NEWS ANALYSIS: Google CEO Eric Schmidt said the search engine is giving out a 10 percent pay hike for 2011 and $1,000 in holiday bonus cash. Is the move largess, self-preservation or both?
Silicon Alley Insider broke the news
that Google CEO
Eric Schmidt granted all of its 23,000-plus employees a 10 percent pay hike for
2011 and $1,000 in holiday bonus cash.
Schmidt said in a memo sent to employees:
"We want to make sure that you feel rewarded for your hard work, and we
want to continue to attract the best people to Google. So that is why we've
decided ... to give all of you a 10 percent raise, effective January 1st. This
salary increase is global and across the board-everyone gets a raise, no matter
their level, to recognize the contribution that each and every one of you makes
Two reasons for the fiscal perks came to mind.
First, Google has had another great year. Second, in order to continue to
have great years, Google needs to keep users from flocking to Facebook and
other burgeoning sectors of the Web where pre-IPO stock options remain sexy.
On the first point, Google's third-quarter numbers were the envy of every
high-tech company save Apple, whose market cap continues to dazzle.
a 32 percent Q3 profit hike, based on $2.17 billion on
earnings per share of $6.72. Revenues totaled $7.29 billion, up 23 percent from
the same period a year ago.
Moreover, Google's chief revenue stream of search advertising, which helps
the company to $20 billion-plus in sales each year, is getting company in the
form of display and mobile ads.
YouTube and other ads are running
at a $2.5 billion run rate for the year, while mobile
ads are tracking at a $1 billion run rate for 2010.
On the second point, a ton of top and midlevel Google employees have
migrated down the street to nemesis Facebook.
Facebook COO and former Google sales head
Sheryl Sandberg lured her successor at Google David Fischer in March, and now
the social network is the runaway leader in display ad sales.
Android Senior Product Manager Erick Tseng just launched single sign-on for
Facebook iPhone and Android apps at Facebook. Google Chrome Operating System
engineer Matthew Papakipos landed at Facebook.
Google Wave didn't make Google money so the company canned it, prompting
creator Lars Rasmussen to move to Facebook. No wonder Google is concerned.
eWEEK believes the pay hike and bonuses won't be big deterrents for
ambitious talent who seeks a challenge and wants to make a killing from pre-IPO
shares in the next few years. Heck, several key Microsoft and Yahoo employees
jumped ship to work at Google for the same reason.
Google offered a half-hearted confirmation of the pay hike and bonuses to
"While we don't typically comment on internal matters, we do believe
that competitive compensation plans are important to the future of the
The only translation here is that Google needs to keep its employees so it
can continue to perform in the market the way it has for a decade. That means
keeping them at Google and away from Facebook and whatever other Joe Startup
Whatever Google's reasons for the fiscal bump, the end is commendable.
Employees should be happier with the extra cash. A 10 percent raise for any
company is nothing to look down upon.
The only real dark doing here is that Google in a rather unsavory move fired
the employee who leaked Schmidt's memo.
This prompted author Nicholas Carr to imply
was hypocritical based on Schmidt's own contention that if people
want to do something private, maybe they shouldn't be doing it in the first