The Wall Street Journal-20080118-Google- From Don-t Be Evil to How to Do Good
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Google: From Don't Be Evil to How to Do Good
In one of the most widely watched efforts in corporate giving in years, Google Inc. unveiled yesterday nearly $30 million in new grants and investments, outlining how it will focus a massive philanthropic endeavor that erases the usual boundaries between the for-profit and nonprofit worlds.
The first set of major five- to eight-year initiatives it will pursue includes efforts to create systems to help predict and prevent disease pandemics, to empower the poor with information about public services and to create jobs by investing in small- and mid-size businesses in the developing world. They join previously announced initiatives to accelerate the commercialization of plug-in cars and make renewable energy cheaper than coal. The grants and investments announced yesterday are an early wave of Google's planned efforts in the five focus areas.
Valued at about $2 billion, the assets currently set aside for the company's philanthropic arm, Google.org, make it larger than any in- house corporate foundation in the U.S., according to the Foundation Center, a nonprofit research firm. (Private foundations set up by tycoons such as Microsoft Corp.'s Bill Gates have more assets.)
Just as important, the Mountain View, Calif., Internet company is marshaling both company and foundation resources around the initiatives, which it hopes will provide more impact in tackling some of the world's biggest problems. Philanthropy experts consider Google to be among the leading edge of donors experimenting with this hybrid for-profit/nonprofit model. Others include eBay Inc. founder Pierre Omidyar's Omidyar Network, which invests in businesses and makes grants to nonprofits.
Google, which has found enormous success with an unconventional business style and a corporate motto of "Don't Be Evil," says it isn't looking to make money on its philanthropic efforts. But, as a division of the for-profit company rather than a nonprofit offshoot, Google.org has freedom to invest in and operate businesses, lobby for political causes and issue certain grants that a traditional corporate foundation wouldn't. Its announcement yesterday includes a $10 million investment in closely held eSolar Inc., which is working on utility- scale solar power. Google.org also expects to invest directly in businesses in places such as Africa to spur job creation. "We can start new industries," says Executive Director Larry Brilliant. "I hope we will."
The money Google.org has awarded to date (http://google.org/projects.html) remains modest, and its progress so far has been slow compared with its parent company's breakneck growth in staff and business reach. Some philanthropy experts warn Google that successful businesspeople with high hopes for solving the world's problems have underestimated those problems' complexity and have fallen short.
But, coming nearly four years after Google first announced it was devoting 1% of its equity, 1% of annual profit and an unspecified amount of employee time to Google.org, yesterday's announcement gives much-awaited shape and focus to its activities.
Selected from more than 800 suggestions, the final initiatives show Google's special interest in projects where it can bring its engineering and information-management prowess to bear. Google staff, many of whom spend 20% of their work time on independent projects, are expected to contribute significantly to Google.org efforts. The initiatives also exhibit Google's characteristic penchant for audacious moves to reshape markets -- from advertising to small- business financing -- others are often more timid in approaching.
Google.org's big ambitions suggest it could potentially transform the business mix of Google itself -- leading the company to become a player in sectors such as energy and finance.
"They're business and technology people saying we want to find business and technology solutions to problems," says Mark Kramer, managing director of FSG Social Impact Advisors, a nonprofit philanthropic consulting group."That hasn't been done much before."
The roots of the effort trace to Google's April 2004 regulatory filing for an initial public offering. In it, company co-founders Sergey Brin and Larry Page announced plans for a corporate foundation with the goal that "someday this institution may eclipse Google itself in terms of overall world impact by ambitiously applying innovation and significant resources to the largest of the world's problems."
To start, the company created a nonprofit corporate foundation with about $90 million in funding. It announced plans to focus on issues related to energy and the environment and global poverty. After discovering in 2005 that its foundation couldn't easily donate to One Laptop Per Child, a nonprofit initiative to sell low-cost laptops to developing countries, Google began pursuing the hybrid approach with the for-profit structure. Laws prevent corporate foundations from making gifts that might financially benefit their businesses, and the laptop project aimed at increasing Internet access arguably could boost Google's online advertising revenue.
In February 2006, Google hired as Google.org's executive director Dr. Brilliant, a former physician who helped direct efforts to eradicate smallpox from India in the 1970s. After the Sept. 11, 2001, attacks, he served as a bioterrorism consultant to the U.S. Centers for Disease Control and Prevention.
With Dr. Brilliant's arrival, Google.org added global health as a third focus area. He and colleagues sought advice from Google staff and leaders in the philanthropy field and made small "learning grants" to nonprofits. But by spring 2007, Dr. Brilliant and his team realized they needed to focus and launched an internal process to select limited initiatives in the environment, poverty and global health areas.
While some Google.org executives championed efforts to toughen energy-efficiency standards, the company's co-founders urged them to look instead at making renewable energy cheaper. In late November, Google announced that it expected to invest hundreds of millions of dollars in efforts to make renewable electricity cheaper than power from coal-fired plants. In an unusual move, Google said it would spend millions of dollars on research and development and would create a renewable-energy research-and-development group within the company, in addition to grants and investments by Google.org.
The other major initiatives Google.org will focus on include the program to predict and prevent disease outbreaks and other global threats. That is anchored by a $5 million grant to InSTEDD, a nonprofit created by Google.org that is applying technology to improve the flow of information between organizations fighting such problems. Google says it believes that better data and systems for analyzing it are critical to identifying disease hot spots. Possible eventual projects for Google include creating simple tests doctors in the developing world could use to diagnose infectious diseases.
As part of the "Inform and Empower to Improve Public Services" initiative, Google is supporting efforts to provide parties in the developing world with information about public services such as education. One beneficiary of a $2 million grant from Google.org is Pratham (www.pratham.org), a nonprofit in India that gives reading tests to schoolchildren and publicly releases the data with the goal of improving education standards.
Google.org also aims to "Fuel the Growth of Small and Medium-Sized Enterprises" in the developing world. It will try to reduce the transaction costs for outsiders to invest in such businesses, help create funds that buy stakes in the businesses and provide investors with an "exit," and invest directly and indirectly in such businesses.
Some warn that Google's unconventional approach risks altering the landscape of industries, putting it in competition with other businesses. Its investment in renewable-energy research and companies, for example, makes Google a potential rival to some oil and coal concerns. Google "is becoming a catalyst for energy innovation, which makes them an invader to the traditional energy industry," says R. Paul Herman, CEO of HIP Investor, which consults on socially responsible investing, and former strategy director at Omidyar Network.
Such philanthropic activities potentially have repercussions for Google's core online advertising business, if energy companies cut back on buying Google ads because they viewed it as a rival. Similarly, any government officials unhappy with Google.org's efforts could potentially use regulatory or lawmaking powers to take it out on the company.
Dr. Brilliant says the company has considered such risks. "It's an experiment to have a philanthropically oriented organization that's part of the [profit and loss] of Google," he says.
