TECH
04/04/2011 09:51 am ET Updated Jun 04, 2011

What Larry Page Must Tackle As Google CEO

As Google's Larry Page becomes CEO for a second time on Monday, analysts say the co-founder must help the Silicon Valley giant, which has been hit by lawsuits, government inquiries, and failed acquisition attempts, regain its lost luster and startup speed in order to fend off increasingly powerful rivals.

Pointing to some of the company's more recent public flops, such as social media services Google Wave and Google Buzz, analysts say the company has stumbled during Eric Schmidt's tenure as CEO and is failing to compete with social networking sites like Facebook, which recently overtook Google as the most popular website in the U.S.

One of the biggest challenges Page will face as CEO is helping the company streamline its development process and regain a startup feel in order to better compete with more nimble rivals, even as it grapples with over 20,000 employees in more than 40 different countries.

"There's a sense that they're turned into fast followers instead of innovators," said Greg Sterling, Internet analyst at Opus Research, adding that many recent innovations seemed like "me too" products lagging behind social networking sites like Facebook and Twitter. "With Google failing to buy Yelp, then creating Yelp-like products, with Google failing to buy Groupon, and now testing a Groupon-like offers product, maybe ideas coming out of Google are not quite as innovative as they once were."

In addition to these "me too" offerings, Google has also become home to a host of products that overlap and the new CEO will have to distinguish between the solutions that can thrive in the market--and deserve added investment and development--from the ones that duplicate efforts.

"When you think about just the location solutions from Google, they have Latitude, Hotpot, Places and Maps. Is that a good use of resources when you have three or four solutions focused on one market?" said Kerry Rice, an analyst at Wedbush Securities.

Analysts concur that Page must trim the fat when it comes to Google's ever-increasing number of products. In addition, one of Larry Page's key challenges as the new CEO will be to prioritize the company's efforts, separating what Google does well from what the company can't do at all, and focusing on the former.

"Close to 60 percent of the research and development projects at Google could be shut down," said Trip Chowdhry, senior analyst at Global Equities Research, arguing that many of the projects in development were no closer to fruition, and were not contributing to revenue. "Many stupid, hobby-type projects are getting the management attention and the resources, and the problem was the old CEO never took a hard look at these projects."

Even as it struggles to compete with and out-innovate its rivals, Google also faces a host of regulatory challenges in the U.S. and overseas. Last month, Google agreed to a landmark settlement with the Federal Trade Commission over charges that the company used "deceptive tactics" and violated user privacy when it launched Google Buzz in 2010. Google was again buffeted in Europe when Microsoft accused the company of being an Internet bully that abuses its dominance of online search and advertising, in an attempt to encourage the European Commission to dig deeper into an investigation opened four months ago into Google's business practices.

The Wall Street Journal reported there are signs that Page is already planning to respond to these challenges, actively reviewing the number of projects in development, and refocusing efforts on the more lucrative Google products and services, like online advertising, YouTube and Android software.