Google's search head warns staff about the new business environment and encourages them to accelerate their work.

• Google search head Prabhakar Raghavan instructed staff to adapt to a new market landscape, stating that "the past 15-20 years are no longer representative of our current reality."
• Raghavan stated at the recent all-hands meeting that user behavior is shifting, competition is intensifying, and regulation is becoming increasingly challenging.
• Raghavan announced that he's reducing the timeframe for his reports to work on specific projects.

Prabhakar Raghavan, the search boss, had an important message for employees at an all-hands meeting last month. He wanted them to settle in and get comfortable before sharing his message.

Raghavan instructed the crowd, who were seated in a theater at the company's headquarters in Mountain View, California, to obtain their boba teas.

Sundar Pichai's direct report, Raghavan, who leads key groups such as search, ads, maps, and commerce, was addressing Google's knowledge and information organization, comprising over 25,000 full-time employees.

According to audio obtained by CNBC, Raghavan stated that things have changed significantly in the past 15-20 years, and we can all agree on that. He was specifically referring to the search industry, which has been dominated by Google for two decades and has become one of the most profitable and valuable companies in the world.

Google's digital ad business has surpassed the combined revenue of Mazda and TikTok, with annual revenue growth of over $100 billion in the past three years, making it the envy of the world, according to Raghavan.

Google's growth is becoming increasingly difficult, as evidenced by Raghavan's recent comments at a company renowned for its free, gourmet lunches and extensive on-campus perks.

He remarked that life wouldn't always be perfect.

In approximately 35 minutes, Raghavan employed sports metaphors and motivational phrases in his reality check speech.

"If there's a clear and present market reality, we need to move more quickly, like athletes," he stated.

He mentioned increased competition and a tougher regulatory landscape. Despite not naming specific opponents, Google is under pressure from companies like Microsoft and OpenAI in the field of generative artificial intelligence.

""Google is trusted because it is a reliable source of information, even in the age of generative AI," Raghavan stated."

Raghavan announced tangible changes, including plans to build teams closer to users in key markets such as India and Brazil, and to shorten the timeframe for his reports' completion to accelerate progress.

He stated that there is something to be learned from the faster-twitch, shorter wavelength execution.

Despite cost cuts, Google's cloud business has instructed employees to move within shorter timelines, sources with knowledge of the matter told CNBC.

"A Google spokesperson stated to CNBC that with a significant opportunity in front of them, they are moving with speed and focus. The spokesperson emphasized the incorporation of generative AI into search and enhancements in search quality, stating, "There's much more to come.""

In March, Google appointed Elizabeth Reid as vice president, responsible for search and reporting to Raghavan.

'High highs and low lows'

Since early 2023, Google has been in cost-cutting mode, with parent Alphabet announcing plans to eliminate about 12,000 jobs, or 6% of the company's workforce. This year, the company has continued with more layoffs, and CFO Ruth Porat announced in a memo last week that the company is restructuring its finance organization, which will result in additional downsizing.

Raghavan emphasized that the current situation is not simply an extension of 2023. He pointed out that his team's last all-hands meeting took place three months ago, even though it felt like three years for some.

"The past three months have been marked by significant ups and downs," he stated.

Google's AI image generator was introduced in that time, but it was later pulled in February due to viral inaccuracies discovered by users online. In an effort to stay ahead in the AI arms race, Google has been reorganizing as more users shift away from traditional internet search towards finding information online.

Wall Street anticipates Alphabet's upcoming earnings report on Thursday to reveal a second consecutive quarter of year-over-year revenue growth in the low teens. Despite this being an improvement from the previous quarters, the figures will still be compared to some of Google's weakest financial reports in history.

Despite Alphabet's better-than-expected revenue and profit in the fourth quarter, its ad revenue fell short of analysts' expectations, causing its shares to decline by more than 6%. Meanwhile, the AI boom is prompting a renewed emphasis on investments.

With generative AI, the company is now spending significantly more on machines, as Raghavan stated.

Raghavan stated that the rate of organic growth is decreasing and the number of new devices entering the market has significantly decreased.

He stated that our growth in this new operating reality must be earned through hard work.

As the company faces a regulatory landscape unlike any it has experienced before, additional challenges are emerging, according to Raghavan.

The European Union's Digital Markets Act was cited by him, stating that the company is still learning about its obligations from the European Commission. The DMA, which became enforceable last month, aims to curb anti-competitive practices among tech companies.

"That does have its impact on us," Raghavan said.

Raghavan encouraged employees to "seize this opportunity" and "take swift action in response to market trends."

""These moments will define the history of industries, even though it won't be easy," he stated."

120 hours a week

Google must tackle its "systemic" issues and develop "new muscles" that have been neglected.

The AI models team working on Gemini, the company's primary AI models, was praised by him. He stated that they had increased their work hours from 100 to 120 hours to fix Google's image recognition tool promptly. As a result, they were able to resolve approximately 80% of the issues in just 10 days, according to him.

Google's AI leader, Demis Hassabis, stated in February that the tool for generating images of people would be re-released in weeks after it was removed.

Raghavan confirmed that the unsuccessful image production was not due to insufficient effort.

He clarified that this situation was not an instance of someone being lazy and neglecting their responsibilities.

Raghavan pointed out that the company has demonstrated its agility in handling crucial matters, citing the launch of Gemini's AI-powered search products within a short timeframe in 2023 as an example.

He proposed that the company couldn't have achieved it with larger numbers.

He remarked, "If we had assigned 2,000 engineers to these projects, we wouldn't have completed them," implying that the company would closely monitor team size and scope.

Raghavan also spoke to critics of the company's bureaucracy.

Google's expanding bureaucracy has hindered employees' ability to launch products quickly, which has worsened with the rapid expansion of the workforce during the pandemic.

In 2022, Pichai introduced a "Simplicity Sprint" to obtain employee feedback on efficiency, in addition to Google's annual survey known as Googlegeist.

""Google doesn't follow the traditional process of obtaining agreements and approvals to bring good ideas to market, according to Raghavan," he stated."

Pichai and Raghavan both commented on the removal of unnecessary layers in the hierarchy, with Raghavan stating that leaders are actively working on it.

"Raghavan stated that we have gained a significant amount of knowledge in the recent quarters. However, he cautioned that we cannot predict if all the challenges have been resolved. What is crucial, he emphasized, is how we react and the lessons we acquire."

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