August 24, 2005
<nyt_headline version="1.0" type=" "> </nyt_headline> Relax, Bill Gates; It's Google's Turn as the Villain
<nyt_byline version="1.0" type=" "> </nyt_byline> By GARY RIVLIN
<nyt_text> </nyt_text> SAN FRANCISCO, Aug. 23 - For years, Silicon Valley hungered for a company mighty enough to best Microsoft. Now it has one such contender: the phenomenally successful Google.
But instead of embracing Google as one of their own, many in Silicon Valley are skittish about its size and power. They fret that the very strengths that made Google a search-engine phenomenon are distancing it from the entrepreneurial culture that produced it - and even transforming it into a threat.
A year after the company went public, those inside Google are learning the hard way what it means to be the top dog inside a culture accustomed to pulling for the underdog. And they are facing a hometown crowd that generally rebels against anything that smacks of corporate behavior.
Nowadays, when venture capitalists, entrepreneurs and technologists gather in Silicon Valley, they often find themselves grousing about Google, complaining about everything from a hoarding of top engineers to its treatment of partners and potential partners. The word arrogant is frequently used.
The news last week that Google plans to sell an additional 14 million shares of stock, adding $4 billion to its current cash reserves of $3 billion, will only provide more reasons to gripe.
"I've definitely been picking up on the resentment," said Max Levchin, a founder of PayPal, the online payment service now owned by eBay. "They're a big company now, doing things people didn't expect them to do."
Mr. Levchin, who last year founded a multimedia company in San Francisco called Slide, said Google "still has a long wick of good will to burn off," but he added, "I'm surprised at how fast the company's reputation is changing."
It was not that long ago that Google reigned here as the upstart computer company that could do no wrong. Now some working in the technology field are starting to draw comparisons between Google and Microsoft, the company in Redmond, Wash., that Silicon Valley loves most to hate.
Bill Gates certainly sees similarities between Google and his own company. This spring, in an interview with Fortune, Mr. Gates, Microsoft's chairman, said that Google was "more like us than anyone else we have ever competed with."
Google's success has already spurred Microsoft to develop its own Internet search engine (a project code-named Underdog), but Google has legions of engineers banging away on a range of projects of its own that, if successful, could dislodge Microsoft from the pre-eminent spot it has enjoyed since the early 1980's.
Of course, Silicon Valley has had past pretenders to the throne. Netscape, which went public 10 years ago this month, and its Web browser, Navigator, were supposed to fell Microsoft - but it is Netscape that is no longer in business. And while Google is riding high, those closely following the company caution that it is hardly invincible; an inflated stock price, a desire to compete in too many sectors simultaneously or simple hubris might cause it to stumble, they say. Even Microsoft, after all, has had legal troubles.
Still, similarities between Google and Microsoft are evident to local entrepreneurs including Steven I. Lurie, who worked at Microsoft between 1993 and 1999 but now lives in San Francisco, and Joe Kraus, a founder of the 1990's search firm Excite.
"There's that same 'think big' attitude about markets and opportunities," said Mr. Lurie, who has visited the Google campus in Mountain View many times to see friends who work there. "Maybe you can call it arrogance, but there's that same sense that they can do anything and get into any area and dominate."
To place Google in context, Mr. Kraus offered a brief history lesson. In the 1990's, he said, I.B.M. was widely perceived in Silicon Valley as a "gentle giant" that was easy to partner with while Microsoft was perceived as an "extraordinarily fearsome, competitive company wanting to be in as many businesses as possible and with the engineering talent capable of implementing effectively anything."
Now, in the view of Mr. Kraus, "Microsoft is becoming I.B.M. and Google is becoming Microsoft." Mr. Kraus is the chief executive and a founder of JotSpot, a Silicon Valley start-up hoping to sell blogging and other self-publishing tools to corporations.
Just as Microsoft has been seen over the years as an aggressive, deep-pocketed competitor for talent, Internet start-ups in Silicon Valley complain that virtually every time they try to recruit a well-regarded computer programmer, that person is already contemplating an offer from Google.
"Google is doing more damage to innovation in the Valley right now than Microsoft ever did," said Reid Hoffman, the founder of two Internet ventures, including LinkedIn, a business networking Web site popular among Silicon Valley's digerati. "It's largely that they're hiring up so many talented people, and the fact they're working on so many different things. It's harder for start-ups to do interesting stuff right now."
Google, Mr. Hoffman said, has caused "across the board a 25 to 50 percent salary inflation for engineers in Silicon Valley" - or at least those in a position to weigh competing offers. A sought-after computer programmer can now expect to make more than $150,000 a year.
David C. Drummond, vice president for corporate development at Google, acknowledged that the company was "very competitive" in its pursuit of talent, but added: "We're very sensitive to how everybody is perceiving us. We think the Silicon Valley ecosystem is critical for Google's success."
Google is also making it more difficult for some start-ups to raise funds. In the second half of the 1990's, entrepreneurs frequently complained that the specter of Microsoft hung over their every conversation with venture capitalists. Today, they say the same about Google.
"When I meet with venture capitalists, or if I'm engaged in a conversation about going into partnership with someone, inevitably the question is, 'Why couldn't Google do what you're doing?' " said Craig Donato, the founder and chief executive of Oodle, a site for searching online classified listings more quickly.
"The answer is, 'They could, and they're probably thinking about it, but they can't do everything and do it well,' " Mr. Donato said. "Or at least I'm hoping they can't."
Google has already added free e-mail, mapping, news aggregation and digital-photo management to its offerings, bringing it into competition in each case with two or more rivals. On Wednesday, it will announce plans for an instant-messaging system. And its plans for a new stock issue are fueling speculation that it is preparing to enter any number of other markets, from services for mobile phone users to an online payment service that would compete with PayPal.
Add to that list an Internet-based phone system and several products that would be directly aimed at Microsoft, including a Google browser and a software offering that would compete with Microsoft Office.
"If there's a perception that we're exploring lots of different areas, some of which might not be directly related to our core area of search, that's true," said Mr. Drummond, the Google vice president. "It's part of our DNA to be always innovating and exploring lots of different areas."
Yet so driven has Google been in its pursuit of new markets that at least a few in Silicon Valley are using an epithet to taunt Google that people here once reserved for Microsoft: "The Borg," a reference to an army of creatures in "Star Trek: The Next Generation" that took over civilization after civilization with machinelike precision.
Perhaps an anti-Google reaction was to be expected, given the glowing press the company has enjoyed for several years. Or maybe the carping and complaining is the inevitable reaction to a company so successful that it cannot help stomping on toes, even if accidentally.
"Hubris is an issue at every one of these Silicon Valley companies that are successful," said Peter Thiel, a founder of PayPal who has invested in roughly 15 Internet start-ups in recent years. "I don't know if it's any worse at Google than it's been at other highly successful technology companies."
Aggressiveness is another signal trait among successful companies like Google - something those in parts of the media world are starting to learn.
Google recently announced that it would not talk to any reporter from CNETNews.com, a technology news Web site, until July 2006, after a reporter for the site wrote an article raising privacy questions about the information Google collects about individuals.
The company also provoked the ire of many within the blogging world - not to mention snarky comments in Silicon Valley from those thinking Google was behaving like an old-line company that doesn't get it - when earlier this year it fired a new employee who had joked online that the free meals, the on-site gym and all the other perks were a clever ploy to keep people at their desks longer.
"Google is at that inflection point where it's starting to act like an establishment company, and Silicon Valley is a rebel culture," said Gautam Godhwani, a founder and chief executive at Simply Hired, an online employment site.
Microsoft, of course, has its hold on the Windows world - and a market capitalization almost four times Google's. By contrast, switching to a new search engine is as easy as calling up another Web page - if a new company is able to do to Google what Google did to some of the earliest leaders of search, including AltaVista and Excite.
For the moment, at least, Google is aiming for that most coveted position in technology: a platform that, like Microsoft's operating system, is so popular that outside software developers write programs, and Web developers build new Google-related services, that render the Google home page indispensable to the personal computer ecosystem.
"In the day, you'd hear that Microsoft was the evil empire, especially in Silicon Valley," said Brian Lent, the president of Medio Systems, a start-up in Seattle working on mobile-phone-based search. "Google is the new evil empire, because they're in such a powerful position in terms of control. They have potential monopolistic control over access to information."
Mr. Lent, who worked closely with Google's founders, Sergey Brin and Larry Page, when all three were Ph.D. students at Stanford University, helped introduce Mr. Brin and Mr. Page to one of the company's earliest investors.
"I like and respect the Google guys," Mr. Lent said, "but let's just say that their ultimate aim seems to me to be, 'One Google under Google, for which it stands.' "