Google CEO Eric Schmidt used the opening moments of a New York City press conference to reinforce a message he’s been delivering for a couple months: The search company thinks the worst is over, that things are looking up, and that it’s spending accordingly.
He added a bit of nuance to that message today, noting that the company had been surprised to see its European business bounce back as quickly as it had. Here’s my transcript of his opening statement.
We are clearly seeing aspects of recovery, and what is notable is that we’re seeing aspects of recovery not just in the United States but in Europe. I had been in error in assuming that there would be a lag, that it would the US first and Europe second. Asia, of course, was never significantly hit in the first place.
So that means from a Google perspective that.. we never stopped hiring, but we told our team internally and again, we’ve said to many other people tht we are increase are hiring rate and our investment rate in anticipation of a recovery.
Schmidt and Google cofounder Sergey Brin covered a lot of ground in the hour-plus press conference, and I’ll try to go back and break out out some of the other highlights. A few items worth noting in summary:
- Brin expressed contrition over recent Gmail outages, and said the company was working both to prevent future failures, and to react more quickly if and when they do happen. But he reiterated the argument, common among cloud computing fans, that conventional email systems fail much more frequently.
- Schmidt repeatedly defended the proposed settlement Google had reached with authors and publishers regarding its book archive. Recurring theme: It’s not a perfect settlement, but it’s workable.
- Schmidt stressed the importance of porting Google’s Chrome browser to Apple’s Mac platform, and said that would happen within months.
- Schmidt said Google was working on ways to help publishers sell their work on the Web (via one-offs or subscription). But he said he had no interest in promoting one publisher’s results over another, as AP officials had recently suggested: ““We have to be very very careful not to favor one media organization over another, with regard to speed or latency.”
- Schmidt, who’d previously said that he expected Google to start making an acquisition per month, said that those would likely be small, 5 to 10-person companies. He said it was unlikely the company would be in the market for something the size of YouTube acquisition, where Google paid $1.65 billion for the video company. Translation: Don’t expect us to pony up billions for Twitter.
Earlier: My live coverage of the press conference.
Google (GOOG) cofounder Sergey Brin is sitting down with about a dozen reporters at Google’s New York city headquarters for a Q&A session. Tune in for live coverage. This should be a wide-ranging conversation, which I’ll attempt to cover live as well as I can. Please consider everything below to be a paraphrase unless it’s in quotes.
Brin is joined by Google CEO Eric Schmidt. Brin gives an unofficial intro, now Schmidt adds one as well.
Schmidt: We’re hear because we have global sales meeting here in New York, and we’re winding that up right now. A series of internal talks, and the mood was “very, very positive.” We told them that “the worst is behind us” which he had said before. Seeing recovery not just in the US, but in Europe as well. I had been in error in thinking it would be US first, then Europe second. Asia is less important, obviously. We’re increasing our hiring rate and investment rate in an anticipation of a recovery.
Brin discusses some tweaks to search.
Q: Do you feel that Microsoft’s (MSFT) innovations with Bing will cause you to accelerate your innovations?
Brin: Competition is healthy. Microsoft has made its contributions. So has Cuill Many of the tweaks in Bing we’d already seen from Microsoft Live earlier in the year.
Schmidt: I agree!
Q: But do you think Bing is really different? Or just a rebranding.
Schmidt: You guys should judge us and our competitors. We’ve been criticized for having a self-referential view of the world. But i’d argue that our success so far proves that’s been a good strategy.
Q: Please talk about Android and other mobile plans.
Brin: We started with Android because it was a problem for us as an end-user and a developer – that phones lacked powerful browsers and ability to install powerful apps. I think Android has addressed that very well, but it’s also pushed the market. It’s pushed Apple with the iPhone and RIM (RIMM) and Windows Mobile. I’m pretty excited about the future, they’re getting increasingly capable browsers, and you can now write native applications across 5 platforms that will cover most smart phones. I think that having the software platform has freed the hardware makers from spending time on that, and they can rejuvenate their efforts on hardware.
Q: Please talk about enterprise efforts.
Brin: We started in enterprise, like mobile, to address our own needs. When we started with mail in 04, Web email was like a toy. We really focused on something that would work on an enterprise, and then we made it available to consumers. We feel we’re farther ahead (than competitors) both in email and in collaborative document editing. We’re moving toward eventually having everything (all our appls) available everywhere. “I just think the cloud model is a better model… I do think this install-less model of a cloud is better…it’s definitely made me more productive.”
More on enterprise from Brin: We’ve been successful with both SMB (small and medium business) and increasingly with enterprise. We’ve got a big implementation with Genetech, and in Washington DC. We’re specifically adding features for enterprise. That’s part of the Postini acquisition — to add some of those email features for enterprises. You’d be surprised to hear some of the things businesses ask for.
Q: Please talk about recent Gmail outages.
Brin: Certainly we’re not happy with any outages. With those outages we’re at the “three nines” level, which is not where we want to be. Targeting “four nines” by end of quarter. We’ll let you know how we do. Focusing not only outages, which we don’t like, but recovery time. Second outage could have been resolved in 5 or 10 minutes, but we made errors in handling it, and it extended over an hour. But if you look at a typical enterprise today, those outages tend to add up to more than even these kind of outages that we had in Q3. Also, we’re working on the number of people affected by outages. Trying to group people into pods so that if one goes down it doesn’t affect others.
Q: You’re adding more complexity to search. It’s more confusing than it ever was. Same thing with site links. Is that an issue (it is for Danny Sullivan)?
Brin: I’d like to see all the options, available in all the corpuses. We don’t have all the same options in each offering. In terms of the links and snippets that we’re offering, we’re trying to experiment with that.
Q: On Google book deal: If judge asked you why he shouldn’t be concerned by concentration of Google’s power, what would you say?
Schmidt: It’s an error to answer a theoretical question from a journalist. But anyway, we won’t get that kind of question. With respect to book search, we were doing something that we thought was appropriate. We were sued and after three years of discussion we’ve come to a settlement. This is perfectly normal. From our perspective, this is a settlement we like, it’s a settlement we think they’ll like, and we’ll hear what the court says, within minutes. Let me reframe your question: There’s nothing particularly exclusive about what we’re doing. The rights registry we’re doing is for the benefits of orphan works. “It’s not a particularly good business for us. We’re going it because we think it’s the right thing to do.” We don’t think settlement is perfect but we think it’s good.
Q: What are plans to expand book search?
Schmidt: We’re already huge. There are millions of books that have never been read, and we’re going to deliver readers to those books.
Brin: We want as many works as possible in some form, because that’s of tremendous value.
Schmidt: This doesn’t cover all international books, all books in the world. [Some disagreement about this between Brin and Schmidt]. It will take time to get registry up and running so for the near future I think that’s all we can achieve.
Q: Back to economy, please:
A: Schmidt: We’ve tried for a while to figure out if Google is an accurate predictor of the economy, and we can’t prove it. If we could we brag about it. Last early in the year we saw decline in UK, which surprised us. From our perspective, the low point was somewhere in the spring. Which is why I said worst was behind us in May, June. Noticed recovery “Juneish”. The conventional wisdom is that US recessions are 18-24 months. Bernanke sees a recovery too, which we agree with. Conventional wisdom was that Europe would lag by 3-5 months, which we’re not seeing. Europe is not one country, and it varies a great deal which country we’re in. I won’t go in to specifics but it’s the obvious stuff — the countries that didn’t have a big bump did not have a big fall. More on being a leading indicator: Obviously we’re aleading indicator in advertising.
Brin: And we’re good indicator for consumer spending, and you can see for yourself by looking at Google trends.
Q: It seems as if Chrome isn’t having the impact with consumer that you would like.
Brin: [Starts, then stopped by Schmidt]
Schmidt: Some of your premise about Chrome is incorrect, in terms of adoption, and we’re going to get that message out.
Brin: It’s actually exceeding our benchmarks.
Schmidt: I see a lot of Macs in this room, and a lot of very sophisticated people are using Macs now and we need to get a version of Chrome out for that, which we’ll have in a couple of months. Key to browser strength is speed. In general, we announced Chrome OS and Chromium product. Everything is linked together: Cloud, chrome, etc.
Q: At one point do android and the Chrome OS come together, or not come together.
Schmidt: Current definition of use platforms has to do with use patterns. Android for mobile, delivered via telecom store, heavily integrated with telco offerings, like our Verizon deal, which we’re enormously excited about. Analog for Chrome is that it’s designed for 10, 12-inc form factor. They both use Linux, etc. But they’re designed for different uses. [Netbooks?] May be some overlap there.
Q: Is Google being too nice? Is there a rethinking of relationships with aggreived groups?
Schmidt: In many ways we’ve always wanted to be this Google as opposed to the way we were percieved a few years ago. Particularly proud of way we’re working with advertising agencies, which is very important to us. With media industry, we’re having success with YouTube and YouTube monetization, and we’ll have more on that coming forward… “We have always wanted to have this partnerships… we’re learning how to do it in a way that they win, too”.
Brin: People can now differentiate between us and the Internet.
Schmidt: Google is an innovator. The internet is causing collisions. Innovation + collisions = opportunity. For instance, the fact that Verizon has embraced most of the open principles that we put forth 5 years ago is shocking. “It’s pretty amazing. This is Verizon. It’s not some itty bitty telecom startup.”
Q: Are you uncomfortable with Google employee’s sense of entitlement? [Per new Ken Auletta book]
Brin: [Refers to layoffs - Schmidt corrects him - "we did not have layoffs" [addendum - Schmidt was talking about Google closing engineering offices in Phoenix and other locations - Google did have layoffs last winter] You’re right:
Q: What do you think about publishers requiring paywalls and how will you help surface that.
Schmidt: We’re starting with that YouTube. Overall, “there’s clearly a market for free content, and that market is the size of the internet.” Also a market for subscription/paid. The analogy I would offer is TV. We all grew up with “free” TV. Now almost everyone pays for cable, and some people pay for pay per view “which is ridiculously expensive” but people will pay for particular events, like boxing. I think all three of those uses will emerge. We’re working on payment models, subscriptions, to enable that.
Q: But what about surfacing paid content in search [ this comes from WSJ.com editor Alan Murray]? Will you factor the desire of someone to pay for content into results?
Schmidt: We’re not going to use the price you use as our ranking in results. That’s not going to be our signal. But will incorporate the price people are paying for your content into results. But I’m not going to answer this precisely because I don’t want to discuss how we produce results. The most interesting improvement you could make is that to the degree that we have more of the marketplace data available, we could take that information and reflect some of that in our rankings.
Q: AP CEO said Google or Microsoft might be willing to pay a premium for an advance look at the news.
Schmidt: We have deal with the AP, and I don’t want to talk about any specifics of any deal. I don’t think that’s proper. “We have to be very very careful not to favor one media organization over another, with regard to speed or latency.” We are staying out of the media business. “You guys are very good at it, and we’re not.”
[Apologies for tech error - missed part of exchange but question was about entitlement.]
Brin: We cut down on snacks, etc to “reset expectations” re: entitlement.
Schmidt: “Google pays very well. Google is clearly a growth company. People at Google don’t work for those reasons at Google. We don’t want them to come to work for Google for those reasons. We want people to come to Google to change the world. Life is short.” The tightening in last year has been good for this, by the way, the controls put into place by Patrick Pichette, who is our hero, has been very helpful.
Q: Please talk about M&A plans and goal of one acquisition per month.
Schmidt: That’s been our historic pattern. I think we will be buying small companies – 5, 10 people. That’s where some of our best stuff has been. One day Larry and Sergey bought Android, and I didn’t even notice. Think about the strategic opportunities that has created. Sergey found Google Earth one day while he was surfing on the Web. And then he walked into my office and told me he bought them. “And I said, “for how much,” Sergey?” And it turned out to be a few million.
Q: Would you buy a YouTube?
Schmidt: Is there another one to buy? The problem with those size acquisition is that you have to make your money back. I think that DoubleClick and YouTube will be two of our best acquisitions. DoubleClick is already close to paying back, and YouTube will get there soon. But bear in mind that any major acquisition now will involve a regulatory review, because of our size and because our competitors will make sure of that.
[Sorry missed another question]
Q: Do you anticipate making large upfront commitments for new or renewed search deals [as you did with MySpace and AOL]?
Schmidt: I’d rather not comment on search deals. We are in discussions with both of those companies. “Some of out best friends are in those companies.”
[Missed yet another one]
Q: What will new tablet machines [a la Apple's (AAPL) mean for you? And for content producers?
Brin: Hardware is getting amazing with regard to cost. Used to be that display was expensive. Now that's cheap, and so are chips, etc. Now main cost is broadband connection, or cellular, or however you get to the Internet. That's why wide broadband availability is important to us. Think about how much you spend on access costs compared to the amount you spend on your handset. The phone cost is negligible.
Schmidt: Not sure how to answer question. We provide the infrastructure below what you're talking about [touch interfaces etc]. Kindle is a good example. Don’t think about current one, think about one two or three years out. I think there will be many kinds of things like Kindles, and that’s a material change in the way people will interact with hardware, media.
Brin: I think it’s better if hardware isn’t locked down to specific platforms.
[long exchange between Danny Sullivan and Schmidt that I'll have to pick up later]
Q: Should Google be required to lease servers and access to Google checkout numbers to deal with “lock-in” issues that brokeup the telcos?
Schmidt: Google checkout isn’t interesting. But I think your analogy is wrong and the data doesn’t support any of your thesis.
[And missing Q here about book settlement re: orphan works, etc.] Schmidt: A lot of these complaints are being made by people who don’t want a solution.
Q: What are the reasonable book settlement proposals you’ve seen?
Schmidt: Goal is to get all the books to everyone and to get all the authors compensated properly. Some of the proposals make sense to me but I don’t want to characterize them. Not perfect solution but the best one we can do.
Q: How will book settlement affect international users?
Brin: It won’t. We’d love settlements that work across a range of countries.
Q: Why won’t you be like Microsoft with regard to antitrust?
Schmidt: Many reasons. Culture, for one. Other reasons that majority of users are one click away from moving away from us. Third: If we went into an “evil room” and had an “evil light” shined on us, and we then behaved in an “evil” way “we would be destroyed… there is a fundamental trust between Google and its users.”
Schmidt walks through “ludicrous” thought experiment where Chrome takes 80% market share and then tries to lock consumers in. Wouldn’t work because of open source.
Q: Do you think you’ll take another stab at moving into radio, print?
Brin: We are quite optimistic on TV front. Radio and print didn’t pan out as well as we thoguht initally. One of the reasons for that is that those mediums are moving online and consumers moving online and the publishers/producers want to work with us there. “We were kind of at the dock where the ship had already left.” But TV is quite similar to Web in terms (potentially) of measurability, so we’re excited about those prospects.
Q: Is page rank broken? People are gaming it, etc.
Brin: No. We have to continually develop. Part of the issue is span, but the main issue is that everything changes. We’re doing a much better job of ranking than we did a decade ago. If we just rested on our laurels with what we wrote in paper from 1998, we’d be in big trouble.