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OK so continuing on from Part 1 with the really long interview that CNBC's Maria Bartiromo gave to Eric Schmidt last week...
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?
Well, Eric's already got the best mobile surfing product on the market right now.. the iPhone. And hmm... he ALSO carries a BlackBerry. I am still waiting for the 3G iPhone and also 3D holographic displays from my mobile. Those mini/pico projectors are coming.
Anyhow, they go on to talk about small fingers and large screens but nothing about how Googles plans to tackle mobile advertising. Yes they have Google Maps on Nokia and iPhones and yes marrying the location based searches are great stuff. Where's the business model? It's a secret.
Bartiromo: 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?
Even reading this transcript I can totally see Maria smirking at the whole Comscore/Google incident, where ComScore's US data were used by Wall Street "analysts" as the basis for projecting Google's 1Q08 revenue (which went up instead of staying flat because of Google's international revenue). See Magid Abraham (ComScore's CEO) blog post here.
People... Trying to use Comscore's Marketing Research data to predict a company's financial performance is like using Nielsen's PeopleMeter TV data to determine share prices of Disney, TimeWarner, and GE (NBC owner). Those "analysts" are NUTS!!!!
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 that's great.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.
Eric's oversimplifying things there. Online Advertising growth rates are higher outside the US because they are further behind on the evolutionary timeline. UK is almost caught up. Europe is 50% to 80% there depending on country. Asia is schizo with countries ranging from 10% to 90% there depending on how you measure and what you measure. Mobile is nuts in Japan. Broadband and eCommerce is nuts in Korea, but they like to buy in Korean (duh!).
So going forward, people will look for more things and buy more things online, but they are going to prefer things in their own languages. The early adopter and Gen Y's will be somewhat comfortable surfing and transacting in English, but your Gen Xers and babyboomers will not (and they are the ones coming online and on mobile). So eCommerce needs to get local!
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 foothold.
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 now.
Like I said. People want local languages. In any case, Google is in a prime position. Their business model is based on getting computers to analyze what people do and their preferences. They don't really have to understand the language and they don't have to set up an online shop. As I mentioned in Part 1: "Then they become online retailers without any warehouses, order processing and payment processing headaches and overheads - and without any customer servicing or warranties to worry about!!!!!"
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.
So Eric Schmidt was watching TV in the 80's. Remember the Smith Barney commercial's with the two old guys from Eddie Murphy's "Trading Places" - "We make money the old fashion way - we EARN it!".
But goes on to say: We measure it. We know where that marketing dollar is going, how many people saw your ad, how many interacted with it, how many people came back later, etc. etc. DoubleClick was infamous for that in the late 90's where they were collecting a little bit TOO MUCH info. But how much of that will be going on now, that Google + Doubleclick ties up their cookies???? Scary.
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: 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.
Let's collectively cross our fingers and hope that the Marketing folks see it the same way.
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 that.
Semantic Web. Better start reading up on it. Some are calling it meta-meta-data. But it boils down to Google and the like categorizing content on the web so that it can better "guess" at what YOU want when you search for it. Actually, the hard part about it is that it involves content owners providing this semantic categorization based on standards. Digg.com says they have just done this.
Seems like it is going to be great for the Search Engine Optimization companies out there. I mean, which company is going to do this themselves? which ones even understand it? They will just shove it under "SEO".
Schmidt: ... 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?
Like I said before, Google wants the advertising dollar. Not the eCommerce dollar. They don't want to have to build physical products or hold physical inventory of other people's products.
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 great.
Well that priority works well for me as a user and it has worked well for them. When it comes to advertising, what counts is the eyeballs. When it comes to owning a media empire, what counts is the eyeballs. And whether we realize it or not, Google is a really just huge media company, but one that understands today's technology, tomorrow's technology, human behavior, interface design, and more and more the advertising industry's evolution.
Not Naisbitt's "High Tech - High Touch" (which is more Apple), but more "High Tech - Mass Touch".
