Google cuts funding, jobs at its new-project incubator

SAN JOSE, CALIFORNIA – Google is making cuts to Area 120, its in-house incubator for new projects, according to people familiar with the matter, as the tech giant moves to control spending and focus more tightly on artificial intelligence (AI).

Some teams at Area 120 were notified this week that their projects had been reorganised or cancelled, according to two people who asked not to be identified because the changes are not public. The affected workers will need to find new roles at Google within a certain period of time or lose their jobs. One of the people estimated that half of the teams at Area 120 had been affected.

A company spokesman said in a statement that Area 120 “will be shifting its focus to projects that build on Google’s deep investment in AI and have the potential to solve important user problems”.

“As a result, Area 120 is winding down several projects to make way for new work,” said the spokesman for Google, which is owned by Alphabet. “Impacted team members will receive dedicated support as they explore new projects and opportunities at Google.”

Area 120 will continue to incubate new projects, according to one of the people with knowledge of the situation.

In recent years, Google has handled cutbacks by giving affected employees a window to find new roles. But the workers may face an uphill battle, especially as the company slows overall hiring.

Launched in 2016, Area 120 offers select employees the opportunity to work on small start-ups that live inside Google. “Many of Google’s best ideas begin as passion projects,” the Area 120 website explains. Among the incubator’s biggest hits was GameSnacks, a gaming platform launched in 2020 that caters to people using low-memory devices on slow cellular networks.

Yet Google has been signalling to both workers and Wall Street that it will exercise greater financial discipline in the face of a potential economic recession. In an e-mail to staff in July, Alphabet chief executive officer Sundar Pichai said Google plans to “focus our hiring on engineering, technical and other critical roles” for the remainder of this year and next year.

Other parts of Alphabet are increasing their ambitions, though. Verily, Alphabet’s life-science unit, announced this week that it had raised US$1 billion (S$1.4 billion) in new investments led by its parent company. The sequence of events suggests Alphabet is prioritising concrete gains in the short term over “pie in the sky” innovation, said Mr Dan Ives, an analyst at Wedbush Securities.

“Google, like every other tech company, is going to have to make some tough decisions,” he said. “With no more free money, investors don’t want these companies to be spending like 1980s rock stars.” BLOOMBERG