• The Wall Street Journal , Wednesday, December 3, 2008 11:15 AM

Google is finally tightening its belt after many years of go-go growth, The Wall Street Journal reports, cutting back on extravagant spending and the so-called "20% time" the company gives workers to tinker away on pet projects. For most of its 10-year history, Google has been able to hire by the thousands, dishing out generous perks like three free meals a day, free doctors, ski trips, and laundry and daycare facilities. The company's main goal was to develop new products and services that would take the company away from its total reliance (97% of revenue) on search advertising.

Though many ideas have surfaced, none have come close to bearing fruit with the same abundance as search. Meanwhile, search revenue growth has slowed dramatically, particularly in the last year. As such, Google's share price has suffered, settling at $275.11 in Tuesday trading, less than half of its record close of $741.79 one year ago.

So Google is cutting back on the go-go day spending. "We have to behave as though we don't know" what's going to happen, Google Chief Executive Eric Schmidt tells the Journal, meaning the company will start cutting the fat, projects that "haven't really caught on" and "aren't really that exciting." Moreover, he says the company isn't going to let an engineer have 20 people to work with on his experimental project. As Thomas Eisenmann, a professor at Harvard Business School, says, "Letting a thousand flowers bloom and letting many of them stall and go nowhere has worked well to this point. But if you want to be the dominant advertising network across every medium, you need more top-down management."

Read the whole story at The Wall Street Journal »