Where Google Is Headed

Google CEO Eric Schmidt was recently interviewed by BusinessWeek about the future of Google.

The following is an excerpt from the BusinessWeek interview:

Maria Bartiromo

Where is the growth coming from in the next 5 or 10 years for Google? Is it more search opportunities? Is it mobility?

Eric E. Schmidt

Probably a combination. It’s obvious that the highest growth is in our core business as we get better and better at targeted ads, and those ads become more valuable. Our whole theory about advertising is that an advertisement that’s not targeted—just a random ad that you just walk by—is a waste of somebody’s money because you’re not going to buy. It wasn’t relevant to you.

Aren’t there three times as many phones out there as there are PCs now?
More than that. The rough number of PCs is around 800 million; the rough number of mobile phones is on the order of 3 billion. Even more important, the growth rate of mobile phones is quite a bit higher than that of personal computers. There’s an estimate of about 600 million mobile phones that are data- and Internet-capable. And that is the group that we really care about because those are the ones that are able to run powerful browsers. This was all kicked off by the iPhone. The iPhone sort of showed what you can do with a very powerful browser. Now there are many new kinds of devices with powerful browsers where you can have very high-quality ads, new applications, and, of course, the phone.

So how do you get to the next step in the mobile business? Do you need to partner with other companies to make sure that the speed is there, that the connectivity is there?
We’re doing that with our telecommunications partners. We actually share in the revenue for the ads that show up on the phones. So the advertiser pays us, and then we share it, literally, with the handset and mobile operator. And often we divide between both. And that seems to be the only way to really get money into that system. It’s very, very important that the telecom operators have enough capital to continue the build-outs of the so-called 3G and 4G networks.

What are the biggest challenges the mobile Web presents?
Let’s start with the fact that the phones are not fast, the networks are not as capable, the ad formats are not standardized. But on the other hand it’s very, very important to solve those problems because a phone is very personal. And so if we know a fair amount about a person, with their permission we can target a useful ad—you know, “It’s Eric. You had a hamburger yesterday, do you want pizza today? There’s a pizza store on the right.” That kind of ad is likely worth a lot of money to an advertiser because it will generate a sale.

In other words, you send a message to the person’s cell phone, saying: “Look, we know you had a burger yesterday. If you want pizza today, just go around the block”?
Right. It may sound creepy, but it might also be quite valuable. People could use advice as to what to eat and where the food is—and of course you can turn it off. So the important thing here is advertising that has value to the person is advertising that is a valuable business. That’s the business we’re in.

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