CNBC's Interview of Google's CEO - Part 1

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CNBC's tech sweetheart Maria Bartiromo interviews Eric Schmidt on Wednesday 30th April. Here are some highlights IMHO....

Schmidt: ... 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 Google.

He forgot to add that more targeted ads mean that advertisers will compete and try to outbid each other and drive up the price of the ads. Hence, "those ads are worth more". Not strange at all. It's economics. And it's not a secret. Well not any more.

Bartiromo: ... 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.

Those of us in Digital Marketing have been saying this for years. And we are all hoping that Mary Meeker and eSchmidt is right: Digital will do better in a downturn. It seems very straightforward; when you need to be more careful with your marketing dollar, you should spend it where you can see results and KPIs. However, many marketers can not tear themselves away from Print and TV. And obviously the big ad agencies don't want to move away from that cashcow either. So you got Digital and Traditional people in the same ad agency telling clients to do different things - fighting for that same dollar. It's not going to be pretty.

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 has aQuantis. It's up for--up for grabs, that part of the business.

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.

1) Recently Wired, now CNBC. GOOGLE OWNS SEARCH.

2) Eric humbly says that Google is not the leader in display ads, but with DoubleClick, they (not so humbly) have the best technology to combine text and display ads on a single platform.

3) Customers want to purchase text and display ads and other advertising in one bundle perhaps, BUT not from necessarily from ONE VENDOR. So yes, GOOG better earn those customers' respect and knowledge.

4) So in this scenario, ad agencies are then reduced to ad creative and media scheduling. OUCH! Media buying? Who needs that when you (like us) have a Google MyClientCenter (MCC) account?

Bartiromo: 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.

Eric is just skirting around the question. Not giving away what he really thinks. Like I said about this whole MicroHoo! and Google thing: it's all about "Consumer Computing Services". See here and here. I coined this term back in Feb.

But Maria digs in and brings it out from Dr. Schmidt. (The transcript refers to him as "Schmidt" and "Dr. Schmidt" while Maria calls him Eric. Schizophrenic I tell you.)

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.

So Eric obfuscates the issue (yes he watches X-Files). Obfuscate means "to make obscure or unclear", and - classic Eric - he obfuscates with .... cloud computing!!!!! hahahahahha...

What he really wants to say is:
"YES!!! Google and Microsoft will be competing for these Consumer Computing Services - direct, head on, 'in your face', 'winner takes all', 'bust yo ass!' - kind of way. Because they are EVIL, and we are not!"

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.

Alright.. so YaGoog is colluding to do what FaceBook fcuked up with Beacon, but do it right this time. Don't publish the freaking data about what they purchased to their "friends". That's valuable data... that's like throwing money away. Keep that data, build up their profile and keep serving the right ads. Ads that will go beyond CPC model and into CPA model. CPA model that will eventually go into Commission model. 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!!!!!

Schmidt: ... 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.

So besides telling us what we already know. He is also sending a message to all those ex-Google defectors who have left to join FaceBook: "Those new shares ain't worth much.. MWAH...MWAH...MWAH...."

Bartiromo: You've got $12 billion in cash right now?

Schmidt: A little more than that.

So according to Finance Y!, the cash position is at USD 12.13Billion. So Dr. Schmidt was not really right about the "little more than that" or is he? The Y! Balance Sheet from YE 2007 shows:

$ 6 billion in Cash and Cash Equivalents, $8.1 billion in Short Term Investments.

How much of these Short Term Inv can be converted to cash as needed?

Anyway... This a long interview with lots of nuggets. Part 2 coming up later.