire Motorola Mobility, a company that bet big on Android very early on. We are excited about the opportunities to build great devices capitalizing on the tremendous success and growth of Android and Motorola’s long history of technological innovation. But it’s important to reiterate that openness and investment by many hardware partners have contributed to Android’s success. So we look forward to working with all of them in the future to deliver outstanding user experiences. Android was built as an open ecosystem, and we have no plans to change that.

Long-term focus

We have always tried to concentrate on the long term, and to place bets on technology we believe will have a significant impact over time. It’s hard to imagine now, but when we started Google most people thought search was a solved problem and that there was no money to be made apart from some banner advertising.  We felt the exact opposite: that search quality was very poor, and that awesome user experiences would clearly make money.

Today it feels like we’re watching the same movie in slow motion over again. We have tremendous new products that were seen as crazy at launch yet now have phenomenal usage. They easily pass the toothbrush test: they are important enough that millions of people use them at least once or twice a day. Take Chrome, for example. In 2008, people asked whether the world really needed another browser. Today Chrome has over 200 million users and is growing fast, thanks to its speed, simplicity, and security. If you don’t use Chrome, just try it out, you’ll never go back! I promise it won’t take too long to install, and if it does you probably need a new computer.

We are seeing phenomenal usage of our Web-based applications, too. When we launched Gmail in 2004, most people thought webmail was a toy, but its accessibility—all your email from anywhere, on any device—and insane storage have made it a winner with more than 350 million people. And our enterprise customers love it too. Over 5,000 new businesses and educational establishments now sign up every day.

In 2006, when Google acquired YouTube, we faced a lot of skepticism. Today, YouTube has over 800 million monthly users uploading over an hour of video per second. It enables an activist in Syria to broadcast globally or a young star to build an entertainment network from scratch. YouTube channels have real potential to entertain and educate, as well as to help organize all the amazing videos that are available. So I’m excited we have a new effort working with media powerhouses such as Jay-Z, the Wall Street Journal, and Disney to create channels that appeal to every interest.

People rightly ask how we’ll make money from these big bets. We understand the need to balance our short- and longer-term needs because our revenue is the engine that funds all our innovation. But over time, our emerging high-usage products will likely generate significant new revenue streams for Google as well as for our partners, just as search does today. For example, we’re seeing a hugely positive revenue impact from mobile advertising, which grew to a run rate of over $2.5 billion by the third quarter of 2011—two and a half times more than at the same point in 2010. Our goal is long-term growth in revenue and absolute profit—so we invest aggressively in future innovation while tightly managing our short-term costs.

Love and trust

We have always wanted Google to be a company that is deserving of great love. But we recognize this is an ambitious goal because most large companies are not well-loved, or even seemingly set up with that in mind. We’re lucky to have a very direct relationship with our users, which creates a strong incentive for us to do the right thing. For every magic moment we create—like the ability to drop a photo into Google and search by image—we have a very happy user.  And when our products don’t work or we make mistakes, it’s easy for users to go elsewhere because our competition is only a click away.

Users place a lot of trust in Google when they store data, like emails and documents, on our systems. And we need to be responsible stewards of that information. It’s why we invest a lot of effort in security and related tools for users, like 2-step verification and encryption, which help prevent unauthorized access to information. The recent changes we made to our privacy policies generated a lot of interest. But they will enable us to create a much better, more intuitive experience across Google—our key focus for the year.

We have always believed that it’s possible to make money without being evil. In fact, healthy revenue is essential if we are to change the world through innovation, and hire (and retain) great people. As a child I remember reading about Nikola Tesla, a genius whose impact was severely limited by his failure to make money from his inventions. It was a good lesson. Today, most of our revenue comes from advertising. We take pains to make sure that users know when something is paid for, and we work hard to make these advertisements relevant for users.  Better ads are better for everyone—better information or offers for users, growth for businesses, and increased revenue for publishers to fund better content.

Over one million businesses now use Google’s advertising products and we’re delighted with the ways in which we have helped other companies (both large and small) succeed. I recently heard about a Thai dressmaker whose store was destroyed by floods. To start rebuilding her business, she invested $5 a day in Google AdWords and doubled her revenue. Today over 80 percent of her orders come from the Web. Taylor’s Bike Shop in Utah, a family-run store, saw increase in sales of over 50 percent when they started using AdWords. Today they maintain a staff of eight people on a steady basis.

At the heart of our business model has always been the belief that we’re better off if we can create a larger pie for our partners. We started with AdSense, and Google has paid out over $30 billion to support content on the Web since its launch over a decade ago. That is a mighty big check (actually lots of smaller checks!) and I’m delighted we’ve been able to support our partners with that much resource. The same is true for our newer technologies like DoubleClick for online publishers and AdMob for mobile developers. YouTube also generates healthy revenue for Google and our content partners—in fact, partner ad revenue has more than doubled for the fourth year in a row. One thing I’ve learned is that if you keep doubling things, it really adds up fast!

All that said, we recognize that we don’t get everything right—and that the changes we make, like our recent visual refresh, can initially upset some users (even if they later come to love them). But we don’t operate in a static industry, and technology changes so fast that we need to innovate and iterate. Of course, when we do make mistakes we try to fix them as quickly as possible and, if necessary, change the way we do things to prevent problems from arising again. And we work hard to explain what we are doing—and why—because with size comes responsibility.

Googlers

People are a crucial part of Google’s long-term success, since companies are no greater than the efforts and ingenuity of their employees. Our goal is to hire the best at every level and keep them.  In our experience your working environment is enormously important because people want to feel part of a family in the office, just as they do at home. So we invest in great food, high quality medical care, gyms, and other fitness facilities, as well as cool workspaces that bring people together.

Most important of all, however, we believe that work should be challenging. People are more motivated and have more fun when they work on important projects. Take Google Translate, which we started eight years ago and now enables anyone to translate text in an instant between any two of 64 languages—including Hindi, Arabic and Chinese. That’s actually 4032 different pairs of languages you can translate! In fact, by combining it with our voice recognition technology, we’ve turned mobile phones into pocket translators for millions of users globally. When you work on projects of this magnitude, it’s impossible not to wake up excited about work; the chance to make a difference is the greatest motivation anyone can have.

Happiness is a healthy disregard for the impossible

When I was a student at the University of Michigan, I went on a summer leadership course. The slogan was “a healthy disregard for the impossible,” and it’s an idea that has stayed with me ever since. It may sound nuts, but I’ve found that it’s easier to make progress on mega-ambitious goals than on less risky projects. Few people are crazy enough to try, and the best people always want to work on the biggest challenges. We’ve also found that “failed” ambitious projects often yield other dividends. Believe it or not, the technological innovation behind AdSense, which, as I mentioned earlier, has paid out over $30 billion to partners, was the result of a “failed” more ambitious project to understand the Web. The team failed at understanding the Web, mostly, I think, because they were distracted by their work making advertisements amazingly relevant.

Last year, the Google+ team decided to integrate multi-person video into their efforts. They had a small committed team that was crazy enough to believe this was possible, and Google+ Hangouts was born. You can now video chat with anyone, anywhere, even from the Great Barrier Reef. It was the same with driverless cars, which we started on in 2008. Today we have driven over 200,000 miles, and Steve Mahan, who is legally blind, recently took a drive in one of them. So the one-sentence summary of how to change the world… work on something that is uncomfortably exciting!

Today the opportunities are greater than ever. Things we used to think were magic, we now take for granted: the ability to get a map instantly, to find information quickly and easily, to choose any video from millions on YouTube rather than just a few TV channels. People are buying more devices and using them more because technology is playing an increasingly important role in our lives. I believe that by producing innovative technology products that touch people deeply, we will enable you to do truly amazing things that change the world. It’s a very exciting time to be at Google, and I take the responsibility I have to all of you very seriously.

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