Google's Founders: These Emperors Have No Clothes

(MoneyWatch)  A sure sign that this economic downturn is far worse than any of the previous ones during the Internet Era is when the perpetually expanding Google hit the outer limits of growth and begins to contract. And that is precisely what has happened.

For the second time this (still-young) year, Google killed off one of its ambitious advertising initiatives yesterday -- Google Audio Ads, which was its radio advertising arm. Up to 40 people will lose their jobs.

Last month, Google closed its Print Ads program, which means that now only one offline advertising product is still alive -- TV ads. That business is not performing well, either. At the core of these failures is the search giant's miscalculation that its keyword auction/automated ad-selling model would prove successful beyond search.

It isn't, as every type of media company is discovering. Even content startups quickly discover, once they do the math, that in order to attain the scale necessary to monetize their businesses, they would have to grow monstrously huge -- rather like Google itself.

Google scaled back on another promising initiative recently, this time with no announcement. As we reported last summer, the company had launched a far-reaching effort to both improve Google News, which is another of its products that is under-performing, and help the news media business generally. CEO Eric Schmidt has been outspoken about his commitment to this work, which begs the question of who exactly is opposed to it.

The answer would have to be the founders. Long overlooked by the press and critics despite their obvious management flaws, Sergey Brin and Larry Page have allowed their company to devolve toward chaos, lacking an essential layer of professional project management. Morale inside the company is plummeting, despite all the perks and prestige gained by those working there, although the recent move to reprice employee options (most of which are under water) -- plus the lousy economy -- will no doubt stave off defections for now.

So it's time to face facts: These emperors have no clothes. But they don't know that, and until and unless they find out, Google's future prospects have to be downgraded to "uncertain."