Google’s KinderGate: Your kids are welcome here for $57,000 a year.

When I first read about trouble in Google land over child care costs I thought it would be another case of the how super well paid but whiney Silicon Valley parents were unreasonably complaining about a minor bump in their charmed luxury lives. But maybe not.

Google appears to be on a search for the holy grail of child care, and even after charging parents for the service Google wound up subsidizing things to the tune of 37,000 *per child per year* – managing to spend the approximate average national income on every kid lucky enough to reach the nirvanesque kinderplex environment. The solution to this negative cash flow – unusual for the company known for showering employees with benefits like laundry service and free meals – was to raise the child care rates to about 2500 per month per child.

The NYT reports that two kids in Google childcare will run you $57,000. Although Googlers take home an average of something like $140,000 per year this isn’t going to ruin them, but this sure ain’t a page from the Brady Bunch days.

The situation is interesting economically but I think even more interesting as an experiment in Google’s approach to social engineering, which I think argue may be failing because it may not be able to scale in the same fashion as many of Google’s magnificent technological innovations.

Although Silicon Valley employees have historically enjoyed some great benefits, Google shined as the company that outdid everybody with free gourmet meals, free laundry, and great parties all within a context of individual freedom to work pretty much as you pleased as long as you were productively engaged, and even that was defined in some part by the employee.

This approach seemed to be working well, but I wonder how much of this was just an illusion caused by Google’s huge wash of incoming cash. The NYT article suggests that the company hardly even noticed the child care subsidy until recently. I’m guessing that only recently have the Google bean counters been called up from their free lunch to sharpen their pencils and find ways for Google to trim the company budget.

There are obviously two huge human resource pressures on Google now as it grows within the context of providing the world’s best company bennies. First is the fact that the legions of Googlers are for the most part…kidless. As employees age, especially the key folks from the early days, Google will see a lot more departures of key folks and a lot more demands for family time and benefits. Even stronger will be the pressure from the growing number of employees in Google’s empire, far more of whom are likely to be “in it for the money and perks” than in the early days. I remember touring the Googleplex a few years ago with an exec who, when asked about this problem, said it was not happening. But I think that was about 10,000 employees ago and before the level of concern over Google’s KinderGate scandal.

I will be very interesting to see if Google can scale their sometimes pesky human resources as effectively as they have scaled their technological and commercial resources.

I’m guessing…make that strongly predicting….the answer is no.

New York Times Reports

Carl Icahn: Blogger

There’s a new guy in blog town and he’s shooting from the hip about the defects of the corporate governance models we’ve all come to know and hate over the past decades. His name is Carl Icahn and his blog offers great insight into the mind of one of the most successful corporate raiders in history.

Although it is obviously favorable to Icahn’s bottom line to maintain how incompetent boards are leading to the decline of western economic civilization as we know it, I’m hardly going to disagree with the notion that corporate governance, especially in the technology sector, often seems out of whack with shareholder interests.

It is important not to confuse Icahn’s critiques with the whacky ones of many who suggest the corporation itself is a bad model and should be replaced by outmoded socialistic and centralized approaches that brought economic ruin on an entire generation of eastern Europeans and helped bring genocidal regimes into power in asia.    On the contrary Icahn’s point is more that we need to make sure the corporation model can thrive by insisting on better governance for struggling companies.

In the case of Yahoo, Biz Doctor Icahn’s prescription is to buy up a huge share, then throw the corporate board bums out and sell the company to Microsoft.  The stakes here are so high for Icahn (he could see over a billion in profit if his plan works), that he’s hardly in a position to entertain alternatives that might be better for Yahoo, but I think most shareholders already are rooting him on in the hopes of salvaging the $11+ per share lost when Microsoft withdrew from the bidding for Yahoo last month.

Disclosure:  Long on YHOO

Why O’Reilly’s wrong about Arrington being wrong about Yahoo being wrong about Microsoft

What did the normally very insightful Tim O’Reilly and Fred Wilson have for lunch, some free hallucinogenic deserts over at Google?

Both are criticizing Mike Arrington for stating the obvious – Yahoo’s not acting in the best interest of shareholders or Yahoo or anybody except Google, who clearly is the big winner in Yahoo’s squandered megadeal with Microsoft.

Fred very correctly notes that Yahoo’s has faced leadership challenges for a long time, but he says he likes the one option that keeps the current Yahoo board intact and very much on track for much more of the same company crushing behavior. Yes, a clean house is needed and that is certainly less likely to happen *now*.

It seems to me there are two issues and they have it wrong on both counts where Arrington’s got it right.

First, Yahoo’s Google move proved that in terms of shareholder obligations it should have sold to MS. Yahoo cannot reasonably make a case that they will come out of the monetization hole using core values while immediately outsourcing their most potentially lucrative biz to Google. Sure this will make more than Yahoo alone, but nothing like what the MS deal would have offered Yahoo in terms of ad cash plus money to develop the search biz. MS offered a shot at glory. Yahoo took Google’s money so they could keep sitting back and watching the really big search money pass them by.

Is Fred saying there is a Googley path back to $34+ per share? Even if yes, it is nonsense to think it’ll happen fast enough to justify turning down MS’s offer of $34 and their subsequent offer of $35 for 1 in 6 of Yahoo’s outstanding shares.

Second, this just gives Google even more of a near monopoly on monetization. As Mike suggests competiton is lacking and needed in the search space. This is a big step in the wrong direction.

Disclosure: Long on YHOO

Googling the Comscore click metrics = indigestion

The Google / Comscore clicking clash is really an interesting story from a lot of angles.     Comscore’s recent report that came earlier this week about Google pay per click metrics sent Google stock into something of an immediate tailspin, losing Google tens of billions in market capitalization as soon as the report came out.   However, today Comscore is claiming their report does not directly support the ideas that Google click ads are in trouble and that the recession is going to kill online ads. 

Comscore notes the two concerns others express from their findings:

1) a potentially weak first quarter outlook for Google, and
2) an indication that a soft U.S. economy is beginning to drag down the online advertising market.

And then says their report does not directly support these conclusions:

While we do not claim that these concerns are unwarranted, we believe a careful analysis of our search data does not lend them direct support. More specifically, the evidence suggests that the softness in Google’s paid click metrics is primarily a result of Google’s own quality initiatives that result in a reduction in the number of paid listings and, therefore, the opportunity for paid clicks to occur. In addition, the reduction in the incidence of paid listings existed progressively throughout 2007 and was successfully offset by improved revenue per click. It is entirely possible, if not likely, that the improved revenue yield will continue to deliver strong revenue growth in the first quarter. Separately, there is no evidence of a slowdown in consumers clicking on paid search ads for rest of the US search market, which comprises 40% of all searches.

I’m still digesting the larger report but it seems to suggest that Comscore sees *no reason whatsoever* from their data to assume Google will have a bad first quarter, and if I’m reading them correctly they are effectively saying there is reason to think the quarter’s earnings will *improve* because the revenue per click is improving and paid clicks are increasing?   Confusing because these are the almost exact opposite of the conclusion made by market watchers based on the same data.