Google looks for opportunities in dark days of recession

Bad economic times? Sure, but Google still sees bright spots

While most companies are hunkering down and trying to survive the recession, Google Inc. has other plans.

For Google, it's not just a matter of getting through the economic turbulence -- it's about trying to take advantage of it.

"There are undercurrents of fear and doubt. They're self-defeating," said Michael Jones, chief technology advocate at Google. "When people have their heads in the sand, it's a good time to do things. We can't help but feel for the people around us, but as a company, this is an opportunity for us."

Jones was quick to note that he's not saying the big thinkers at Google are so brilliant that they have made the company recession-proof. Not at all. But while companies are cinching up their purse strings to a near strangulation point, canceling projects along with big and small purchases, he says it's time to think beyond the downslide. And when even talented, experienced people are being laid off, Jones sees it as a chance to scoop up great new employees.

It's all about swimming against the stream -- and Google did just that this week.

As most venture capital dries up with the sinking economy, Google on Tuesday launched Google Ventures, a venture capital fund to invest in high-tech start-ups. The company reportedly plans to invest up to $100 million over the next year with a focus on consumer Internet, software, clean-tech, bio-tech and health care start-ups.

The economy certainly isn't fostering much venture funding, and with the collapse of investment banks like Lehman Brothers Holdings Inc. and Bear, Stearns & Co., raising venture capital has become harder than ever.

But, Jones said, that doesn't mean it's a bad idea for Google to dive into the VC arena. Just the opposite, he said, noting that the recession actually made the company accelerate plans to launch Google Venture.

"Recessions are like the store is out of bread," said Jones. "There will be bread later. It's temporary. You can't make all your decisions like this is your whole life. It won't be, but even if it was a whole decade, it won't be your whole life. Good deals aren't getting funded because people are focused on the next three years instead of the next 30 years."

And it's not as if the bad economy hasn't touched Google, which has laid of personnel and closed engineering offices in the U.S., Norway and Sweden.

The company is still hiring new employees but at a reduced rate, it said during a quarterly earnings call last fall.

Despite the struggles, Jones said Google is trying to look beyond where the economy is right now.

To make lemonade out of economic lemons, one strategy is to fill out the company's employee roster with some of the very talented people looking for work, said Jones. Strong companies also look to increase market share as the recession weeds out some competitors.

"As companies stumble, their customers have to go somewhere," he said. "There's opportunity for us to grow in the vacuum."

Tight budgets - in the home and in the enterprise - also mean that more people might replace costly e-mail systems or applications with free hosted services, like Google's own Gmail or Google Apps. Jones said the company has noticed an increase in people switching to Gmail since the economy started to sink, though he wouldn't give any statistics on it.

Dan Olds, principle analyst at the Gabriel Consulting Group, said Google has the right attitude, but it's one that's pretty hard for most people or companies to follow through on in the face of falling stock prices, layoffs and dismal headlines.

"Think of it this way: Everyone knows that you want to buy stocks in good companies when the price is low -- like after a market crash, for example, right?" he asked. "Everyone knows this, but not that many people actually do it. They are afraid the price might drop lower or that something else bad will happen. It's the same principal with companies and managers pushing forward during a deep recession. Most people's instincts, along with herd psychology, is telling them to hunker down."

Olds said that a few companies are moving forward to take advantage of the recession but that none appear to be as aggressive as Google.

"I'd point to IBM and HP as examples of large companies that are not standing in place or hunkering down," he noted. "Both companies have been recasting their programs, product strategies, and tactics with an eye toward helping customers get more for their tech spending. Both have innovative financing programs that have helped their customers make purchases when their traditional financing may have dried up."

Copyright © 2009 IDG Communications, Inc.

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