Google Raises a Ploy to Keep Talent from Facebook?

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 to Google."

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.

Google revealed 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 the media:

"While we don't typically comment on internal matters, we do believe that competitive compensation plans are important to the future of the company."

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 pops up.

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 the move 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 place.