Update: Google's CEO switch could be a risky move

Some wonder if Google co-founder Larry Page is up to the mammoth task of running such a large, powerful and increasingly diverse company

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Steve Arnold, an analyst who heads the firm ArnoldIT, faulted Schmidt for leaving Google too dependent on search advertising. "It has not diversified its revenue streams in a meaningful way," Arnold said. The financial success that Google has enjoyed has been largely due to ad sales, and was probably little influenced by Schmidt, he said.

Arnold also finds fault with Schmidt's public comments, which have sometimes fuelled existing controversies. And he notes that Google has had problems retaining talented employees, who sometimes leave to go to Facebook and more promising startups.

Consumer Watchdog, an organization that has been critical of Google's privacy policies and missteps, said it welcomes the CEO change.

"Eric Schmidt has put his foot in his mouth so far on key issues like privacy that he's kicked himself out of the CEO's office," said John M. Simpson, director of Consumer Watchdog's Inside Google Project, in a statement.

But while Google continues to generate most of its revenue from ads on its search result pages and partner websites, the company has spread its wings during Schmidt's tenure. It started by complementing its search service with other consumer online services, often rocking established markets, as it did with webmail when it launched Gmail in 2004.

It has also become a key mobile player with its Android platform and with mobile versions of its various services and applications. The company has entered the enterprise software market with Google Apps, and its Chrome browser and operating system could leave it poised to become a provider of a new personal computing platform.

But Schmidt was also at the helm for some controversies Google found itself in over the past decade, including a number of privacy-related fiascos and thorny copyright-ingringement lawsuits from book publishers, media conglomerates and major companies.

A big challenge for Page will be tackling the influence of social media and social-networking sites, namely Facebook and Twitter, which have encroached on Google's territory both in advertising and distributing online content.

"One of the things missing from Google's strategy has been the social component," Gartner's Weiner said. "I think the ability to move on a major social-networking strategy may come more easily from a younger CEO." In fact, Google's struggles with the social Web may have played a part in the CEO switch, he said.

Google also faces tests internationally, especially in high-growth areas like China, India and Russia, where the company's track record has been mixed, Valdes said.

"Google's challenges are visible on the horizon and it's likely that new blood, a new perspective, is needed," he said.

Whatever happens, IDC's Hilwa said he hopes Schmidt will continue to participate in major decisions at the company.

"Eric, Larry and Sergey have always effectively acted as a co-CEOs," he said. "Being able to put their heads together on important decisions has served them well in the past. One would hope that they keep this consultative management style."

(Additional reporting by Joab Jackson, Marc Ferranti and Robert McMillan.)

Copyright © 2011 IDG Communications, Inc.

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