Eric Schmidt: Google’s Next Big Business Is Display Ads

Annual shareholder meetings can be anticlimactic snoozers, but often enough, Google’s are not. There was the time in 2008 when cofounder Sergey Brin abstained from a motion for Google to end its activities in China, on which the rest of the board voted no–providing a clue to Google’s recent decision to stop censoring search results in that country. And with many issues, from antitrust to Android’s challenge to onetime Google partner Apple, continuing to percolate, it’s worth hearing the latest official line from the company’s executives.

Indeed, judging from questions already posted on Google Moderator for the meeting, the interchanges could be lively. One question: “Google top management seems to be too egotistical and aloof about the stock price Shareholders are mad,the stock is down 21%YTD,You play catch up with apple with nexus one and now verizon tablet What is actually going on?” Hostile tone aside, interesting questions.

There are also several shareholder proposals, on China, behavioral advertising and privacy, and sustainability, all of which Google is officially opposing.

So I’ll liveblog the highlights of  the meeting here starting at 2 p.m. Pacific–and in the unlikely event there are any big surprises, I’ll also tweet them here. I’m told there will be a Webcast here, though it wasn’t listed on that page earlier today.

And we’re nearly underway, as Joe Cocker’s Feelin’ Alright and smells from the adjoining cafeteria waft across the room.

CEO Eric Schmidt comes onstage with what will be the usual board introductions, including John Doerr and cofounder Larry Page. And then the shareholder proposal presentations. First the proposal on asking Google to do a sustainability report. Then the proposal asking Google to strengthen its privacy policy, especially with regard to behavioral advertising. Finally the one calling for more protections for human rights in China–by a guy who I think has asked pointed questions at at least one previous annual meeting (I recognize his T-shirt). And, big surprise, they’re voted down.

Now Schmidt comes back on to talk about Google’s business. “We had a very good year.” And did better coming out of  the crisis than many other companies. Core business grew well, internationally and in the U.S. “So all is well after a year of great tumult.”

So what’s next: Schmidt shows a slide entitled “The rich Internet,” and explains the explosion of data, now about 800 exabytes (which is a billion gigabytes), from 5 exabytes from the dawn of civilization to 2003. “No wonder we all have headaches.” Except Google, of course, because search becomes all the more important with that infoglut.

“Search is no longer just a static Web page.” YouTube and search “audiences” are already larger than most television companies. Taking off in mobile too–number of mobile searches up five times from two years ago. “Search is not just a query”–Google Goggles lets you use a photo as a query. Also 550 quality improvements in the last three months.

Schmidt talks about what he calls “the engaging Internet,” like YouTube. Now all of a sudden, the ads need to be engaging too. In five years or so, “the ad we  grew up with will go away.” Click to call, direct links to store locations or the particular product being searched, etc.

“A huge success for us now is display.” DoubleClick was “money extremely well-spent.” Also announced an ad exchange. Some 60% of display advertisers are new to display. “This is probably our next huge business.”

Enterprise business is growing fast too–a few thousand businesses a day, he says, starting to use Google Apps.

Android is going to be either the No. 1 or the No 2 player in the mobile market–not sure yet. We’re trying to build an entire system of openness–the opposite of the other guys. (Yes, he used a plural, even though we all know he’s talking about Apple.)

The Chrome browser, he says, is also a huge success, because of speed, simplicity, and security. Schmidt says Chrome OS should become a third platform for computers (I guess Linux doesn’t count?).

OK, time for questions. Onstage are Schmidt, Page, search experience chief Marissa Mayer, products head Susan Wojcicki, CFO Patrick Pichette, and Kent Walker.

A guy from Consumers Union (I think) asks a couple of questions that seem rather inside-baseball. One is on use of SSL more broadly–Mayer says stay tuned. Another, more interesting: Is there a $700 million kill fee on the AdMob deal. Schmidt doesn’t say, but says he expects the deal to get approved because mobile is a “highly competitive market.”

Another guy asks a convoluted question about the mobile market, ending with: Why isn’t Google doing mobile devices and products more directly? Page says Google is making “tremendous progress” in those areas but thinks the best strategy is to provide a mobile platform.

Q: Is it over in China or what? Schmidt says Google wants to continue business operations in China, but the situation isn’t settled yet.

Q: Will Google run out of computer space for all that data? Mayer: It’s a big challenge to keep up with data, but that’s what makes it exciting. Wojcicki: Algorithms and better technology will improve Google’s ability to deal with growing data.

Q: What is the next big thing? Page: One of the next big things is translation. Other two-thirds of world population not yet online need that. I think that’s really going to significantly change the world.

Three people now have complained about the lack of responsiveness of investor relations. Pichette tries not to look too uncomfortable.

Q: What’s happening with that competition for Google to build a citywide fiber-optic network? Schmidt: Winnowing the list down but no decision yet. Page: We had an Olympics for trench diggers. (Yes, they did.)

And that’s it.

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3 Responses

  1. [...] * YouTube will finally become a business. Between content deals, a spate of new ad formats, and the realization that online video ads are really the most effective brand advertising, Google’s video site will start bringing in the revenues that its massive audience always promised. This will be a big boost for Google’s display ads that CEO Eric Schmidt has been promising would be the search giant’s next billion-dollar-plus business. [...]

  2. [...] * YouTube will finally become a business. Between content deals, a spate of new ad formats, and the realization that online video ads are really the most effective brand advertising, Google’s video site will start bringing in the revenues that its massive audience always promised. This will be a big boost for Google’s display ads that CEO Eric Schmidt has been promising would be the search giant’s next billion-dollar-plus business. [...]

  3. [...] * YouTube will finally become a business. Between content deals, a spate of new ad formats, and the realization that online video ads are really the most effective brand advertising, Google’s video site will start bringing in the revenues that its massive audience always promised. This will be a big boost for Google’s display ads that CEO Eric Schmidt has been promising would be the search giant’s next billion-dollar-plus business. [...]

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