Investors think Google wastes money on moonshot projects. Larry Page wants to spend more.

October 18, 2013

File: Google co-founder and CEO Larry Page speaks during a news conference at the Google offices on May 21, 2012 in New York City.  (Photo by Justin Sullivan/Getty Images)

Last month, Google surprised everyone by launching an initiative called Calico — a literally death-defying health-care enterprise that seemed to contradict the company's recent attempt to kill off a broad swath of what it saw as moribund projects.

CEO Larry Page was peppered with questions Thursday about the feasibility of making such long-term (and, some might say, random-looking) investments. But Page pushed back, arguing that it's actually really hard to get people to think big about the future:

My struggle in general is to get people to spend money on long-term R&D. Most companies, even companies that have significant R&D budgets, if you look at that, maybe 99 percent of it ends up being really incremental, which is relatively small improvements to your existing businesses, and maybe 1 percent of that ends up being true long-term things like Android was when it got started. ... You should actually be asking me to make more significant investments.

That Page mentioned Calico in virtually the same breath as Android — now the most widespread mobile operating system on the planet — sheds light on how convinced he is about its business relevance, even if the rest of us peons aren't.

There's a deeper reason for that: Google hasn't discovered the next Google yet.

Yes, the company made gobs of money last quarter — nearly $15 billion. But the largest share of those revenues, around 70 percent, came from good, old-fashioned search advertising. Most of its money, in other words, comes from the same business it was doing 10 years ago (albeit with the addition of mobile search). And that raises the pressure on Google to diversify its revenue sources.

From the outside, the pressure seems pretty low; the company's doing as well as ever. In Page's view, though, it's better to put your resources into moonshot projects while you still have the luxury — and not when the market forces you to.

Brian Fung covers technology for The Washington Post, focusing on telecom, broadband and digital politics. Before joining the Post, he was the technology correspondent for National Journal and an associate editor at the Atlantic.
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Brian Fung · October 18, 2013