Google's Schmidt Defends the Company's 'Moonshot' Projects

Investments in "moonshot" projects will keep Google at the leading edge of innovation, Eric Schmidt, executive chairman, told shareholders.

Google Project Loon

Google initiatives—including its self-driving cars effort, its Project Loon balloon-powered Internet initiative and its project to develop contact lenses capable of reading blood sugar levels from tears—have earned the company a reputation for taking on "moonshot" projects with little immediate return.

But those kinds of investments have kept, and will keep, the company at the leading edge of innovation, Google Executive Chairman Eric Schmidt told investors June 3 at the company's annual shareholder's meeting, a recording of which is available on YouTube.

"Our mantra is, if you do something useful, everything else follows," Schmidt said. "We don't start from the position of 'here's a business plan and here's a large market.' We start from a position that says 'here is a problem that has to get solved and solved in an interesting way.'"

That approach powered a lot of the innovation and the success of Google core search business over the years, he said. When Google embarks on something, the company's goal is always to look beyond just the 2 billion or so people using smartphones and the Web and at the broader population.

He pointed to Google's Project Loon (pictured) initiative—which uses a network of high-altitude balloons to provide Internet connectivity to poorly served areas—as an example of how the company's out-of-the-box approach to solving problems has begun delivering tangible benefits.

Schmidt's comments appeared designed to allay investor concern over the long-term strategy behind Google's investments in an increasingly diverse product and service portfolio. Recently, Google has ventured into the wireless carrier market, high-speed Internet business, autonomous cars, the health care business, satellite industry and even the aerospace businesses.

Meanwhile, almost 90 percent of Google's revenues and almost all of the company profits are derived from its core search business. In its first quarter, which ended March 31, Google's search engine-driven ad business accounted for about $15.5 billion of the company's $17.3 billion in total revenue. But the company's increasing forays into areas that are far afield of its roots in Internet search have begun attracting attention because its core business itself has begun slowing down somewhat.

Although Google remains enormously profitable, it has missed revenue and profit expectations six times in a row, including in the latest quarter. The company is making less money per click on online ads even as the cost of acquiring those ads has kept inching up. Though Wall Street analysts have fretted at the company's performance, investors and industry analysts remain bullish on Google's prospects.

Schmidt's comments June 3 indicate that Google plans to continue to invest in moonshot efforts it finds interesting. He pointed to Google's autonomous car initiative and its smart contact lens effort as the kind of ventures that the company hopes will pay off in the long term. Google's strategy is to be unreasonable but in a clever way, he said, paraphrasing a recent quote from California Governor Jerry Brown, whom Schmidt said he met recently.

"Our strategy is to focus on things which are not just relevant now but for the next generation" he said, adding that most companies ultimately fail because they do one thing very well but fail to anticipate the next big thing. "They don't broaden their mission; they don't challenge themselves. They don't continually build on that platform."

In the process, they end up being "incrementalists," Schmidt said. "Google is very committed to not being that."

Jaikumar Vijayan

Jaikumar Vijayan

Vijayan is an award-winning independent journalist and tech content creation specialist covering data security and privacy, business intelligence, big data and data analytics.