Google, at 15, perfects search for the next big thing

Story originally appeared on USA Today.

The thriving search giant is embarking on futuristic new endeavors while facing stiff competition on mobile devices.

FORT WORTH — In a vast, fluorescent-lit facility, rows of workers in white and pink and blue smocks stand at workstations and snap color-splashed backs onto mobile phones. Then the handset moves down the line to the next station. Occasionally, a cheer erupts from one of the rows as work teams meet daily quotas.

High-tech assembly lines such as these are typically seen in places like Burma or Beijing. But this facility — a vast space larger than two Costco warehouses — sits in an industrial zone in this Texas city. And the workers, mostly Americans, are making history: assembling the first-ever smartphones produced on U.S. soil — for Google.

The phones are Motorola's Moto X brand, Google's latest high-stakes gamble and a first step in returning high-tech assembly jobs to the USA, according to executives at Google and Motorola, which is owned by the tech giant.

"Google is a place where we take bets," Google Executive Chairman Eric Schmidt said recently to a gathering of workers and journalists at the facility. "This is a bet we're taking on America, on Texas, on this incredible workforce assembled here.
 We think this is a very, very safe bet."

He added: "This is the first of a series of steps that are going to change the perception of the United States as a manufacturing hub.
 It's historic. And it's changing America."

Whether the Moto X facility sparks a resurgence in U.S.-based manufacturing remains to be seen. But it's clear the smartphone facility is the latest high-stakes gamble in what could be called the tech industry's Teflon company.

Google, which turns 15 on Friday, has become ubiquitous in the lives of millions of Americans — from e-mail and maps to searches, documents and self-driving cars. Google-owned YouTube has become the biggest video site on the planet, and its Android is the dominant mobile phone operating system, with 80% market share. Meanwhile, the mysterious Google X wing of the company is crafting forward-looking projects like Google Glass (computer-equipped glasses) and Project Loon, in which balloons transmit broadband Internet to remote regions from 12 miles in the air. Calico, which focuses on the process of aging, is an independent company wholly owned by Google.

While much-older tech rivals Apple and Microsoft fend off questions about their innovation chops, Google is as inventive and financially stout as ever. Google topped $50 billion in sales for the first time last year. Bold bets on Android, Web browser Chrome and YouTube have paid off, and the company is breathing new life into popular services like Search, Gmail and Maps.

Schmidt says the Moto X facility is a perfect example of how Google operates: an idea hatched by low-level employees that bubbled up and became a reality.

"The way Google runs is a sort of bizarre, bottoms-up innovation model, where people are encouraged to think outside the box," Schmidt told USA TODAY in an exclusive interview alongside Motorola Mobility CEO Dennis Woodside. "I'd love to say Dennis and I had the brilliant idea of doing this. But these ideas actually came from the bottom up."

But what grabs the public's fascination are big ideas that CEO Larry Page calls "moon shots" and for which Google has carved a considerable niche. Projects range from Google Glass and driverless cars to high-altitude balloons that provide Internet access to remote areas.

Such is the grand scheme at the Googleplex in Mountain View, Calif., where top engineers and designers toil on bold initiatives. "Not every moon shot turns into the next big thing, but some will," says Google board member Ram Shriram, managing partner at Sherpalo Ventures, an angel-venture investment company. "We're taking as many risks now as ever before."

Says Woodside, "Google has always made very large bets on big technological trends that are going to persist for at least a decade."

TURNING THE PAGE

Yet just two years ago, Google had seemingly lost its way, and some questioned its long-term prospects.

When he took over the company he co-founded as CEO from Schmidt in 2011, Page inherited a jumble: dozens of confusing products, a faltering stock price and growing competition from Facebook.

"They were like the land of lost toys," says Bryan Stolle, a general partner at venture-capital firm Mohr Davidow. He says Google drifted into a trap most corporate behemoths face: how to create new businesses without sucking R&D resources and detracting from its primary source of revenue — in Google's case, search.

Page has brought a sharpened focus, shuttering marginal products while stressing out-there "moon shots."

"You have to reinvent yourself but not stray from what makes you successful," says Matt Cutler, CEO and founder of Collaborate, a software company. Google, if anything, is at what industry observers call peak innovation. While search goes gangbusters, the company is accelerating its own search for cutting-edge products.

But, make no mistake, search is the engine that drives the Google machine. "Their core business is so wildly profitable and deeply defensible, they have the breathing room to be highly experimental," Cutler says.

Google intends to forge ahead beyond driverless cars (which may debut in five years), computer-equipped glasses (a year or two away) and its life-extending venture.

"The path we are on — the runway — is huge," says Ben Gomes, vice president of search. Gomes has watched the company's narrative arc from a front-row seat as Google employee No. 45; he joined the firm 14 years ago.

Google Maps, like search, has undergone major upgrades. The latest version offers 360-degree views of streets, from Main Street USA to locations as far-flung as Europe, Australia and Asia.

"The goal is to have the most accurate, three-dimensional map of the world," says Brian McClendon, vice president of Google Maps.

And Google may well be at a point of transition.

"Google's first 15 years have focused on mastering information collection," says Ross Rubin, an analyst at Recticle Research. "The next 15 years will be more about information application."

"The next phase of this is to help provide the right decision-making resources to you at the right time and in the right context," he adds. "For example, you're driving home from work and Google might remind you that your dry cleaning is ready — 'Would you like to pick it up?' Maybe that info is in Google Calendar or maybe the info has been posted by another company aggregating laundromat services. Just say yes, and your phone or connected car GPS will reroute you to the dry cleaner along with info on some other stores and specials nearby."

NAVIGATING BUMPS IN THE ROAD

But not everything is rosy. Questions persist about Google's mobile strategy, thanks to an engineering-heavy culture that sometimes leads to product that misfire with consumers, and stiff competition from formidable rivals including Apple and Samsung.

Mobile is a tough arena because Google — which is dominant in search and advertising on personal computers — faces competition from smartphones, tablets, game consoles and set-top devices for the attention and dollars of consumers. Google also must contend with social media stalwarts such as Facebook and Twitter in the battle to attract advertising. So far, Google has yet to corral large social audiences, according to Internet analysts.

"If Google starts losing ad revenue to other ad platforms like social and mobile, projects like self-driving cars and Google Glass look more like distractions than big innovation," says Patrick Moorhead, principal analyst at Moor Insights & Strategy.

Another potential problem area is privacy, for which data-intensive tech companies face scrutiny in light of disclosures about their role — many contend unwitting — in the National Security Agency's PRISM surveillance program. (Page has said Google works "very hard to protect your data as a user.")

"Google is in an interesting position of leveraging data — how far do they push that?" venture capitalist Stolle says. "They are on a tightrope in that regard. Government might scrutinize them. They have to be more careful than smaller companies."

On the day of the Texas media event, a U.S. appeals court in California ruled that Google was not exempt from liability under federal privacy laws for inadvertently intercepting e-mails and other data from private Wi-Fi networks while creating Street View, which provides panoramic views of city streets.

Asked how Google plans to pursue its aggressive, bet-taking philosophy while protecting privacy rights, Schmidt says the company takes conscious steps to ensure privacy while keeping up with the latest technology, such as blurring people's faces and license plates in Street View.

"There's usually a way to find an appropriate protection of people's privacy along the technology lines," Schmidt said.

NO MESSING WITH TEXAS

The Fort Worth facility pushing out the smartphones once made Nokia phones but had been idle for years, says Mike McNamara, CEO of Flextronics, which provides logistics to build the Moto X. The space was transformed for Motorola, which was acquired by Google last year, in just six months and production began in August. Today, its 2,500 workers are capable of putting together and shipping 100,000 phones a week, according to McNamara. The phones' interior workings are still made overseas but are assembled in Fort Worth.

Making Moto X in the USA may not have happened without Google's backing, says Mark Randall, Motorola's senior vice president of supply chain and operations, "Google is a company that takes big risks," Randall says. "Being part of Google allowed us to take those risks."

Workers and executives at both companies were struck by the fact that of the 150 million smartphones used in the U.S., none was actually made here, Woodside says. The company decided to assemble the Moto X in Texas as part of a long-term strategy to bring well-paying, high-tech jobs to the U.S., while making phones that reach customers faster.

The gamble is consistent with Google's DNA, Woodside says. He points to the company's purchase of YouTube in 2006 for $1.65 billion — a move many industry experts questioned, he points out. Today, the online video service is seen by more than 1 billion people worldwide and is the largest of its kind in the world, Woodside says.

"The question is not where we see ourselves in the next couple of years," he says, "but: What's the big accomplishment we can drive over the next decade?"