As a citizen of Planet Earth, I'm glad to know that Google, the country's sixth-largest corporation in terms of market cap, is planning to invest hundreds of millions to fight global warming. If I were a shareholder (which I'm not), I wouldn't be so thrilled.
As a citizen of Planet Earth, I'm glad to know that Google, the country's sixth-largest corporation in terms of market cap, is planning to invest hundreds of millions to fight global warming. If I were a shareholder (which I'm not), I wouldn't be so thrilled.Briefly, Google co-founders Sergey Brin and Larry Page said today that they are launching an initiative called Renewable Energy Cheaper Than Coal (RE<C, in Google's shorthand), to develop technologies that can produce power from renewable sources such as solar, wind, and geothermal power that costs less than coal. The target range would be 1 to 3 cents per kilowatt hour.
To get there, Google is creating a new unit with at least 20 to 30 engineers and energy specialists to do R&D on the new technologies while also partnering with outside companies. The company will test much of the most promising technology itself. Brin says the company will continue to invest 70% of its R&D funds in search and 20% on developing Web applications that extend its core business. The energy project fits into the 10% the company sets aside for innovation. A few hundred million, for a company with a market cap of nearly $217 billion, amounts to a rounding error.
Still, does an online search-and-advertising company really have any business moving into renewable energy? To say the least, it's not exactly among Google's core competencies.
To be sure, Google has entered businesses beyond search -- like online storage and mobile phone operating systems. These, however, all further the company's core mission, which is to get its search function, Web-based applications, and advertising on as many screens worldwide as possible. Keep in mind that other Google ventures beyond search and Web applications, like building a Wi-Fi network for San Francisco, haven't been unalloyed successes.
There's a distinction between taking steps as a company to lower your carbon footprint -- which Google is a leader at -- and trying to create a new energy industry yourself. Google has committed itself, corporate jets and all, to being "carbon neutral" by the end of the year, and already has built data centers powered by hydropower (on the Columbia River in The Dalles, Ore.) and by wind (in the Netherlands). Those are efforts that any environmentally conscious shareholder can get behind.
RE<C is different: it's an attempt to save the world. And it's not the business that public companies such as Google should be in.
One could argue (and many have) that in the absence of decisive federal government action (from either party) to limit global climate change, other big entities, like state governments and large corporations, must step in. I think it's great that Google is stepping up to this plate, in a variety of ways. I'm just not so sure that major shareholders will support spreading the company's resources, and diluting its focus, in this way.
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