Google cuts spending and searches for new revenue as downturn bites

You know things are grim when even the world’s largest technology company has started to feel the effects of the downturn.

You know things are grim when even the world’s largest technology company has started to feel the effects of the downturn.

Search engine giant Google says it will begin to cut back spending on projects that aren’t going anywhere, Christmas parties and labour costs in a bid to insulate itself from the global recession.

The group will also ramp up its core advertising programs and consider placing advertisements on some of its previously ad-free web services in a bid to boost revenue. It is also investing in more display ads and growing its mobile advertising division.

Chief executive Eric Schmidt says the group must act as though it doesn’t know the future, and will cut projects which, “haven’t really caught on and aren’t that exciting”.

Google also claims it will “prioritise our resources and focus more on our core search, ads and apps business”.

Google has always been a big spender, providing three free meals a day for employees, laundry facilities, personal trainers and free access to doctors. The Google offices also feature pool tables and video games to emphasise the company’s laid back attitude.

But it recently announced it was sacking 10,000 contract workers in engineering projects and food divisions, and has cut back on cafeteria services.

The group’s focus on employee creativity and experimentation is also set to suffer. The company has become famous in tech circles for allowing its engineers to use 20% of their time to pursue their own projects, but as online advertising still accounts for 97% of the group’s revenue, any new un-related projects that aren’t producing the goods will be cut.

Schmidt has been holding meetings with top executives to decide how to cut spending on projects the group is merely “fiddling with” and the company has also hired a chief financial officer to control wasteful spending and eliminate budget inefficiencies.

Among the experiments terminated was a project called SearchMash, a search engine result organisation tool. Next to go is a “virtual world” project called Lively. The introduction of several new products such as web-payment service Google Check-out and Google TV Ads haven’t produced much cash, so they may be scaled back.

The scale-backs have even affected staff Christmas parties. While previously the group ran large gatherings of up to 10,000 people, this year smaller, team based get-togethers are on the agenda to save costs.

The group’s share prices have also declined over the past year, falling from a November 2007 record of $US741.79 to $US275.11 on Tuesday.

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