Google is growing up, and so are the men who created it.
Once the Web's fastest-growing upstart, the search giant faces increasing competition from younger, more nimble tech firms, and, for the first time in a decade, is turning to a new chief.
Eric Schmidt announced on Thursday he will step down as Google's chief executive officer as of April 4, handing the reins to Google co-founder Larry Page, who will become the central figure in day-to-day operations. Mr. Schmidt will take the title of executive chairman, which entails a focus on "deals, partnerships, customers and broader business relationships, government outreach and technology thought leadership." Perhaps the most important aspect of Mr. Schmidt's new job will be keeping government bodies at bay, as Google's dominance attracts more attention from regulatory authorities.
Google's other co-founder, Sergey Brin, will spend his time working on "strategic projects," or new areas outside Google's core strengths, such as social networking.
The management shakeup appears to signal that Google's corporate concerns are shifting - from the ability of its young co-founders to manage the tech giant, to how well the company can compete with more flexible tech firms such as Facebook, which threaten to redefine the very notion of Internet search. Google framed the management switch as a means of "streamlining" decision-making, hoping to combat the kind of corporate lethargy that has plagued many tech firms as they grew from nimble startups to slow-moving behemoths.
In announcing the news of his title change on his Twitter account, Mr. Schmidt simply wrote: "Day-to-day adult supervision no longer needed!"
Google is the second tech giant in less than a week to surprise investors with a CEO change. On Monday, Apple CEO Steve Jobs announced he would take an indefinite medical leave of absence from the company, leaving chief operating officer Tim Cook in charge.
The change comes almost a decade after Mr. Schmidt first replaced Mr. Page as CEO. At the time, both Mr. Page and Mr. Brin were still in their late-20s and responsible for a company that, when it went public three years later, would immediately be valued at $23-billion (U.S.) (it is worth $200-billion today).
At the time of Mr. Schmidt's appointment, many outside observers - including, most critically, the investors whose money initially helped launch the company - believed its co-founders were still too young and inexperienced to run such a potentially massive enterprise on their own. Mr. Schmidt, almost 20 years older than the men who started Google, brought with him an impressive résumé that included stints at Sun Microsystems and Novell.
"There's no doubt Google's probably overdue for a major management reorganization," wrote Danny Sullivan, editor-in-chief of the Search Engine Land blog, following the announcement. "The structures between the three have remained exactly the same over the past 10 years - which might as well be 100 years of Internet time."
Much as it did with Mr. Jobs' announcement, news of the Google management change threatened to overshadow the company's better-than expected quarterly results, also announced on Thursday.
Google posted revenue of $8.44-billion in the fourth quarter of 2010, compared with $6.67-billion in the same period a year earlier. Excluding certain items, the company posted net revenue of $6.37-billion and earnings per share of $8.75. According to Thomson Reuters I/B/E/S, analysts had expected net revenue of $6.06-billion in the quarter, with EPS of $8.09, excluding certain items.
"Our strong performance has been driven by a rapidly growing digital economy, continuous product innovation that benefits both users and advertisers, and by the extraordinary momentum of our newer businesses, such as display and mobile," Mr. Schmidt said.
Although Google has for years dominated the traditional search engine market, that dominance is no longer generating as much investor enthusiasm as it used to. For one thing, the company's growth prospects in traditional search are shrinking - Google already controls two-thirds of the U.S. search market, with Microsoft and Yahoo combining for a 28-per-cent share, according to ComScore Inc.
But Google's dominance is also becoming less relevant as more users change the way they search for information. Rather than simply search for restaurants, millions of people are turning to sites such as Facebook and Twitter to find out what other people think of those restaurants.
In addition, more users are conducting such searches from their mobile devices - a market where Google is waging war against Apple Inc. for dominance. During a call with analysts on Thursday, Jonathan Rosenberg, Google's senior vice-president of product management, said roughly 300,000 smart phones powered by Google's Android operating system are being activated every day, resulting in a ten-fold increase in the volume of searches coming from Android devices, compared to the year previous.