New York Times – A Failed Ad Strategy January 5, 2009Posted by John in Technology.
Tags: NY Times, online advertising, web 2.0
1 comment so far
New York Times is now selling ads on their front page. I have to say that I didn’t even notice. This is the reason why it’s a failed strategy. Trend is away from print to online and that is where the NYTimes should be focused. Not only are web users not clicking on display ads, a new crop of software led by Adblocker Plus is blocking all the ads. Adblocker Plus used on about 10% of all web users is quietly gaining ground as a tool for end users. I wonder if the New York Times will see the impact of the fact that display ads are being blocked.
The New York Times unveiled a display ad on its front page, despite decades of fear that advertising there could contaminate the journalistic product or brand.
|Today’s ad, which promotes CBS, occupies a strip of real estate two and a half inches high at the very bottom of page A1.|
Today’s ad, which promotes CBS, occupies a strip of real estate two and a half inches high at the very bottom of page A1. That makes the unit less noticeable than the boxes available on the front of Rupert Murdoch’s Wall Street Journal, but it’s still a big departure for the Times.
In a statement this morning, the Times pitched the turnabout as win for marketers. “In 2006 we began testing ads on some section fronts and received a very positive response from the advertising community,” said Denise Warren, senior VP-chief advertising officer for the New York Times Media Group.
Taking its situation seriously
But it’s also a clear reflection that the Times is taking its situation seriously, something that was questioned after a recent presentation to investors and analysts. The New York Times Co. finally cut its costly dividend payments last November but drew fire for failing to suspend them altogether. “It just seems the reality is it’s a very, very difficult business right now, newspapers,” a questioner told executives. “And the notion that cash is flowing out of the company to the equity seems — it seems like you may not understand the gravity of the situation.”
In a funny way, the awful business environment may have actually freed the business side to sell the ads without worrying about an outcry from the newsroom.
“While three years ago the notion of the august New York Times serving up front-page ads would have stirred emotions far and wide, today it’s a one-day story,” said Ken Doctor, a newspaper vet turned media analyst for Outsell, a research and advisory firm. “When someone doesn’t have enough to eat, he doesn’t quibble about the source of the food.”
Made their peace
Many other papers have already made their peace with front-page advertising. The Journal began selling front-page units in 2006, carefully milking their potential to get big commitments from the five marketers allowed to buy them each year.
“Every single purchase has with it an annual commitment, an online commitment,” said Michael Rooney, chief revenue officer at Journal parent Dow Jones. “Some are multiyear, and some are global as well.”
With such prominent ad units, of course, it’s easy to wonder how the big articles next to them hurt or enhance their effectiveness. General Motors and Hewlett-Packard ads have bumped up against negative coverage of their own companies.
The front of the Journal’s Marketplace section today, on the other hand, shows an Oracle ad next to an article pegged to the Consumer Electronics Show. That’s an adjacency Oracle might have liked to arrange — which in turn is a possible suspicion that bothers opponents of these ads. Mr. Rooney said the paper never talks about news articles with advertisers. “It’s just not a conversation we would ever have,” he said. “Whether it’s the B section, the A section or anywhere in the paper, we sell our audience.”
Off the table
Last June The Washington Post’s new publisher, Katharine Weymouth, told Ad Age that front-page ads remained off the table. “I’ve had advertisers beg me to put ads on the front page, and we’re not ready to do that,” she said. The same goes for ads on Post-it notes affixed to the paper. “We declined to do that because we thought it cheapened the front page.”
Since then, of course, the economy has worsened dramatically. The Washington Post Co. saw print-ad revenue at its newspapers fall 14% in the third quarter.
This morning Ms. Weymouth confirmed, however, that the Post still doesn’t sell front-page ads. “No,” she e-mailed Ad Age. “The Washington Post does not currently accept front-page ads in our print edition.”
Entrepreneurs Are Blind To Recessions – It’s All Signal – Series A Deals Are Happening October 17, 2008Posted by John in Technology.
Tags: venture capital, web 2.0
Paul has another great post. I swear he must have the same five posts that continue to get recycled. He is always pounding that drum. He’s correct in his view. This is my third down cycle as an entrepreneur. It’s not fun but the reality is that the advantage goes to the entrepreneur. I’ve spoken to 3 other serial entrepreneurs this week and all fully agree that they are licking their chops to do a startup now. Not so 8 months ago.
I fully agree that it is the best time to start a company both for entrepreneur and the venture capitalist. In fact the angels are out there. I ran into one yesterday (granted I live in Palo Alto and you can swing a dead cat without hitting an angel or VC). There is big interest in seed, super seed, and full blown Series A deals.
In these downturn times the opportunities just fall out of the trees. In a downturn the noise level is reduced and it’s all signal. Thanks to the memo from Sequoia which was a strong signal from the Silicon Valley elite money machine on which behavior will be tolerated (translation they want less Seesmics and more real companies). The other them is that innovation is coming out strong. The real opportunities are presenting themselves. The real web 2.0 will emerge from this downturn.
If you look you will see the opportunities ..clarity is the best policy for startups.
The benefit of a downturn – there is no tolerance for “Noise” –
Twitter’s Business Model – Real Time Alerts and Keywords July 30, 2008Posted by John in Technology.
Tags: Biz Stone, David Dalka, MG Siegler, Presence, twitter, unified communications, web 2.0
Ok way back when we had the tsunami, then the London bombing, and today earthquake in SoCal. Why does it take a disaster or potential disaster to wake up the masses.
Hey people Twitter is real or should I say the twitter’s value proposition is real. MG at Venturebeat has a post nailing the real time nature of Twitter. Big Biz Stone at Twitter opens the curtain to show us the stats (Biz we love stats – keep them coming).
What came out of the blue was David Dalka (one smart guy in Chicago) who brings in his perspective to the Twitter business model question.
David writes: “Graphs and/or alert spikes of user defined keywords – ie ones that are important to oneself personally or to one’s business or clients. I would dare to say this might actually be business model that could lead to meaningful monetization – I think alot of web services haven’t thought this through nearly enough. Organizing real-time data for useful decision making as a business model worked out OK for Michael Bloomberg if I recall correctly. Some might say Google Trends does this already from a search perspective, but it doesn’t break down the word clusters to core words with “sidekicks” and is not the leading indicator that Twitter is by an uncertain but definite time margin.”
The triple net is this: take MG’s post, Big Biz, and David’s and you have the Twitter business model. It’s a communication system about real-time but with asynchonous logging as well. It’s a data mining “quantjock’s” dream. Expect some real innovation around this new twist on Unified Communications.
That is why convergence is happening around presence and why I believe that the Unified Communications (covered on my other blog BroadDev.com) sector may be a pipe dream if presence paradigms like twitter continue to provide real time and non-linear value.
Tags: facebook, Facebook Connect, Unified Communication, web 2.0
Walled garden is a bad word in Web 1.0, but maybe not in Web 2.0 web services. In Web 2.0 and Unified Communications “presence” is a big concept and a battleground for the convergence play – the real Web 2.0 opportunity. Over at GigaOm Om writes about his views on Facebook Connect announced yesterday at the F8 2nd annual developer conference.
Walled gardens conjure up memories of AOL. No user value with vendor lock-in. Is Facebook creating a ‘virtual walled garden’ for their lock-in?. Absolutely. What is a virutal walled garden – a place where users originate and let apps and information come to them. It could be the best user experience (one of user choice) a kinds of safe harbor from the clutter on the web that we are seeing today. I think that the Facebook developer story is moving to an approach where apps and information come to the user by design. Where users have a choice to leave at anytime, but the value of the experience creates a comfortably numb user experience that makes them stay.
If I can have my presence sit at Facebook and it can let value come to me via intelligence then I like that. Facebook could be a personal agent for me using my data, their data, machines, and developers apps do all the work. Letting Facebook and my social graph do work for me can be a good thing. This is the original Google value proposition. However, it’s the opposite of Google. It’s discovery and navigaiton in reverse. It’s automated reverse navigation. The social graphs work for me the user. No silos, no requirements, no extra steps, time savings just value.
This line is very telling from Om’s story: Each service adds a few more data points about you inside the Facebook brain, which is quite aware of your activities inside the Facebook ecosystem. The brain can then crunch all that information and build a fairly accurate image of who you are, what you like and what might interest you. With all that information at its disposal, Facebook can build a fairly large cash register.
In my view Facebook is land grabing the presence component of what is looking to be a paradigm shift that will disrupt the Web 2.0 and Unified Communciations sectors (covered at BroadDev.com).
Other Web 2.0 services like Twitter et al have a unique presence component as well but they might just be a feature not a company. Silo’d platforms might not make it going forward.
Facebook might just force a defacto standard in presence by their dominate position at the user level (90 million and growing).
Could presence be ripped away from the emerging segments like Unified Communications platform and converged into an environment like Facebook? To me user value will win and if users prefer environments like Facebook where information and applications come to them then that might just force some massive change across the board.
Vertical silos might be demolished by open horizontal networks. Interesting development if that happens.
Is it the walled garden of Web 2.0?
Tags: Aggregate Knowledge, computer science, Discovery, john furrier, podcast, Search, Search 2.0, web 2.0
add a comment
Yezdi Lashkari outlines the origins and limitations of collaborative filtering, the importance of Web 2.0, and how the commoditization of certain specific web technologies will benefit both consumers and businesses alike. He addresses the importance of blending algorithms to effectively harness collective user behavior, and the wisdom of crowds.
Yezdi Lashkari was a co-founder of Firefly Networks (acquired by Microsoft), a pioneering company in the area of collaborative filtering and personalization. Lashkari recently left Microsoft, where he played a number of senior product leadership roles, the last being a special assignment sponsored directly by CEO Steven Ballmer, focused on researching large scale network-centric computing infrastructures for thousands of hosts. This work is now driving one of the technical pillars of the post-Vista Windows release. Lashkari holds numerous patents in collaborative filtering, data protection and user profiling technologies. He received his M.S. from the MIT Media Laboratory and has three computer science degrees covering research areas ranging from artificial intelligence, databases, to collaborative filtering and personalization.
Enjoy the podcast sponsored by Aggregate Knowledge – Leader in Web 2.0 Discovery Technology
Yezdi and I talk about the big trend in Search or Search 2.0 – and it has nothing to do with search as we know it today.
Google CEO Eric Schmidt Interview in NY April 30, 2008Posted by John in Technology.
Tags: google, web 2.0
add a comment
Furrier.org’s own Maria Bartiromo of CNBC sat down with Google CEO Eric Schmidt for an exclusive interview. Given the scope of the interview and the timing of it – I wanted to provide the entire transcript from the CNBC interview. Commentary will be flying in on this one. Already many are chiming in like SAI.
What strikes me is the humble nature of Eric Schmidt and the magnitude of their plans. SAI says that YouTube will be the secret weapon but it’s clear YouTube doesn’t have a clue on how to monetize it’s video position and audience asset. No offense YouTube, but I haven’t had one intelligent conversation with one YouTube person on monetization. Personally I love YouTube and see huge potential, but the current YouTube team just seems stuck. For example stupid pre roll deals and ackward sponsorships. Enough said, YouTube get on the cluetrain. Maybe Chad or Steve can fix it.
However it’s clear to me what Google’s secret weapon is …it’s intelligent software across their distributed platform – datacenter, communications, and Web. Ok this is not that obvious to most non-computer science folks but think a ‘new kind of’ Artificical Intelligence or AI. While Microsoft rolls out Live Mess opps Live Mesh(note had to get Live Mesh using only my hotmail account – duh), Google has to deliver on a new software model around the ‘new kind of’ AI.
There is more to be said…Maybe I’ll do more on the new podcast that I’m doing called the Discovery Series
Thanks to CNBC for the interview:
Here is Eric Schmidt interview via the transcript:
Maria’s interview with Google CEO, Dr. Eric Schmidt Tuesday at the Milken Conference in Los Angeles to discuss Google’s growth and U.S. slowdown, the possibility of a Microsoft acquisition of Yahoo!, online advertising growth rates, Google’s European stronghold and Google’s stock, and other topics.
Here is the full, unaltered transcript of that interview:
Maria Bartiromo, host: Eric, thanks so much for joining us.
Dr. Eric Schmidt, Google CEO: Thank you for having me on again.
Bartiromo: Let’s begin with this debate that seems to be brewing on Wall
Street about growth. So the company grew 46 percent in the third quarter, 40
percent in the fourth quarter, 30 percent in the next quarter, and then
sequentially 1 1/2 percent when you look quarter to quarter. How insulated
would you say is Google to the economic slowdown or recession?
Paul Sakuma / AP
Schmidt: Well, the numbers you’re using are year over year, quarter over quarter in the US. Globally, of course, we had good growth, and the US numbers are masked by the fact that, a year ago, we had a very strong quarterly growth of that quarter. So the real growth rate in the US is good,
although overall growth rates are slowing, as they have for years. Just because of the scale and size of what we operate. The business has continued to be good.
Bartiromo: OK, because when you get to a certain size, it’s really hard to
sort of grind down more market share when you’ve already got 70 percent or get
that much bigger, given the fact that the company is getting–you’re a large
Schmidt: But we have–we have multiple ways in which we grow. Of
course, more people use the Internet, more people are using electronic
commerce on the Internet, more people are clicking on the ads, and also our ad
technology is getting much, much better. And it’s really any one of those
will push us over the top in any given quarter; sometimes they all come
together. We don’t seem to be very sensitive to macroeconomics, at least
right now. We don’t seem to be very sensitive to things like recession. But
we’re very sensitive to how quickly do we bring in the new product improvement
or something like that.
Bartiromo: The comScore data took everybody’s estimates down, and this whole
debate about whether it was accurate or not. How can you ensure that the
growth occurs, even if people pull in their spending, if perhaps advertisers
slow down on the budgets? I mean, is it fair to say that the hypergrowth of
2004 to ’07 is–has been seen?
Schmidt: Well, as I said, if you think about it over a five- or six- or
seven-year period, growth rates are slowing, as they have to. So I don’t
think it’s a big shift. It’s not, you know, today it was one way and tomorrow
it’s another. In our case, we focus on quality, and we have a very simple
model. If we show fewer ads that are more targeted, those ads are worth more.
So we’re in this strange situation where we show a smaller number of ads and
we make more money because we show better ads. And that’s the secret of
Bartiromo: Yes, that’s what Mary Meeker was saying. She’s saying, `Look, it
could be that they’re actually benefiting from a recession because they’re
monetizing the ads better.’
Schmidt: There’s been–you you know, if you were running a business
today, you would be looking very carefully at where is your marketing spend
going? And we think that you’ll choose to put your marketing spend on the
thing that’s most measurable, the thing that’s most, you know–because you can
always defer a branding campaign that may or may not work, but you want to get
those customers and those leads right now, and that’s what we do.
Bartiromo: Let’s talk about DoubleClick. You acquired the company. How’s
the integration going?
Schmidt: Well, it just started. It started about three weeks ago. And
what we’re doing is we’re taking their products and our products and
integrating them so that people have better tools, advertisers have more,
literally, ads, and publishers have more spots that they can publish
information into. So it’s the combination of all that that we’ve been waiting
for so long, and it’s under way. It takes six months to get all the products
Bartiromo: So you think that the integration process will take about six
Schmidt: It’s on the order of that. And, of course, at Google
Bartiromo: It’s no secret that Google owns search, but what about the display
ads? Is it–is it fair to say that’s sort of up for grabs? You know, you’ve
got DoubleClick, Microsoft
Schmidt: Well, it’s fair to say that that Google is not the leader in
display ads, but our customers want to be able to purchase text ads and
display ads and other advertising in one purchasing bundle, and the
combination of the tools that we’re developing, plus the DoubleClick
integration acquisition and so forth, allows us to offer a single product for
those advertisers. So we think that will help us with our display ads
competitiveness. We think our technology is better. And so really now it’s a
question of earning those customers’ respect and knowledge.
Bartiromo: So how do you ensure that that was actually the right acquisition
and not just go it alone, do it on your own?
Bartiromo: Tell me what you’re doing with Yahoo! in terms of testing. On
the earnings call last time, you said you’re setting up ads there. How’s it
going? What’s involved?
Schmidt: Well, the long and short of it is that we did a test for about
two weeks, which has since ended, where Yahoo! took a small percentage of
their ads and replaced them by ours. We did this as part of a commercial
conversation, which I obviously cannot go into, but it’s one of the strategic
options that we believe Yahoo! is considering at this time.
Bartiromo: Now, of course, after that, I guess the Department of Justice
announces that it’s, you know, doing an inquiry about this. Have you heard
from the Department of Justice on this?
Schmidt: Well, again, without going into the specifics, you should
expect that in all of these possible transactions, all of the regulatory
bodies will be reviewing them. If there were an acquisition of Yahoo!, for
example, the Department of Justice would also be doing a review. And the
anti-trust laws allow the government–and I think properly so–to look at both
commercial deals as well as acquisitions.
Bartiromo: What kind of a combination would you like to see with Yahoo!?
What kind of a partnership would you like to see?
Schmidt: Oh, well, we actually enjoyed working with Yahoo!. We also
compete with them. They’re a well run and, I think, impressive company.
We’ve primarily been concerned about the possibility of a Microsoft
acquisition of Yahoo! because of Microsoft’s history and because of the
assets that Yahoo! has are quite valuable. And we actually think that in the
wrong hands, they could be used in the wrong way.
Bartiromo: What do you mean, Microsoft’s history?
Schmidt: I think people are aware of the anti-trust trial from 10 years
ago. Microsoft has a long history in that area.
Bartiromo: Yeah, you can bet, I guess, who tipped off the DOJ about the phone
call that was made, Steve Ballmer or somebody from that side.
So what do we know about Microsoft and Yahoo!? Tell me this. I mean, I know
that, you know, we’re waiting on possible news from Microsoft, possibly, a
hostile–we don’t know what’s going to happen next. But what kind of a
challenge would Microsoft/Yahoo! be for Google?
Schmidt: Well, today we actually do not know what’s going on. We read
in the press that there’s discussions and we’ll see what they decide to do.
If they go ahead and the merger’s ultimately successful, it would be possible
for Microsoft to integrate some of the properties and essentially eliminate
consumer choice, particularly in electronic mail, instant messaging, the
things where they have 80 or 90 percent market share, and that’s a sweet spot
for Microsoft in its ability to eliminate choice.
Bartiromo: Mm-hmm. And, of course, Google has been getting all these new
killer apps, whether it’s Gmail or Maps or, you know, spreadsheets.
Ultimately is the game to compete direct, head on, with Microsoft?
Schmidt: Well, Google is actually trying to be an innovator, and we’re
always concerned about competition. We have found that if we can simply
invent a brand-new product that really solves a problem that really does
matter to you, we can get your business, we can get your attention, we can get
your traffic and your customers or what have you. We’re trying in a new thing
called cloud computing to offer very powerful Web services that do the common
things–e-mail, word processing and so forth–where the data’s kept in the
cloud, it’s kept by somebody else, it’s managed by professionals. You don’t
need to worry about where you keep all that information. We like that model a
lot. We’re getting traction. It is a competitive threat to other companies,
but we think it’s a technological breakthrough.
Bartiromo: How will you respond if Microsoft goes hostile?
Schmidt: Well, a lot will depend on whether their strategy is
successful. In the short term, we have pointed out the possibility of a bad
outcome, but it really depends on what happens in the hostile.
Bartiromo: Do you have any sense of how these things go? I mean, can they go
in the open market, buy the stock, and then just create a proxy battle?
Schmidt: All I know is what I’ve read in the press, which is that
essentially you replace the board and you force–you force the deal.
Bartiromo: Let me ask you about YouTube and MySpace. YouTube has these
phenomenal growth rates. What do you think is behind that?
Schmidt: Video is powerful. And it’s amazing. You know, we started off
with Mentos and the other sort of fun videos, and now people, because they
have so many digital cameras, are essentially uploading everything.
Furthermore, we’re beginning to see glimpses of significant professional
content on YouTube. People are using it–because there’s such a large reach,
they’re learning how to reach that audience. We’re working but have not yet
in my view gotten a breakthrough around monetization. So while we have lots
and lots of traffic and we have lots and lots of interesting and creative
people and all sorts of controversies–we’re blocked in countries, so on and
so on–I don’t think we’ve quite figured out the perfect solution of how to
make money, and we’re working on that. That’s our highest priority this year.
Bartiromo: Which is a huge priority, clearly. A lot of people feel like this
is an amazing opportunity for you. So, as far as monetizing that business on
YouTube, do you think that takes a year? Does it take the next five years?
What’s your time frame on that?
Schmidt: We believe the best products are coming out this year. And
they’re new products. They’re not announced. They’re not just putting
in-line ads in the things that people are trying. But we have a number–and,
of course, Google is an innovative place. The Yahoo! team are trying various
new forms of advertising, ones which are much more participative, much more
creative, much more–much more interesting in and of themselves. Google
believes that advertising itself has value. The ads literally are valuable to
consumers. Not just to the advertisers, but the consumers.
Bartiromo: They want to look at them.
Schmidt: When they’re targeted. When they’re the right ad for what
you’re doing or what you care about.
Bartiromo: Mm-hmm. But, you know, it gets me to MySpace. Some people feel
like, when you look at the MySpace part of the business, that’s really where
people are looking at, or feeling a bit of an economic downturn. Let me ask
you about that. The deal involving revenue promises, is that going to impact
margins in the coming two years?
Schmidt: Not materially in that sense. We have pointed out, and I’ll
repeat again, that the whole social networking space has been harder for us to
monetize–that is, develop advertising businesses again–than some of the
other–than some of the other spaces that we’re in. It has to do what people
are doing. When you think about it, you’re in a social network, you’re
looking at people’s photos, you’re figuring out where your friends are.
You’re not as likely to be purchasing a new car at the same time or purchasing
clothes or purchasing a book or what have–whatever business that you’re in.
So the development of the advertising tools and techniques, literally the
platform, has been more difficult than we have thought. But we’re working on
it, and we’re hopeful
Bartiromo: You’ve got $12 billion in cash right now?
Schmidt: A little more than that.
Bartiromo: What are your plans for that money? A lot of people say, `Look,
the company’s doing well. Growth is still continuing very strongly, global in
particular. Why not pay a dividend out? Why not buy back stock?
Schmidt: We love watching that cash sit in a well-managed bank and not
Bartiromo: So you could categorically rule out, no dividend coming?
Schmidt: Well, first this: We never rule anything out. But right now
we’re happy to let the cash accumulate. The cash represents a strategic
option for the future. As you know, we had the luxury of entering the
wireless auction. And we did not win the auction, but our financial resources
allowed us to credibly and seriously enter an auction for 4.65 billion.
Couldn’t have done that without the cash.
Bartiromo: What did you get out of that, though, Eric?
Schmidt: Well, from a corporate perspective, we participated in
something important. From a consumer perspective, we know that our
participation helped in making sure that the networks remained open. So
consumers get choices. What’s better than that?
Bartiromo: Yeah, and the FCC was happy about that.
Mobile. A lot of people say mobility is where it’s at. You’ve said,
actually, I’ve heard you on conference calls saying that this is one of the
big priorities for the company. How do you envision this? Tell me what
you’re looking for.
Schmidt: First place, everyone I know, everyone you know carries a
mobile phone. And it’s true in every country.
Bartiromo: And I’m not carrying my PC, by the way.
Schmidt: And most people in most developed countries have a roughly 100
percent coverage of mobile phones. So it really is a tremendous phenomenon.
Over the next three or four years, there’ll be more than another billion or so
mobile phones added. Eventually our numbers indicate that there’ll be five or
so billion mobile phones in a world of six billion or so. People, this is a
phenomenon. It’s an unprecedented reach, even greater than, for example,
television, or even electricity in some cases. So that’s a platform that we
can exploit. Our mobile phone, both search traffic as well as advertising is
growing very rapidly, and we think people will do more and more interesting
things in mobile phones. And, I mean, small phones, big phones, big screens,
things that don’t look like a phone, things which are mobile.
Furthermore, the telecommunications industry is helping because they’re
deploying billions of dollars of literally excess data capacity so these
things will have fast networks wherever I go. One of the greatest things for
me is whenever I fly somewhere, I open up and I open up my iPhone or my
BlackBerry, and, boom, there’s everything in my world as I’ve landed in a
country I’ve never been in. It’s a remarkable achievement.
Bartiromo: Yeah. What needs to happen before we actually get to that world
that you’re talking about? In other words, do we need to see the providers
create different screens? I mean, do you need a larger screen to access some
of this data? How do we get there?
Schmidt: Well, one of the problems is we haven’t figured out a way to
change finger sizes. We just haven’t…
Schmidt: There’s no solution to that.
Schmidt: We’d like to, but we haven’t done it. And people don’t like to
kind of go like this. So you need a certain size screen. But there’s other
technology. For example, the processors in the phones have gotten faster.
The batteries have gotten longer last–longer lasting. The screens have
gotten brighter. The whole device has gotten lighter. So all of that has
been happening while people have been talking about this. We know that these
things are working now. We know because we measure it that there’s been a
huge increase in maps, Google Maps, hugely successful. These phones have
GPSes in them. So when I want to go to the equivalent of a Starbucks, I just
type “Starbucks,” it says it’s over there. For me, that’s just a huge–a huge
improvement. And that service is available almost everywhere in the world.
Bartiromo: That’s amazing. Let’s–that transitions right to the rest of the
world. Global has been really the hot spot for Google. Tell me how you keep
that going. Where are the biggest opportunities for Google right now outside
of the United States?
Dr. Schmidt: Well, first place, the Internet is growing faster outside the
United States than in the United States. Also advertising online growth rates
are higher outside the United States than they are in the United States.
You’ve got–and of course you have a weak dollar strategy–because the US has
a very weak dollar–so that also helps. For all of those reasons, revenue
outside of the United States should grow dramatically over the next while, and
In our case, the biggest difference–and, in fact, perhaps the only
difference–between people in the US and other people is language. Other than
that, simple rule: Everybody wants the same thing. They want fashion, they
want information, they want products, they want e-commerce, they want it now,
they want to have fun, they want to use credit cards or debit cards. So we
work very hard to make that true globally. I think most of the large,
successful US corporations, the ones that you certainly cover all day, all are
going to see that kind of growth if they’ll well positioned internationally.
Bartiromo: So when you look around the world, what’s the most important, sort
of richest area for you right here?
Schmidt: Well, for us, of course, Europe has been our stronghold for a
long time. And Europe is just very, very strong for Google. They have
relatively higher market share, they’re very sophisticated consumers, and a
very mature advertising rate. If you look at the global advertising market,
it’s the United States, Japan, China, Britain, France and Europe–and Great
Britain. Those are the sort of the big five or six. Well, of course, we’re
doing very well in Europe, we’re doing well in Japan, and we’ve been in the
process of entering China for a while, and we’re growing there nicely.
Bartiromo: What’s happening there, though? You’re number one in every market
except a handful in Asia. How do you break in, and really with a solid
Schmidt: Well, in each case, they’re different. In China, of course,
there’s all the issues of regulation and censorship. We delayed our entry for
good reasons, and as a result we’re not number one there. In some of the
other countries, it’s because we didn’t get the language right. It turns out
Asian languages often have what you and I would think of are nonsensical ways
in which words are put together. So, for example, all the words in Thai are
put into one very long sentence. They don’t have word breaks. So developing
the technology to do that right and then search and index against it took us a
little while longer. We’ve now addressed that, so we think we should do well
Bartiromo: Fascinating. So what’s the biggest challenge that you’re facing
Schmidt: In Google’s case, I think it’s internal. It’s the ability to
manage the creative process, deal with the complexity in what is a relatively
large company, in terms of people, who’s doing what. We have 50 development
centers all around the world, people in different time zones, `Are you doing
that? Are you doing that? Do I work with you? How do I check in my code?’
Those sorts of things.
Bartiromo: And for a long time, people were saying, `Look, you know, Google
has this incredible campus, and, you know, spending money, and really
showering employees, making sure that people are happy there.’ Are you
beginning a new process of managing employee growth right now and managing
expenses more aggressively than you have in the past?
Schmidt: Well, certainly not our benefits, per se. Every day I turn
around, there’s some new benefit that we’ve come up with for our employees.
It’s part of our culture; we’re happy to do that. And, of course, we have
gross margins to afford it. So higher gross margins is one of the
explanations. We have slowed our head count growth for a couple of reasons,
but the biggest reason is it began to feel like we really didn’t have a good
sense of what people were doing. The systems in the company, literally who’s
doing what, what are they doing, seemed to lag our ability to hire these great
people. So we slowed it a little bit. But we’re still going to hire some
number of thousand people this year.
Bartiromo: Let me–let me go back to something on the DoubleClick
acquisition. Are you seeing any pushback from some of the advertisers who
say, `Look’–the ad agencies who say, `We’re already spending a ton of money
on Google. Why do we need to spend more on all this other stuff away from
search?’ How are you going to get them to devote more money to display, to
audio, to print and TV ventures, which are–and everything else you’re–and
the display ads, obviously.
Schmidt: Because we earn it. Because you can measure it. We never want
people to give us–give us money that we don’t earn and that we can’t prove
that they–that they–that it really provides value. That’s not a good
business for us. So as we enter these markets, we hope to say, `We have the
tools that can show you that if you put this display ad out there, you really
will get the sale.’ And we have ideas, we have new research in how to do that
in a closed loop way that is phenomenal. So our innovation model is in very
category of ads, not just text ads, to show real return, real sales, and we
think we can do that. And if we do that, we’ll get the business. And if we
can’t do it, we shouldn’t get the business.
Bartiromo: Right, because it’s so measurable. That’s why you don’t really
see a real dry up in the advertising during a recession.
Schmidt: Which is…
Bartiromo: Would you agree with that?
Schmidt: That’s our hope. Our hope is that, again, in a recession,
people would say, `Look, I’m going to put my money where I know my money’s
being well spent.’ Now, we don’t know that we’re in a recession, but if we
were, we hope that’s what will happen.
Bartiromo: Now, earlier you said, `Look, growth levels have to slow,
obviously.’ What’s appropriate then? I mean, when you say–I mean, investors
are saying, `Look, is this company insulated? Is it not insulated?’ So you
say of course growth levels have to slow. To what?
Schmidt: Well, we don’t know, but obviously, we don’t plan to a growth
level, we plan to an innovation level. Our idea is you just keep inventing
new stuff, and it grows as quickly as it can. And there’s some capacity with
which we can deliver these to customers and that they can adopt them. And, of
course, they have to do work. They have to learn how to use new tools, we
have to talk to them, there’s a lot of selling and marketing involved. It
just doesn’t happen automatically. Here’s a new idea. People have to be
comfortable with it. But once they are, we’ve found that growth rate is
Bartiromo: As a steward of technology and innovation your entire career, what
would you say is the most innovative thing out there? What’s the next big
thing, from your standpoint?
Schmidt: I’ve always thought that the scariest piece of innovation is
knowledge understanding and language translation. I don’t understand how it
works, but to watch a computer–literally watch it–read something in English,
dissect what it’s about, translate it into a language that I don’t speak and
having that other person say, `Wow, that’s incredible,’ to me, that’s magic.
And it isn’t magic, it’s just very good computer science, very good artificial
intelligence, very good physics. And that’s where we are. So the things that
are most impressive to me are the things where the computer does something
that nobody could do, literally translate things 100 language in parallel,
summarize something for me, take me to something which I didn’t know I was
interested in but knows that I cared about it. And we’re right on the cusp of
Bartiromo: Eric, your stock went from $750 to $450 in a very short period of
time. What do you think happened?
Schmidt: I don’t know. We don’t really focus on short-term movement of
the stock price. We said, since the company went public, that we’re in this
for the long term, and we want shareholders to be with us. These short-term
fluctuations in outlook and so forth are not something that we focus on. We
don’t talk about it. We’re really focused on this huge opportunity before us,
which is automating the trillion-dollar industry that is advertising. We
won’t get all of that, for sure, but we should be able to get a significant
part of that over the lifetime, certainly of my service to the company. And
our goal is to build this into an institution that lasts for many, many years
and is the greatest innovator in technology in this space.
Bartiromo: So the biggest priorities right now, continuing to access that
potential huge, huge advertising market. What else?
Schmidt: Well, our number one priority is end-user–end-user happiness.
Literally, are people happy with the results that they get using Google
search? So it’s literally search, and every day we bring out new improvements
and indices that are–taxonomies that are understanding of language, more
content, bigger–all of the things that make Google such a great search
experience. That’s our number-one priority, even more important, for example,
than advertising. The way we pay for it, of course, is by improving our
advertising solutions, as you described. That’s what we do in the core.
Our next big play is in this applications phase, where we think people spend a
lot of time online with information, and we can help them, whether it’s their
e-mail, which is an easy one to understand, but what about their personal
data? What about their spreadsheets and their calendar, keeping it all there?
And we can help them search. We can solve the problem of `how do I live in
this digital lifestyle?’ If we do that right, they can do it on mobile phones
as well as at home, in their office and on a Mac and on a PC, and it all works
Bartiromo: This is all fantastic for the consumer. It’s free, they’ve got
access to all this stuff, they don’t have to pay for it. What about…
Schmidt: It’s a pretty good model.
Schmidt: It works pretty well.
Bartiromo: What about the corporate customer? I understand that there are
tests going on right now. What are you hearing from that customer?
Schmidt: We’re working with the corporate customers to do the same thing
inside their networks as we do with consumers. Now, corporate customers are
not the same thing as consumer customers. Corporate customers have a much
higher need for reliability, so we’ll sign an agreement that guarantees a
certain level of service. But then we charge for it. So that’s a case where
people are willing to pay for something which is free without the level of
reliability. They also have other needs. They need greater security, for all
the obvious reasons. And they also need better integration with all of the
other services that their companies have. This is a long process. It’s not a
fast process. But it’s very deeply valuable. And those customers we will
have for 20 or 30 or 40 years as they build into our model. We like that
model. It’s an enterprise play. It’s a business that I’ve been in for a long
time, and one which will ultimately be very, very lucrative through Google.
Bartiromo: Do you ever look back and think about what has happened to the
company? I mean, you, for a long time, have been really one of the most
admired companies out there, and then one of the sexy, sort of big growers out
there. And then as the company got bigger and bigger, people started to get
afraid of Google, they way they were afraid of Microsoft at one point as well.
Do you worry that that’s the perception or that perception could take hold at
Schmidt: We do worry about perception because we want to make sure that
we are–that our perception is consistent with the way we way we behave.
Google runs on a set of principles, and every company has their own
principles. Ours are about doing no evil, it’s about trying to serve the end
user. Larry Page, our–one of our founders, wrote a very thoughtful memo
about what it’s like to be a big company. So, for example, he authored the
rule that we’ll never trap people’s data. So if you become dissatisfied with
us, we will make it easy for you to go to our competitor. Most companies
don’t do that. So we’re trying to find that balance between the structure of
a company and the need for predictability and so forth with our real mission,
which is to serve you as an end user. And if you’re not happy with us,
keeping you trapped, that’s a mistake. We want you to have another choice.
Bartiromo: Final question. Eric, let’s face it. Microsoft wants Yahoo!.
How much of a disadvantage do you think Google is at if these two players get
together, what…(unintelligible)…two and third player in the market?
Schmidt: Well, a lot of people debate this. There’s a big debate within
the company. People say, on the one hand, that we stay focused, which, of
course, we’re very focused, while they’re doing their maneuver. On the other
hand, people are concerned about the history, as I mentioned, and the
possibility of merger. So I don’t think we really know yet. We debate it all
Bartiromo: Eric, would you like to add anything else?
Schmidt: No, I’m fine. Thank you very much.