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Business Comment

Stephen Foley: Searching question Google can't answer

US Outlook: Was Google's move this week to give every employee a 10 per cent pay rise a bold tactical move in the "war for talent", or was it surrender?

The company has prided itself on being a desirable place to work – the desirable place to work – a university campus of experimentation, where employees get 20 per cent of their time to follow their own personal projects, in the knowledge that Google can back them if they are successful. So I just don't get the boast about a big pay rise. Is that all you have to offer? Cash?

For in-demand computer science graduates looking to get rich, the really big upside is never going to be in a publicly-quoted company. Pre-flotation upstarts, such as Facebook (where 12 per cent of employees are ex-Google), offer more monetary promise. Baby start-ups offer vastly more, if they take off. Google equity and share options have lost their appeal, as its own employees have been telling it.

It is hardly news that Google is not a start-up any more. The company is worth $200bn and makes profits at the rate of $1m an hour.

It is the entrenched market leader in online advertising and the launches of great inventions like Google Maps and Gmail are now quite some distance behind it. Its latest big product roll-out, pop-up previews of web pages alongside its search results, is in fact a copy of Microsoft's Bing.

The worrying question raised by the raise is whether Google is running out of ideas, not just ideas about how to compensate its staff but about how to energise them.

My experience of software engineers and their ilk is that they are motivated more by creativity and the chance to change the world for the good than they are by money. It is exactly the world view that is summed up in Google's own company slogan: Don't be evil. That slogan is much under attack these days, as the company's tentacles stretch into all corners of business and it has greater and greater profits to defend. I'm not sure there is much that a 10 per cent pay rise can do about that.