In The Plex

by Steve Levy

  The Droid was also the first Android phone that used another feature Google recently introduced, a high-quality implementation of the “turn-by-turn” navigation that various companies offered in stand-alone GPS devices and other phones. While those competitors charged a monthly fee of $10 or $15 for the service, Google’s version was free. As with other cases when Google had decimated an entire subindustry by offering a product for free, the company was anything but apologetic. “We don’t monetize the thing we create,” Andy Rubin says. “We monetize the people that use it. The more people that use our products, the more opportunity we have to advertise to them.”

  Surely one would have thought that the line Google would not cross would be going into competition with Android partners who made phones and sold them. But in mid-2009, while discussing ideas for a new Android model with the head of HTC, Andy Rubin asked, why not break the usual procedure where Google created and gave away the software, the handset maker designed and manufactured the hardware, and the carrier ran the device on its network and sold the device along with a contract? The phone contract was universally despised by customers. It was not Googley. A better way, Rubin felt, would be for Google to make its own great phone, “unlocked” so it could be used with any carrier, and let consumers buy it via a browser, using the company’s payment service, Google Checkout.

  “We fundamentally believe in the online business,” he explained. “It’s what we stand for, it’s what we participate in.”

  Rubin pitched the idea at a GPS that summer, outlining a plan for Google to sell its own phone, unlocked, on the website. (Google wouldn’t physically make the phone, he explained; HTC would manufacture the device to Google’s specifications.) If all went well, this method, called direct to consumer, would smash the unfriendly system that bound users to carriers and prevented them from easily switching, for example to the latest Android phone. By removing nasty impediments, Google would be encouraging more phones, more phone uses, more mobile searching, and more ads. What was good for mobility was good for Google.

  Google’s Operating Committee signed on—good thing, because Rubin had already set the project in motion. “That’s the way Google works,” Rubin later explained. “Don’t ask for permission for an idea, just go and do it. And then, when you’re way beyond the point of no return, you’re like, ‘I need $200 million.’”

  The initiative was a two-step process. The first was to build “the best possible phone with the latest hardware, the latest technology, to push the limits of innovation of mobile applications for that phone,” said Mario Queiroz, an Android executive who came to the team from Google Europe. This was bound to be seen as hostile by partners who were using Android to build their own phones. The second part was selling the phone on the website. Users would buy an unlocked phone for a high price—$529—but then, at least in theory, would not have to bind themselves to a carrier for a long contract. If they wanted to sign up for a contract, that was okay, too, and Google expected Sprint, Verizon, T-Mobile, and AT&T to offer big phone discounts for those who wanted a more traditional arrangement.

  The phone itself would be called Nexus One. “Nexus,” explained Queiroz, “is a convergence of connections.” But the real origin of the name was Andy Rubin’s robot fixation: in the movie Blade Runner, the model name of one of the humanlike robots was Nexus 6. “We’re not at six yet, we’re at one,” said Queiroz. “This is our first device.” Inside Google, however, there was a different code name: the Passion Device.

  Google’s playbook had gaps. One of them was customer support. Though buyers of $500 phones were accustomed to having human beings accessible on help lines when something went wrong, that concept was alien to Google. Early in its history, Google had decided that human customer support was something that should be left behind with the twentieth century. Back in 2000, some of Google’s millions of users had begun filling its inboxes with questions, comments, and even love letters. But there was not a single person in the company whose job was to communicate with those users. Grudgingly, Google came to accept that it should have at least one regular employee to do this. Denise Griffin arrived that year to face a backlog of several thousand emails. “It was never manageable from the first day,” she says.

  At one point in 2003 Griffin and Sheryl Sandberg went to ask Larry Page for more people. He told them that the whole idea of support was ridiculous. “Why do we even do it?” he asked. Instead of Google assuming the nonscalable task of answering users one by one, it should let users help one another! The idea ran so counter to accepted practice—it was almost as if you were stranding customers on a desert island and asking them to form their own society to get off—that Griffin felt lost. But Google implemented Page’s suggestion; a system called Google Help Forums allows users (with an occasional Googler dropping in) to share their knowledge about the system. To Griffin’s surprise, it worked, and thereafter she cited it as evidence of Page’s instinctive brilliance.

  “There’s a very strong belief at Google that if the product is better, people will use it anyway,” says Griffin. “You might not like not having support; you might want to talk to somebody. But are you going to stop using it? If we create better products, support isn’t a differentiating factor.”

  Griffin wound up heading a bare-bones customer support team of people numbered “in the low three figures,” many of them spread around the globe. (A lot of email seemed to be handled in Hyderabad, India.) Even though, a few years later, Google did offer some phone and email support to corporations that paid for its productivity software, by and large it had managed to keep its products going without customer service. But with the Nexus One, Google was selling a physical product where user problems were inevitable. When people bought a Google phone from Google, they would naturally expect support from the company. But when they tried to call, they could get no one to help. The resulting outcry reverberated in every corner of the net.

  Nexus One had a bigger problem: offering a good financial deal to the customer. For some reason, Google hadn’t figured out that in order to offer users an attractive package, it would need the cooperation of the telecoms. As hateful as the current contracts were, they offered a way to buy a phone at a discount, though the ultimate costs were hidden by the long, overpriced connection contract. Google, not having its own network, could not counter. Google hoped that networks would offer users who bought an unlocked phone a significant discount on their normal rates. But none did, and that hurt the adoption of the product. Google sold very few units.

  The irony was that the Nexus One was an excellent phone. At the time of its release, it was easily the best Android handset available. It was especially impressive in the way it used voice recognition. It superbly ran a new version of Android software, which included some interesting advances. For instance, Google had devised an app that fulfilled a long-held dream of its founders. Called Google Goggles, it was a visual search engine. The user could take a picture of something—a wine bottle, a movie poster, a book cover, an Eames chair—and Google would return search results as if you typed the relevant information into the search box. It was effective, even a bit scary. (It could have been scarier: the Google engineers who devised it built in a component to recognize faces. After a spirited discussion at an October 2009 GPS, Google’s executives decided that such a feature was too radioactive to include.)

  Goggles was definitely a portent of the future—the same future that Page and Brin had been talking about since the early days of their company, when speculating about how Google would become an information prosthetic, always available, a brain appendage that would instantly provide you with the world’s knowledge. “A mobile phone has eyes, ears, a skin, and knows your location,” said Vic Gundotra while demo’ing the phone one day before its release. “Eyes, because you never see one that doesn’t have a camera. Ears, because they all have microphones. Skin because a lot of these devices are touch screens. And GPS allows you to know your location. Those things have caused
us to change our development goals to do things that are relatively like magic.” Gundotra picked up his Nexus One and dictated, “Best Italian restaurant in Schenectady, New York.” He smiled. “Now, clearly, that’s not something you’re going to type in.” Then he showed the screen. Ferrari’s Ristorante, 1254 Congress Street. Nice.

  But further advances would have to come through phones not made directly by Google. On May 14, 2010, barely five months after Google introduced its direct-sales model, Andy Rubin posted an official “never mind” blog item announcing that Nexus had reached its exit. He brightly noted that “innovation requires constant iteration,” while admitting that the web store for its phone was no more than “a niche channel for early adopters.” Thus ended the experiment, and thereafter those seeking Nexus One phones would have to buy them from carriers, which would presumably station sufficient numbers of human beings on the phone lines to help buyers with a problem. At a Google event in May 2010, Rubin said that the experiment “didn’t pan out.”

  If all of this hadn’t sufficiently tainted Google’s relationship with the telecom giants, another initiative would. Google, it seemed, would not rest at making mobile phone operating systems and even phones. It had embarked on another initiative that actually made it a virtual phone company: giving users a single telephone number that would work for all their various devices while authorizing Google to be their communications terminus. All, of course, for free.

  As was common at Google, this project didn’t start from an executive strategy but in the brain of a product manager, in this case Wesley Chan. He was the restless product manager who had enjoyed successes with the Toolbar and Google Analytics. One night he and Salar Kamangar were talking about Internet phone calls and the huge number of people using the free Skype service. “Let’s figure out how to get in on this,” says Chan. It was a classic expansionist Google move—on the surface it had nothing to do with search, but since more free calls could popularize the web, Google would get more search customers and more ad clicks. “So I went shopping again,” says Chan.

  Not long after, he was at a conference in Boston and a Google bizdev person asked him if he’d go to a demo by Craig Walker, the founder of a start-up called GrandCentral. It was an amazing piece of software. Its motto was “One number for life.” You would pick a telephone number, and the service would automatically link to all your office, home, and mobile numbers, direct callers to your locations, and screen them with the deftness of an efficient secretary. Launched in September 2006, it had won a small but devoted following, whose enthusiastic recommendations elevated GrandCentral accounts into a precious commodity. Even though Wesley Chan was suffering from food poisoning (he would blame a toxic hot dog) and was sprawled on a bench doing everything he could not to vomit, he understood enough of the demo to see that GrandCentral was special. “Why can’t I have this?” he thought. Walker didn’t want to sell, which was the exact response Chan had hoped for. “You don’t want to buy companies that want to sell,” he explains. “The ones who want to sell have problems.”

  Chan was persistent, and he wore Walker down, convincing him that with Google his idea would be amplified by other services and reach tens of millions of people. “Google had all these cool properties that GrandCentral could really work with—Google Talk [web-based chat], Gmail, Calendar, and the Android project,” says Walker. “If we were going to be acquired by anyone, Google was at the top of the list.” (The payout, estimated at $50 million, wasn’t bad, either.) Chan had a bigger problem: getting the Google brain trust to sign off on the deal. “No one wanted it,” he says. “It was branded as another crazy Wesley product.” Chan said that Nikesh Arora, then the head of Google’s business operations in Europe, opposed it because he felt it would upset the carriers in Europe.

  Even Page and Brin were wary. Voice calls? “I don’t make phone calls anymore—nobody does,” Brin told him. Larry Page, who at one point early in Google’s history argued that there should be no landlines in the company, agreed. He also seconded Arora’s notion that GrandCentral would cause too many troubles with carriers—he was worried about AT&T and Verizon. “Larry,” Chan recalls saying, “they already hate us—what’s the downside? If we fail, we fail.” He appealed to Page’s and Brin’s sense of guilt about having objected to his previous projects, Google Toolbar and Google Analytics, when Chan had proved them wrong. They gave him the okay, and Google announced the deal in August 2007.

  Thus began an eighteen-month process to improve and Googleize the service into something called Google Voice. In the very first GPS, with Chan as his consigliere, Walker presented a project road map. Larry Page laid out his own vision: Google Voice should become an Android application that would do everything that GrandCentral did—but it would also make Internet voice calls, like Skype. You wouldn’t even know it was any different from making regular phone calls. The plan would essentially make Google into a stealth phone carrier. (Chan liked the idea—he thought that Page was brilliant on innovation but not so much on the details of product design. “Larry’s the worst person you want designing your product—he’s very smart but not your average user,” he says. To avoid this situation, Chan had a strategy of “giving him shiny objects to play with.” At the beginning of one Google Voice product review, for instance, he offered Page, and Brin as well, the opportunity to pick their own phone numbers for the new service. For the next hour the founders brainstormed sequences that embodied mathematical puns, while the product sailed through the review.)

  Halfway through the development cycle, an opportunity arose that Google’s leaders felt compelled to consider: Skype was available. It was a onetime chance to grab hundreds of millions of Internet voice customers, merging them with Google Voice to create an instant powerhouse. Wesley Chan believed that this was a bad move. Skype relied on a technology called peer to peer, which moved information cheaply and quickly through a decentralized network that emerged through the connections of users. But Google didn’t need that system because it had its own efficient infrastructure. In addition, there was a question whether eBay, the owner of Skype, had claim to all the patents to the underlying technology, so it was unclear what rights Google would have as it tried to embellish and improve the peer-to-peer protocols. Finally, before Google could take possession, the U.S. government might stall the deal for months, maybe even two years, before approving it. “We would have paid all this money, but the value would go away and then we’d be stuck with a piece of shit,” says Chan.

  Chan was desperate to stop the acquisition, so he went to his friend Salar Kamangar. By then Kamangar, though almost totally unknown to the outside world, had become a hugely influential force in the company. He was a key member of a quiet cabal of Googlers who weighed in on crucial issues and influenced the final decisions of Brin and Page. Some were top executives, and others had “influence beyond their title,” says one insider, who said that quite often the conflicts aired in GPS meetings were settled by conversations and email among this loose cabal. The group included some of the very early people, such as Susan Wojcicki, Marissa Mayer, and Lori Park, who had been one of the first twenty employees and had been influential in activities such as protecting the logs, China policy, and fulfilling odd personal assignments for Larry and Sergey. It wasn’t a formal club, and you didn’t have to have been at Google from the very early days—sometimes people like Chan could work their way in by being supersmart in a very Googley way, such as coming up with great ideas that promoted the company in general. Everyone in that inner circle really cared about Google both as a company and as a concept. Of all the people in that cohort, none was as respected as Kamangar. “Salar is like the secret president of Google,” says Chan, who laid out the reasons why a Skype acquisition would be a disaster. Kamangar agreed. Then the two of them talked to Sergey and won him over as well.

  With those allies on board, Chan devised a plan to kill the Skype purchase. As he later described it, his scheme involved “laying grenades” at the
executive meeting where the purchase was up for approval. Chan tricked the business development executive who was pushing the acquisition into thinking that he was in favor of the deal: he had even prepared a PowerPoint presentation with all the reasons Google should buy Skype. Chan says that halfway through the presentation, though, the trap sprang. Brin suddenly began asking questions that the deck didn’t address. “Who’s going to run this?” he demanded. “Not me,” said Kamangar. Craig Walker said he had two kids in school and wasn’t about to make regular runs to Eastern Europe. “What are the regulatory risks?” A lawyer said it might take months to get approval. Finally, Brin looked at Chan and asked why Google would want to take the risk to begin with. Chan dropped his defense entirely and began explaining why Google had no need for Skype.

  “At that point,” recalls Chan, “Sergey gets up and says, ‘This is the dumbest shit I’ve ever seen.’ And Eric gets up and walks out of the room. The deal’s off.”

  Not long after, eBay sold Skype to a group of investors, taking a loss from its original purchase price.

  In March 2009, Google Voice made its debut with a thunderclap. In addition to all the services GrandCentral offered, such as one number for life, the company had added others, including integration with Gmail and Google Calendar. Best of all was the way the service handled voice mail. Using Google’s sophisticated voice recognition technology, the service translated voice-mail messages into text and sent them to the recipient by email. Google Voice also made phone calls—web and domestic calls for free and international calls for a pittance. While carriers made billions of dollars charging people to send text messages to other mobile phones, Google Voice let you do it for free. People clamored to grab the limited number of accounts available. (It wasn’t until early 2010 that Google was able to satisfy all the people who wanted to use Google Voice.) Once again, the press seized on the fact that Google was giving away a service that people would be happy to pay for.