Brainstorm Tech video: Google’s Patrick Pichette on Android’s future

July 20, 2011, 6:34 PM UTC

Google CFO Patrick Pichette sat down with Fortune’s Adam Lashinsky for a wide-ranging discussion about the search giant’s business model, its acquisition strategy, Android, and its employee perks.
MR. LASHINSKY: So we have a very, very packed day. We have a full lineup. So please join me in welcoming Patrick Pichette, the Chief Financial Officer of Google.


MR. LASHINSKY: Patrick, welcome.

MR. PICHETTE: Thank you.

MR. LASHINSKY: Thank you for being here. You are featured briefly in the current issue of Fortune, around our Dream Team series. We have a little piece that CFOs are not just green eyeshade types or strategic. I learned that you have brought, since you’ve joined Google, you had a broader responsibility than only the chief financial officer, and you’ve since added responsibilities. Could you just tell us about that?

MR. PICHETTE: That’s correct. Even from day one, I remember that dinner with Eric. We had this long dinner about the roles and responsibilities. Eric basically just said at one point, wow, you’re going to be really bored with just the CFO job. So we’re going to create something very Googlely for you.

So at Google (GOOG) I have the CFO job. I also run all the capital, all the real estate, all the employee services. Think of buses, massage therapists, chefs, food. I also have the Economics team. I have the internal consulting team, which is the Biz Ops team, and I have people in Operations. So all the HR.

MR. LASHINSKY: And specifically with HR, what was the — who had that before, and that’s one of your newer responsibilities; is that right?

MR. PICHETTE: Through the reorg, the realignment that Larry did a couple of months ago, he just wanted to put focus specifically on product. Like the mind set was we have to get more velocity, the start-up velocity in the company.

So he kind of looked at a couple of places and said okay, why don’t we just reshuffle, to make sure that we keep on all the focus we need on these areas, but at my team on Monday morning or Monday afternoon, just simplify a bit. So I mean everybody knows, people, operations and the HR component of Google is one critical strategic asset that we have.

So it’s not that we’re losing any focus over it and our head of HR, Laslo Bach (ph), continues to kind of be formidable around the company. It was just simply to streamline just the day to day processes, rather than —

MR. LASHINSKY: Okay. If I’m understanding what you’re saying, it’s not directly a product matter. So bring this under your purview, so that somebody else can focus more on product?

MR. PICHETTE: Correct.

MR. LASHINSKY: Okay. You reminded me that shortly after you joined Google, I wrote an article about you, and the headline was something like “The axe man cometh to Google.” There was certainly a reputation, justifiably, that Google was big on spending and not so big on being cost-conscious before your arrival. Google quickly killed a handful of products and programs after you joined.

So let’s just start high level and talk about expense management, from your perspective and Google’s perspective.

MR. PICHETTE: I think people have a misconception about Google in general on that topic. I think Google is a very responsible company. It’s a generous company, but it’s very frugal in many ways. It’s very smart in the way it invests, and the perfect example of that is the bus service that we have in San Francisco.

People always say Google spends money like there’s no tomorrow. They have free buses and therefore, you know, it’s true everywhere. Well, take a step back and think of buses for a moment.

We have a huge campus in Mountain View, and well, if we did not have these bus services, what we would have is gridlock every morning and every afternoon, with loss of productivity for employees.

By the way, you know, we’d have issues about parking, amount of parking available, right, which would cost a ton of capital to actually make sure the infrastructure is there, and a number of other kind of site costs that are related to it. You put buses in the formula, I reduce my capital spend. Everybody’s there on time. Nobody has to worry about — plus the green cost. Then they get Wi-Fi an hour in, an hour out. What a fantastic productivity tool.

That’s the magic of Google. It takes the prejudices that we have, and looks very much into kind of how do we actually spend wisely in a creative way, that actually delivers immense value. When you have it with those lens, comb through all the expenses that look frivolous at Google, and then you’ll find there’s something magical about the way they thought about it.

Having said that, I look at my cost for buses every year. Every half year, my unit cost has to go down, because it’s the low cost. So that’s my job as a CFO, but don’t underestimate the really strategic value and the creativity and our total cost in that example.

MR. LASHINSKY: What percentage of Mountain View employees ride the bus?

MR. PICHETTE: We have, without giving it, thousands a day.

MR. LASHINSKY: Okay. You have like 28, 29 thousand employees worldwide. So 50, 60 percent of those are in Mountain View?

MR. PICHETTE: We don’t divulge that, unfortunately.

MR. LASHINSKY: Reasonable guess? I mean I’ll try. So thousands is not an insignificant number.

MR. PICHETTE: It’s thousands. No, I mean we have our bus company. We have 300 routes a day.

MR. LASHINSKY: 300 routes you said?

MR. PICHETTE: Yes, 300 a day. I mean going through the East Bay, everywhere, and this is a really important benefit to Google.

MR. LASHINSKY: I think that the bus system is sort of a well understood tool now. It’s not the least bit controversial. Other companies have copied Google in Silicon Valley, as other companies have copied many of Google’s expenses, including the free food.

Someone at this conference told me he has on authority that you’re cutting back the food expense by ten percent. Can you confirm that?

MR. PICHETTE: No. I mean I asked — again, it’s the same thing. I mean we look for food programs that are very healthy for our employees. We actually, that’s part of — again, the fundamental reason is we want our employees to be healthy.

So we actually put — that’s why we have chefs in our cafes. We have real folks on nutrition, and part again of my job is to make sure that we have more for less. That’s just the job of the CFO.

So in our food program, in our transport program, in our capital programs for real estate, in everything we do, my job is to ask more for less. So every year, we look at our unit costs and then we build a plan for the unit and then we track it through the years.

So we’re at mid-year right now, and you shouldn’t be surprised to hear at Google, hey, it’s mid-year, and therefore we’re resetting the clocks in a number of areas. But you should — if you go to the cafes right now, they have tremendous amounts of diversity in the food program, and it’s actually really, really good food.

MR. LASHINSKY: So I’m sorry. Just to be clear, you are or you’re not cutting back food expenses by ten percent?

MR. PICHETTE: We are not.

MR. LASHINSKY: You are not? Okay, good. Let’s try to move to some more substantive issues regarding Google, because there are many. I want to read a quote to you from a prominent Silicon Valley CEO. He said “Our goal is to make beautiful products that are simple and intuitive to use.” Can anybody guess who that CEO is? It’s not Steve Jobs. It’s Larry Page in Google’s last week’s earnings call.

The implication is that Google has not sufficiently made beautiful and intuitive products before now. There was something that Larry’s trying to change. So can you start at a high level? Talk about the new life at Google under Larry’s management. What has changed? What is he trying to accomplish?

MR. PICHETTE: As I said a minute ago, I think that the two things that matter a lot to us is we don’t want to lose our start-up velocity, and with scale, there always becomes this tension of how do you keep the start-up velocity.

Then the second piece is focusing on products. I mean Google is an engineering and product company, and in that balance of engineering and product, there’s always — it’s always a tension between when you have massive engineering efforts, it’s easy to kind of lose sight of the ease of use.

When you focus a lot on ease of use, right, it’s easy to actually lose the focus on the inside. There lies that balance. So Larry is actually just, in the last 90 days he basically said hey, it’s just time to reshift. Don’t lose any sight into the insights of the deep engineering innovation that we drive. Time to freshen up a number of sites, and let’s make sure that we don’t lose focus on that ease of use that makes it magical.

I mean he talks about the toothbrush example, right. He wants the product to be so beautiful and so intuitive that just naturally, just like a toothbrush, you want to use it twice a day, three times a day. It’s just a thing that you want to live with. So that’s the kind of focus.

But in addition to that, Larry really was very clear that it is important, and we saw it with the triumvirate, right, with a worldwide company. It was slowing us down to have Eric in Europe for two weeks and then you have to make a decision. It’s just kind of simplify the organization, to make sure that we have velocity, just like a start-up would.

You see it in the Google Plus, for example, right, the number of changes that we have done to Google Plus since its launch, sometimes a number of times a day, right. That’s what a start-up does. That’s what we want as the kind of cultural fiber of the company.

MR. LASHINSKY: What’s an example of a change you’ve made to Google Plus? It’s only been — it was only launched several weeks ago, right?

MR. PICHETTE: It was launched about two weeks ago, and without knowing the details, we got feedback. The way that the team set up the product is they actually set up a set of blogs to get feedback instantly, and as people said hey, I can’t do this or I can’t do that; I wouldn’t know all the details of it, we actually had the team change code right a couple of times a day or once a day, and they do a push on a regular basis.

So what you see today, because Google Plus is a project really, right, what you see today is already quite different than what you would have seen, say, two weeks ago. So for example, if you had — before you click on a button that people would have found confusing, they would have said hey, I found this confusing. You’ll have a popup now that says hey, just to be clear, this is what this will do, as an example, because I had one yesterday.

MR. LASHINSKY: I want to come — we’ll come back to Google Plus in a moment. The interesting thing about the toothbrush is that there aren’t many products that we use every day. For quite a few years of Google’s history, Google Search is a product that many of us used, maybe I would say most of us used every day, all day long.

Is Larry articulating a vision of is there an optimal number of products that Google can do well? Because right now, Google has many products, too many for us to name in the time that we have remaining, right?

MR. PICHETTE: I think that if you think of Google as a platform and core product company, it’s actually not that many. Like take a step back for a moment, right. You have Search, right, and then from Search you move to the big platforms of Android, Chrome, the apps platform, the You Tube platform.

Then from there, you actually move to newer areas, which include Local, Commerce. From there, you’ll see a lot of additions to these products, right, that actually compliment them. But those are the core platforms in which we’re investing today, and they’re just — we’re actually incredibly fortunate.

I was telling a team of Googlers yesterday most companies struggle to find their next platform of growth, right. Chrome’s got 160 million users, right, from a project that when I joined the company didn’t, wasn’t out yet.

MR. LASHINSKY: That’s worldwide?

MR. PICHETTE: Worldwide.

MR. LASHINSKY: And do you have a sense, off the top of your head, of what kind of a market share that represents?

MR. PICHETTE: I don’t think we divulge that. But yes, I do actually know exactly the number.

MR. LASHINSKY: Well, Firefox is in the 20 percent range, right, and I don’t pay careful attention.

MR. PICHETTE: Suffice to say, it’s growing really fast because it’s innovating really fast.

MR. LASHINSKY: Can you just shout out what that represents in Search please, in market share, the 160 million users? Somebody must have that at their fingertips. No? Okay, Tweet it. We’ll get back to it.

MR. PICHETTE: It’s growing.


MR. PICHETTE: It’s growing because it’s actually useful. People see the speed, people see the innovation, the relentless innovation, and that’s what Google is about. And you go to Android, and it’s the same thing, right? We’ve passed the 550 — tomorrow morning, when everybody gets up, another 550,000 devices will be activated on Android. Even by Google standards, these are like just runaway successes.

MR. LASHINSKY: So let’s play the what does this mean to revenue gain, and we’ll do it on a variety of things. We’ll start with Chrome. Explain the business model behind Chrome.

MR. PICHETTE: You have to take a step back on this one, and explain the following. I think Larry, if anybody has the time to kind of go back and listen to the script of the earnings call, the most important point Larry made was the following. When we have products that get resounding user and consumer success, right, and that are growing in the hundreds of millions, right, we don’t worry. The only question is when and how will we monetize.

When you have a franchise of hundreds of millions, you know. Like people thought that Google was crazy when they started Search. There was a lot of competition at that time, right. There was Lycos and Alta Vista. Like people forgot these names, right? They were there. They were giants compared to Google, and all Google focused on is give me innovation that users want to use like that toothbrush.

As long as I’m growing, right, nobody should worry. We will actually find it. Now having said all that, go back to your fundamental premise. You know that people that actually have a faster browser search more. We know that. They search more by leaps. If your browser is not only faster but as you type in the top box, the Omni box, and you get instant search results out of it, right, you actually again perform more searches.

So speed, ease of use, innovation and formats and delivery. What we know and recognized was hey, there was ten years of zero innovation, until Firefox and Chrome came around. With Chrome, we put the innovation on steroids. For us, right, more searches, just on that basis, right?

It’s a great financial return. But that’s just the beginning, because with that, because you’re Google, you say the fundamental premise of these platforms is not only to actually have our products work very well, but to enable an entire ecosystem. Always build an ecosystem, where there’s a ton of win-wins.

On Chrome, just like on Android, marketplaces, developers, the developer community. Because we don’t believe that one company has the monopoly on innovation. You have to let these ecosystems bloom, so that there’s tons of innovation as a byproduct, and that’s what we focus on.

MR. LASHINSKY: So I would boil down and paraphrase what you said, that what’s good for the web is good for Google, and if a better browser is better, it makes for better web search, better web experience, that’s better for web search. That’s better for Google, that’s better for ad words, which remains your profit engine, your growth engine.

MR. PICHETTE: And that’s only the beginning. That’s true.

MR. LASHINSKY: But is there a different revenue opportunity — it strikes me that this is really about Search, and there’s nothing wrong with that.

MR. PICHETTE: Take Chrome again, right? Chrome enabled the follow, which is Chrome OS, right?


MR. PICHETTE: Chrome OS, we announced a device that was launched and I actually carry it everywhere I go, and I have the choice. By the way, I have the choice of Google, you have the choice of any computer you want, right. Since we had, I had the first beta of the Chrome Book, and for me, right, you see the future in that. Just like the first G-1 phone that Andy and the Android team put out, you see the future in it.

So just to come back to it, to your specific question, Chrome Books, right, and the enterprise announcement of the service, is nothing could be further in an ad system that is ad words, and these are huge markets again.

MR. LASHINSKY: Yep, I understand. It is a revenue opportunity, in other words, in the enterprise.

MR. PICHETTE: Absolutely.

MR. LASHINSKY: And is the answer in Android as straightforward? Is this really about Search? Let’s not be confused about, you know, how do we monetize this? If we get people searching on their mobile phones, we own Search, we make money. Period, full stop?

MR. PICHETTE: And again, right, the answer is that pays it already, and now you have all the optionality of local, right, commerce. Think of how you live. We all know that mobile’s going to change the world. We already live it, right, five years ago compared to today, how you use your maps, how you use to near me now. How you think of how you would — you know today, if you don’t have your cell phone with you, you’re in panic mode. You know that.

Android is in fact a platform, it happens that in fact it fuels Search. But it fuels so many other avenues of growth for us and the ecosystem beside it.

MR. LASHINSKY: Okay. So it’s first — so two parts, the ecosystem second. You haven’t shown any mobile revenue opportunities other than Search. Are there other revenue opportunities? For example, could you license, would you license the OS? You’re not now.

MR. PICHETTE: No. It’s an open source license. I think we think of it at this time in history, at the moment we’re in, it is really critical that the license stays open source. It’s what fuels the innovation. So for us, that’s a critical element.

Again, take a step back, right. Everybody’s all nervous about the fact that hey, it’s been 36 months since Android has launched, and you only have Search, right? That’s the criticism that I hear, right, and you sound like a sorry, a sell side guy now, right.

It’s like how come I don’t have another, right? Where’s my model not — it’s like just relax, right? 550,000 devices everyday with an ecosystem that has, right? We’ve announced Wallet. We’ve announced Payments. We’ve announced Offers. You have Google Maps. You have all the functionality nearing me now. You have all the voice search.

Now take a step back and think of the opportunities that that provides for Google and the entire ecosystem? That’s why I think that the questions are asked so much short-termish, are just not the way that Google thinks. That’s not the way Larry thinks, and that’s not the way Eric thinks.

It so refreshing to be in a company where you don’t have that kind of obsessive mind set of the next 30 days, because then you can really dream about how do you want the change to work.

MR. LASHINSKY: The ecosystem, you mentioned the daily activations. You said last week there are now 250,000 apps in Google’s apps store. There’s been six billion downloads. There’s a lot of third party research that Apple’s apps stores generated about one and a half billion dollars of revenue for its developers. What’s the corresponding figure for Google’s apps store ecosystem?

MR. PICHETTE: I don’t have that on my fingertips. I’m sure somebody can give you the details. But it is, it’s substantial, and we, you know, in the mix of things, right, everybody knows that we give the vast majority of the value to the developers, because they’re the ones creating the value.

If you kind of take the time to develop an app that you put on the Chrome or the Android store, right, it’s your value you’ve created. It belongs to you.

MR. LASHINSKY: Does the vast majority mean the same 70 percent that Apple gives its developers?

MR. PICHETTE: In rough. I think we’ve been public about that, so it’s roughly the same number, yes.

MR. LASHINSKY: And I’m sorry, you were saying — okay so — sorry. I lost my train of thought.

MR. PICHETTE: That’s okay.

MR. LASHINSKY: It happens.

MR. PICHETTE: Look. Android, Chrome, You Tube, right, all of these projects when I joined the company, people all said why are you doing this, right? They even said, I remember reading articles about You Tube was the worst acquisition in the history of the universe or something like that, just like Patrick was the axe man cometh, right.

You Tube is a resounding success, for the same reason. Users, like three billion views a day. Three billion views, growing. 48 hours of video every minute being uploaded, right.

MR. LASHINSKY: There was ample evidence that the company was concerned that You Tube was not being monetized quickly enough. There was a lot of talent that went into You Tube on the sales side. We have to amp, we have to rev this up. I’m just saying Google was not unconcerned about making that acquisition work either?

MR. PICHETTE: No. I think that at the time, I remember when I joined specifically, the question was, and it’s true of all these runaway successes. You actually have this thing. Android was the same, by the way. The question is as you got a runaway success, right, you’ve got to let it go, and then you’ve got to decide okay, when do you actually put controls in, to make sure that you don’t lose control over it.

There is the tension of if you kind of try to stifle it originally, immediately, then you lose a huge option of creativity that’s the next wave of innovation. You see that today in You Tube, with the lean back programs and everything else. The teams are continuing to innovate, instead of saying, you know, in its simplest form, it would be really easy to make You Tube very profitable now.

As a long term shareholder and somebody who’s trying to create a platform for the next decade, what a mistake that would be.

MR. LASHINSKY: Patrick, before we go to questions, I remember where I was. You threw me by accusing me of sounding like a sell-side analyst, like a Wall Street analyst. Is it fair to assume that Larry Page staying on the entire conference call last week was a response to investor anger, that he didn’t stay on the previous call, that it was arrogant of him to leave that previous earnings call before it was finished?

MR. PICHETTE: No. I think that — I think Larry was delighted to join the call. We had so much to kind of — we had just to update everybody, right? We had to update everybody on the project of Google Plus, which is kind of an important moment for us. We had to update everybody on how the reorganization of the company functioned.

We had to update everybody on a lot of great progress in so many of our platforms, and then remind everybody, which was a great message too I think everybody should take, right. If you go back to the Founder’s letter, and I just encourage anybody. I tell every new Googler that joins in, I say go and read that Founder’s letter, and when you read it, and you read this, you know, the focus for the long term, the focus for transformative answers, the focus for making the world a better place through technology, it’s the same cats. They haven’t left.


MR. PICHETTE: And what you see in today’s — what people — it’s actually the world that has changed, in kind of saying okay now that you’re ten years old, you’re an old company. I should think of you differently.

The key message that Larry wanted to tell everybody is it’s a very young company. We are in start-up mode. We are going to invest for the long term, because we see these amazing opportunities for technologies transforming the world.

You have evidence in the last 36 months of such platforms, and we’re investing now in other areas, like commerce and local, which need to be completely turned around. I spend my weekends, I jokingly say, allow me this. I spend my weekends with my Android phone in an elastic band that has tied to my Android phone my driver’s license and my credit card.

That’s how I live. I’m not carrying a wallet anymore. Like a wallet is a medieval item, right? It’s made of hide, so people go and hunt cows to kind of tan them. Like we still — and then you go into mines, to kind of draw ore, to put coins.

MR. LASHINSKY: All right. You’ve made that point. I want to — but before —

MR. PICHETTE: That’s the world of Google.

MR. LASHINSKY: My question was was the fact that Larry stayed on the full call last week a reaction to the criticism he got the previous quarter, for not staying on the whole call?

MR. PICHETTE: I don’t think — I think that what you’re referring to is what I would call noise.


MR. PICHETTE: I think that we had a great opportunity to reset the clocks and update everybody, and Larry just wanted to take the time to kind of update everyone as to where we were.

MR. LASHINSKY: All right. For the first question, I want to go a real life sell-side analyst over here, Mark Mahaney (ph) of Citi.

AUDIENCE: Thanks for your contribution.


AUDIENCE: I wanted to ask about Google’s competitive position, in terms of bringing in new employees. This is a record hire year for you. You’ve been increasing compensation.

There are obviously a lot of other places, new platforms, especially with capital markets reemerging. There are a lot of other places for potential employees to go to. I know you measure it very carefully.

How do you feel your ability to attract the best minds out there is today versus what it was a year or two ago? Is it where you need it to be? Are you able to get the best people?

MR. PICHETTE: The short answer on that is absolutely. I mean we have been — we took a strategic decision at the end of last year, which was to raise everybody’s salary by ten percent. Part of the strategic decision we made there was we wanted to send a signal to the market that we will actually, you know, Google will continue to be the place of choice, and we wanted to signal that very clearly to our employees.

What happened there was the following. Think of three dials. People leaving Google, people applying to Google, and then people that accept offers that we make them. In that context, here’s what happened. All three dials went the right way, right. Everybody’s staying happily, because they’re working on great projects.

MR. LASHINSKY: Not everybody’s staying, but you mean an acceptable number.

MR. PICHETTE: Our attrition rate is the lowest it’s been in years, years.

MR. LASHINSKY: What is that rate?

MR. PICHETTE: And we don’t disclose that either. Thank you for asking.


MR. PICHETTE: But I don’t have the stat for Q2, but I’ll give you the stat for Q1, because I still remember at the end of Q1 asking it. In the first 90 days of 2011, just under 600,000 people applied for a job at Google. Of that number, right, we have the luxury of cherrypicking the very best.

So we now ended up, in the first half of this year, with the lowest attrition ever. Everybody we make an offer to is delighted to accept it, and basically a wall of applications coming our way of the very best talent in the world.

So in that context, right, hiring a little more than we would have otherwise, and now we have the luxury of controlling that gas pedal. What a great problem to have.

MR. LASHINSKY: He’s confident, yes. I just want to tell the clock gods we’re going to take five extra minutes. I apologize. We have so many hands, that I want to go to a bunch of them. Jason first, and then we’ll go over there. Yep. Just identify yourself please, even though —

AUDIENCE: Hey, Jason Hirschorn. I’m a big fan of Google, but I’m also, as a fan, a critic. One of the weaknesses I’ve seen is in graphic to user interfaces and how you integrate all your products together. My understanding of the hiring process at Google is that when you go there and you’re end product, you get interviewed by a series of engineers.

I think one of the weaknesses that Google has is in graphical user interfaces and design and user experience. How is your interview process changing to actually improve on that?

MR. PICHETTE: Actually, one of the things that we did in the tune-ups of the organizations this spring was we actually merged the product engineering teams together, which was — you know, what we found was we were losing — when Google was just a one product company, it was very easy to have product and engineering work together at a table.

But now when you’re trying to organize a conversation between the Maps team, the Local team and the Search team, right, now you have times three, six. Plus if you needed in the old days Larry, Surry (ph) and Eric, now you’re at nine, right? It started slowing down things.

By actually merging the product and engineering teams, they’re together now in the decision-making process every day. In addition to that, in all of those processes, right, they do it jointly. So I think that we have a much better symbiotic relationship in attracting people that actually have the focus on UI.

Larry has made it very clear in his comments, that you’ll notice on the call right, where he actually is putting more emphasis on the UI and the integration of these different products, to make sure that they work seamlessly for us. We recognize that there are some areas where there’s just too much clutter.


AUDIENCE: Yes, George Coffey. Is it evil to pay only six percent federal tax?

MR. PICHETTE: We pay all our taxes in every jurisdiction, to the full extent that the law allows us. That’s what we do. We pay every penny of tax we owe to everybody everywhere. The issue is, I don’t make the laws. I just — basically, you know, I’m just like every other corporation.

I just make sure that, you know, I abide by all the laws and we’re good corporate citizens. I mean I think that that’s the situation we’re in.

MR. LASHINSKY: So you will be hearing no apology about Google’s tax payments. Back in the back please. Just please identify yourself.

AUDIENCE: Hey guys, Andrew Siegel. Listen, your operating margins and your capital efficiency metrics are so outrageously great, that you can take all sort of deal costs against them and they wouldn’t budget. You’ve got roughly 40 billion in cash growing 25 percent per year. Why aren’t you guys being even more active buying innovation?

MR. PICHETTE: That’s a great question, and it’s the same question for how many people we bring in, in fact. The trick is for acquisitions of people, and now if you make the case for acquisitions, there’s two components. There’s our ability to absorb, which is — there’s no sense buying a company and just having them spinning in never-never land.

So for us, we have our priorities. You’ve heard us talk about our priorities through this conversation. The real tests are the following: Is there a company out there that actually has a natural fit with our priorities? If it has a fit with our priorities, then on top of that, we actually go and scrub the team, and we go and scrub the IP really hard.

Because if they’re a team that won’t fit with us, there’s no sense buying them. It will just fall apart, and if the IP is a good test of the engineering capacity, right, then you know, if it passes the test, if it fits with our agenda, great team, decent IP, then there’s always price, right. There’s a price after which you can’t say yes.

We basically scan the entire planet looking for these great opportunities. Every single one that passes the bar, right, we’re delighted to bring them on board, because they just fuel the agenda.

That’s how we think about it. It’s a very simple model, but it’s — we can’t drop the bar of the quality of the people we bring in and the fit, because otherwise we’ll end up with just a dog’s breakfast out there. That’s not Google.

MR. LASHINSKY: Last question back there, short question, short answer please.

AUDIENCE: Hi Patrick. Miguel Hauth (ph) with Fortune. So there’s no arguing with the success of Android, and it’s obvious that if I switch from a feature phone, even a BlackBerry to a Smartphone, I’m going to search more. But there’s also a hypothesis that in an app world, there will be less search in the modal world.

So I wanted to ask how you think about that? Is this a concern for Google, and is it —

MR. PICHETTE: That’s a wrong — I hear that often, and it’s actually a wrong premise. If you have a Smartphone, whatever the Smartphone, you search a ton. That’s what you do. by the way, this concept of I love to hear these kind of clashes of titans.

It’s only apps or only (inaudible), right. It can only be one. The fact is they’re both, and this is a digital economy, where there are going to be applications where you want richness and you need a lot of power, because it’s about voice recognition.

It can’t be an app. It’s going to be cloud-based, and then there’s some really simple things that are really cool, because you’re just kind of shooting birds across to kind of kill pigs. Then that’s fine if it’s an app, right. There’s space for both, and what we know is for us, our applications are going to run on both.

But the cloud is the future for us. That’s where we build the core applications, because with the cloud, you’ve got horsepower, and with horsepower you do crazy good innovations, and that’s what the Googlers focus on.

MR. LASHINSKY: I would add to that if from your comments, that Google has the luxury of not caring, which is the right answer?

MR. PICHETTE: We care deeply.

MR. LASHINSKY: Not which is the right answer, though. You’re making investments so that you win this way and you win that way; correct?

MR. PICHETTE: The digital economy is going to win, and both are going to win.

MR. LASHINSKY: Before you go, Patrick, I want to show, though, the results to our poll about that very important question about Reggie Watts’ hair. It’s just come up there. The answer is it’s impossible to tell, because no one can get close enough. Please join me in thanking Patrick Pichette of Google.

MR. PICHETTE: Thank you, everybody. Thank you for your time.

MR. LASHINSKY: Thank you.


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