Google CEO Eric Schmidt likely surprised few by confirming Wednesday that his company's video-sharing powerhouse YouTube isn't quite throwing off lots of cash.
It was obvious from Google's earnings reports that YouTube has yet to generate material income. Still, it's worth noting, 18 months after Google acquired YouTube for $1.65 billion, the company has acknowledged that it hasn't "figured out the perfect solution of how to make money."
"We're working but have not yet in my view gotten a breakthrough around monetization," Schmidt said during an interview for CNBC. "We're working on that. That's our highest priority this year."
Schmidt also indicated that the company is coming out with new modes of advertising.
"We believe the best products are coming out this year," Schmidt said. "They're new products. They're not announced. They're not just putting in-line ads in the things that people are trying...Google believes that advertising itself has value. The ads literally are valuable to consumers. Not just to the advertisers, but the consumers."
Google CEO Eric Schmidt
(Credit: Elinor Mills/CNET News.com)In-line ads are the text ads you see around video players. Google has also experimented with overlay ads that pop up within the video player itself for a few seconds. I wrote last year that I didn't think the ads were too obtrusive. TV networks have used overlays for years to battle TiVo users skipping past commercials. Audiences are already used to them.
Plenty of people disagreed with my assessment of the overlay ads.
But I'm expecting Google to be more aggressive with advertising at YouTube this year. Right now the company is providing a free video-hosting service to hundreds of millions all over the world (more than 10 hours of video is uploaded to YouTube every minute).
Google and YouTube are paying what many believe are millions in bandwidth costs every year. They have every right to be compensated.
I also think the longer Google takes to get users accustomed to some form of advertising, the harder it will be.
Schmidt is concerned about a possible Microhoo combination.
(Credit: CNBC)In a broad interview scheduled to run on CNBC at 4 p.m. EST Wednesday, Google CEO Eric Schmidt made it clear he's not pleased with the prospect of a Microsoft-Yahoo combination.
In the interview with CNBC's Maria Bartiromo, Schmidt said that given Microsoft's history of antitrust issues, an acquisition is cause for concern, according to a transcript of the interview. He also said a two-week partnership trial with Yahoo went well, and said he expects it to be one of several options Yahoo's executives are considering for their future.
"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," Schmidt said. "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."
Schmidt, who was a senior executive at Sun Microsystems and CEO of software-maker Novell before taking the helm at Google, has competed with Microsoft for years, and it was very clear in his conversation with Bartiromo that he is not keen on the Redmond, Wash., company landing Yahoo. Schmidt said:
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 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.
Nonetheless, beyond saying the Yahoo effort went well, Schmidt did not tip his hand about Google's response if it should face a Microhoo combination.
"There's a big debate within the company...people are concerned about the history, as I mentioned, and the possibility of a merger. So I don't think we really know yet. We debate it all the time," Schmidt said.
Some on Wall Street expect Microsoft to announce a hostile takeover bid of Yahoo as soon as Wednesday afternoon after the close of trading.
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