Google Cloud boss Kurian’s rocky path to profit: ‘We were not in a very good situation’
Google Cloud CEO Thomas Kurian, right, arrives on stage as Alphabet CEO Sundar Pichai exits during the Google Cloud Next event in San Francisco on April 9, 2019.
Michael Short | Bloomberg | Getty Images
When Google hired Oracle’s Thomas Kurian four years ago to run its cloud business, the internet search company had a clear reason for putting its trust in a career enterprise software executive.
Google was a consumer company. Despite years spent trying to compete with Amazon and Microsoft in selling cloud-based storage, computing and other services to big corporations, it was coming up short in its effort to win marquee deals.
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While Google is still third in the U.S. cloud infrastructure market, its business is growing rapidly and, as of the first quarter, is finally contributing positively to Alphabet’s bottom line. Earlier this week, Alphabet said Google’s cloud unit generated $191 million in operating profit, after losing a total of $4 billion in 2021 and 2022. Revenue jumped 28% from a year earlier to $7.45 billion, far outpacing Google’s struggling ad business.
“We were not in a very good situation when I joined,” Kurian told CNBC in an interview after the results were released. “I think we were very early in the business. Most enterprises did not take us as a viable partner.”
The central problem wasn’t hard to spot. Google was a company of software developers and data scientists, who were trained at building sophisticated technologies. But they had no real idea how to build, market and sell them to the business world. Under Kurian’s predecessor, VMware co-founder Diane Greene, critics said Google’s cloud business hadn’t matured enough to handle enterprises even as it was investing heavily to do so.
The cloud division includes the Google Cloud Platform, which competes with Amazon Web Services and Microsoft Azure, and the Google Workspace productivity software bundle that goes head-to-head with Microsoft Office.
Kurian said he spent a lot of time with the technology in his early days to see how it worked and where it needed improvement. From 4 a.m. to 7 a.m., he would read technical design documents. In the evenings, he played with the products.
“We shifted the organization from thinking, we’re building technology to we’re building products and solutions,” Kurian said.
It’s a market Google has been committed to winning for years, as corporations have been rapidly pushing workloads from their own data centers to the cloud. Google wants to not only capture that storage and computing business but also get developers from those companies and others to use its cutting-edge technology, particularly as artificial intelligence systems gain traction.
The expansion has been costly. Almost every quarter, from the beginning of 2017 through the third period of 2020, finance chief Ruth Porat told analysts that cloud had been the biggest area of head count increases, for both sales and technical roles. Google also grew the operation through acquisitions, buying data analytics software startup Looker for $2.4 billion in 2019 and security software vendor Mandiant for $6.1 billion last year.
The cloud unit now accounts for more than 25% of Alphabet’s full-time workforce, CNBC reported earlier this year.
Kurian’s focus has included developing product road maps, introducing new pricing models, bolstering customer service and becoming more efficient with its infrastructure, a key to saving money.
“We’ve reduced cycle time in the way we provision and deploy machines by a factor of five in the last four years,” Kurian said. “There’s 100 different projects that have gone on to optimize resource consumption.”
Customer success is a practice that’s been widely adopted in the enterprise software world as a way to keep clients happy and wanting to buy more, emphasizing retention and limiting churn.
Google built up its customer-success mode to work more tightly with clients, and it racked up a community of 100,000 partners. The company has had hundreds of its senior engineers sponsor important customers so they could see how their products are being used and understand what needs to be changed.
“We have awards twice a year for teams that have done the best job helping customers,” Kurian said, adding that Google now ranks among the top five enterprise software sellers.
In 2020, Google brought its productivity tools under the brand Google Workspace. It also issued new pricing tiers, resulting in organizations of different sizes starting to pay different prices.
While Google’s cloud unit has swung to posting a profit, there’s some fuzziness in the numbers.
Last week, Alphabet restated operating income for cloud and its other segments, resulting in lower cloud losses in 2021 and 2022. The restated numbers show the cloud unit had a $186 million operating loss in the fourth quarter, compared with $480 million before the change, for example.
The cloud numbers also benefited from an extension of the useful life of data center equipment. But Kurian said competitors have made similar depreciation adjustments.
“We were always going to get to profitability,” he said. “If you draw the line, you can see the curve.”
‘Enterprise discipline’
Under Kurian’s leadership, Google’s cloud group has had to cope with its share of executive turnover. Javier Soltero, who was the head of Workspace, left in July. Rob Enslin, a former top SAP executive who joined Google as president of global customer operations in 2019, departed last year to become co-CEO of UiPath. And Kirsten Kliphouse, who was the cloud group’s president of Americas, left in 2023 after four years at the company.
But head count has continued to grow, as has the company’s roster of large customers. In the past three years, Google has signed deals with Coinbase, Deutsche Bank, Ford, General Mills and SpaceX.
And existing clients have gone deeper with Google.
Home Depot said it was adopting Google’s public cloud in 2016, while Greene was CEO. Fahim Siddiqui, Home Depot’s chief information officer, said the home-improvement retailer has found increasing value from Google’s platform since he joined from Staples in late 2018.
“He’s brought in the enterprise discipline,” Siddiqui said of Kurian. “It’s one thing to provide the capability of the cloud, a set of interesting technical capabilities. There’s a discipline of availability, reliability, management and being a proven partner on this journey.”
Siddiqui said Home Depot uses its own data centers and co-location facilities, as well as cloud services from Google and Microsoft. Google is the company’s main cloud-computing partner, he said, and last year Home Depot started moving merchandising applications to Google’s cloud.
A big partner move Kurian made in his early months as CEO involved what he called an “integrated open-source ecosystem.” It was an alliance with Elastic, MongoDB and five other companies that sell distributions of open source software.
Elastic and MongoDB shares rallied as Kurian, speaking at Google’s Next cloud conference, talked about how clients could receive a single bill while using products from other companies managed through Google’s cloud console.
“It was music to my ears,” said Dev Ittycheria, CEO of MongoDB, which sells cloud database software and services. At the time, AWS was attempting to add some open source MongoDB database software capabilities into its DocumentDB service.
Ittycheria said the open source initiative was Kurian’s idea, and he applauded how Google has arranged the partnerships. In 2021, Google said it was lowering the percentage of revenue it keeps in marketplace deals to 3% from 20%. Ittycheria said MongoDB is “very happy with the structure of the deal.”
Jeffrey Flaks, the CEO of Hartford HealthCare, which has 37,000 employees, said one reason why his Connecticut health system moved to Google Cloud Platform last year from its on-premises data centers is that other large hospitals had picked Google. He said Kurian was another factor in why it selected Google over AWS, Azure and Oracle’s cloud.
“His personal engagement, his knowledge of our intentions and our desires and, candidly, his personal problem-solving skills,” Flaks said, “distinguished Google Cloud in this process.”
Google Cloud technology chief Will Grannis said Kurian’s commitment to improving the division’s offerings was evident right away. Grannis recalled a day in late 2018, after Kurian had been picked for the role but before he’d actually started the job.
Kurian stopped by a Google office in Sunnyvale, California, and was introduced to employees. After the meeting, Grannis found himself alone in the elevator with Kurian and they rode down silently. As they walked toward the parking lot, Grannis, who was then a managing director, introduced himself, and they began talking about a container-management technology called Kubernetes.
“I’ve been trying to get some Kubernetes clusters spun up in the console, and I have some feedback,” Kurian said, according to Grannis. “I’d like to understand how we can improve the experience for developers.”
The conversation went on for an hour.
An employee walks past a quilt displaying Etsy Inc. signage at the company’s headquarters in the Brooklyn.
Victor J. Blue/Bloomberg via Getty Images
Etsy is trying to make it easier for shoppers to purchase products from local merchants and avoid the extra cost of imports as President Donald Trump’s sweeping tariffs raise concerns about soaring prices.
In a post to Etsy’s website on Thursday, CEO Josh Silverman said the company is “surfacing new ways for buyers to discover businesses in their countries” via shopping pages and by featuring local sellers on its website and app.
“While we continue to nurture and enable cross-border trade on Etsy, we understand that people are increasingly interested in shopping domestically,” Silverman said.
Etsy operates an online marketplace that connects buyers and sellers with mostly artisanal and handcrafted goods. The site, which had 5.6 million active sellers as of the end of December, competes with e-commerce juggernaut Amazon, as well as newer entrants that have ties to China like Temu, Shein and TikTok Shop.
By highlighting local sellers, Etsy could relieve some shoppers from having to pay higher prices induced by President Trump’s widespread tariffs on trade partners. Trump has imposed tariffs on most foreign countries, with China facing a rate of 145%, and other nations facing 10% rates after he instituted a 90-day pause to allow for negotiations. Trump also signed an executive order that will end the de minimis provision, a loophole for low-value shipments often used by online businesses, on May 2.
Temu and Shein have already announced they plan to raise prices late next week in response to the tariffs. Sellers on Amazon’s third-party marketplace, many of whom source their products from China, have said they’re considering raising prices.
Silverman said Etsy has provided guidance for its sellers to help them “run their businesses with as little disruption as possible” in the wake of tariffs and changes to the de minimis exemption.
Before Trump’s “Liberation Day” tariffs took effect, Silverman said on the company’s fourth-quarter earnings call in late February that he expects Etsy to benefit from the tariffs and de minimis restrictions because it “has much less dependence on products coming in from China.”
“We’re doing whatever work we can do to anticipate and prepare for come what may,” Silverman said at the time. “In general, though, I think Etsy will be more resilient than many of our competitors in these situations.”
Still, American shoppers may face higher prices on Etsy as U.S. businesses that source their products or components from China pass some of those costs on to consumers.
Etsy shares are down 17% this year, slightly more than the Nasdaq.
WATCH: Amazon CEO Andy Jassy says sellers will pass cost of tariffs on to consumers
Google CEO Sundar Pichai testifies before the House Judiciary Committee at the Rayburn House Office Building on December 11, 2018 in Washington, DC.
Alex Wong | Getty Images
Google’s antitrust woes are continuing to mount, just as the company tries to brace for a future dominated by artificial intelligence.
On Thursday, a federal judge ruled that Google held illegal monopolies in online advertising markets due to its position between ad buyers and sellers.
The ruling, which followed a September trial in Alexandria, Virginia, represents a second major antitrust blow for Google in under a year. In August, a judge determined the company has held a monopoly in its core market of internet search, the most-significant antitrust ruling in the tech industry since the case against Microsoft more than 20 years ago.
Google is in a particularly precarious spot as it tries to simultaneously defend its primary business in court while fending off an onslaught of new competition due to the emergence of generative AI, most notably OpenAI’s ChatGPT, which offers users alternative ways to search for information. Revenue growth has cooled in recent years, and Google also now faces the added potential of a slowdown in ad spending due to economic concerns from President Donald Trump’s sweeping new tariffs.
Parent company Alphabet reports first-quarter results next week. Alphabet’s stock price dipped more than 1% on Thursday and is now down 20% this year.
In Thursday’s ruling, U.S. District Judge Leonie Brinkema said Google’s anticompetitive practices “substantially harmed” publishers and users on the web. The trial featured 39 live witnesses, depositions from an additional 20 witnesses and hundreds of exhibits.
Judge Brinkema ruled that Google unlawfully controls two of the three parts of the advertising technology market: the publisher ad server market and ad exchange market. Brinkema dismissed the third part of the case, determining that tools used for general display advertising can’t clearly be defined as Google’s own market. In particular, the judge cited the purchases of DoubleClick and Admeld and said the government failed to show those “acquisitions were anticompetitive.”
“We won half of this case and we will appeal the other half,” Lee-Anne Mulholland, Google’s vice president or regulatory affairs, said in an emailed statement. “We disagree with the Court’s decision regarding our publisher tools. Publishers have many options and they choose Google because our ad tech tools are simple, affordable and effective.”
Attorney General Pam Bondi said in a press release from the DOJ that the ruling represents a “landmark victory in the ongoing fight to stop Google from monopolizing the digital public square.”
Potential ad disruption
If regulators force the company to divest parts of the ad-tech business, as the Justice Department has requested, it could open up opportunities for smaller players and other competitors to fill the void and snap up valuable market share. Amazon has been growing its ad business in recent years.
Meanwhile, Google is still defending itself against claims that its search has acted as a monopoly by creating strong barriers to entry and a feedback loop that sustained its dominance. Google said in August, immediately after the search case ruling, that it would appeal, meaning the matter can play out in court for years even after the remedies are determined.
The remedies trial, which will lay out the consequences, begins next week. The Justice Department is aiming for a break up of Google’s Chrome browser and eliminating exclusive agreements, like its deal with Apple for search on iPhones. The judge is expected to make the ruling by August.
Google CEO Sundar Pichai (L) and Apple CEO Tim Cook (R) listen as U.S. President Joe Biden speaks during a roundtable with American and Indian business leaders in the East Room of the White House on June 23, 2023 in Washington, DC.
Anna Moneymaker | Getty Images
After the ad market ruling on Thursday, Gartner’s Andrew Frank said Google’s “conflicts of interest” are apparent by how the market runs.
“The structure has been decades in the making,” Frank said, adding that “untangling that would be a significant challenge, particularly since lawyers don’t tend to be system architects.”
However, the uncertainty that comes with a potentially years-long appeals process means many publishers and advertisers will be waiting to see how things shake out before making any big decisions given how much they rely on Google’s technology.
“Google will have incentives to encourage more competition possibly by loosening certain restrictions on certain media it controls, YouTube being one of them,” Frank said. “Those kind of incentives may create opportunities for other publishers or ad tech players.”
A date for the remedies trial hasn’t been set.
Damian Rollison, senior director of market insights for marketing platform Soci, said the revenue hit from the ad market case could be more dramatic than the impact from the search case.
“The company stands to lose a lot more in material terms if its ad business, long its main source of revenue, is broken up,” Rollison said in an email. “Whereas divisions like Chrome are more strategically important.”
WATCH: U.S. judge finds Google holds illegal online ad-tech monopolies
Jason Citron, CEO of Discord in Washington, DC, on January 31, 2024.
Andrew Caballero-Reynolds | AFP | Getty Images
The New Jersey attorney general sued Discord on Thursday, alleging that the company misled consumers about child safety features on the gaming-centric social messaging app.
The lawsuit, filed in the New Jersey Superior Court by Attorney General Matthew Platkin and the state’s division of consumer affairs, alleges that Discord violated the state’s consumer fraud laws.
Discord did so, the complaint said, by allegedly “misleading children and parents from New Jersey” about safety features, “obscuring” the risks children face on the platform and failing to enforce its minimum age requirement.
“Discord’s strategy of employing difficult to navigate and ambiguous safety settings to lull parents and children into a false sense of safety, when Discord knew well that children on the Application were being targeted and exploited, are unconscionable and/or abusive commercial acts or practices,” lawyers wrote in the legal filing.
They alleged that Discord’s acts and practices were “offensive to public policy.”
A Discord spokesperson said in a statement that the company disputes the allegations and that it is “proud of our continuous efforts and investments in features and tools that help make Discord safer.”
“Given our engagement with the Attorney General’s office, we are surprised by the announcement that New Jersey has filed an action against Discord today,” the spokesperson said.
One of the lawsuit’s allegations centers around Discord’s age-verification process, which the plaintiffs believe is flawed, writing that children under thirteen can easily lie about their age to bypass the app’s minimum age requirement.
The lawsuit also alleges that Discord misled parents to believe that its so-called Safe Direct Messaging feature “was designed to automatically scan and delete all private messages containing explicit media content.” The lawyers claim that Discord misrepresented the efficacy of that safety tool.
“By default, direct messages between ‘friends’ were not scanned at all,” the complaint stated. “But even when Safe Direct Messaging filters were enabled, children were still exposed to child sexual abuse material, videos depicting violence or terror, and other harmful content.”
The New Jersey attorney general is seeking unspecified civil penalties against Discord, according to the complaint.
The filing marks the latest lawsuit brought by various state attorneys general around the country against social media companies.
In 2023, a bipartisan coalition of over 40 state attorneys general sued Meta over allegations that the company knowingly implemented addictive features across apps like Facebook and Instagram that harm the mental well being of children and young adults.
The New Mexico attorney general sued Snap in Sep. 2024 over allegations that Snapchat’s design features have made it easy for predators to easily target children through sextortion schemes.
The following month, a bipartisan group of over a dozen state attorneys general filed lawsuits against TikTok over allegations that the app misleads consumers that its safe for children. In one particular lawsuit filed by the District of Columbia’s attorney general, lawyers allege that the ByteDance-owned app maintains a virtual currency that “substantially harms children” and a livestreaming feature that “exploits them financially.”
In January 2024, executives from Meta, TikTok, Snap, Discord and X were grilled by lawmakers during a senate hearing over allegations that the companies failed to protect children on their respective social media platforms.
WATCH: The FTC has an uphill battle in its antitrust case against Meta.
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