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June 11, 2008 5:06 PM PDT

Schmidt: It's Google's duty to help fix ad business

by Stephen Shankland
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SAN FRANCISCO--Media companies should see Google not as an enemy but as an ally that's trying to make advertising work on the Internet, Chief Executive Eric Schmidt said Wednesday.

Google has a financial incentive to make sure advertising can support companies that supply high-quality content, Schmidt said during an on-stage interview here with Ken Auletta, The New Yorker's media reporter. But Schmidt said there's another dimension to Google's motivation, too, one not often figuring prominently in business affairs.

"It's a huge moral imperative to help here," Schmidt said of publishers' problems making advertising work on the Internet.

Google CEO Eric Schmidt speaks in San Francisco.

Google CEO Eric Schmidt speaks in San Francisco.

(Credit: Stephen Shankland/CNET News.com)

Happily for Google's moral compass, the company's effort to make money is pointed the same direction. The company is trying to solve the online ad problem in part with DoubleClick, the display-ad company Google bought earlier this year. Google's cash cow is selling text advertisements that appear next to search results, but with DoubleClick, Google hopes to tackle the graphical ad side of the market.

DoubleClick will let advertisers tackle the market for both search and display ads with a unified interface, Schmidt said. "By combining DoubleClick with that (search-ad) architecture, we can provide a single platform for publishers that over time will begin to generate significant revenue for publishers," Schmidt said.

Display ads are a business in flux on the Internet, though. A new study showed that growth slowed for display ads on the Web, hurt by a weakening economy. Revenue increased 8.5 percent annually to $2.9 billion in the first quarter of 2008; the year earlier, the growth rate was 16.7 percent, according to TNS Media.

Viacom has sued Google over copyrighted material on its YouTube site. But, Schmidt argued, media companies attack Google for helping to usher in the digital content era.

"There is a sea change from one model to another. Many of the criticisms I see seem to be merely about the change, and Google happens to be the messenger," Schmidt said. "Those changes are going to occur independently."

Google itself is a publisher, at least in one sense: it offers countless videos through YouTube service. So Google has more incentive than just its DoubleClick division to improve display advertising.

People are consuming more and more media on the Internet but paying less and less, Schmidt said. "That's bad for Google. We are critically dependent on high-quality content," he said.

A key part of making advertising work is making sure ads are targeted at people who are actually interested, Schmidt said. Searching for a subject on a Web site makes targeting easier, because a search engine can infer people's interests through their search queries, but for display ads, it's not so simple. As advertisers figure out how to target ads better, though, they'll curtail spending on general ads, Schmidt predicted.

"Why does my TV show me ads I couldn't possibly be interested in?" he asked, saying it's a waste of advertisers' money.

Schmidt insisted that profitability is only a useful tool that's subordinate to Google's true agenda.

Morality in the driver's seat
Schmidt touched on the company's principled agenda several times during the talk.

Ken Auletta of The New Yorker speaks with Google CEO Eric Schmidt.

Ken Auletta of The New Yorker speaks with Google CEO Eric Schmidt.

(Credit: Stephen Shankland/CNET News.com)

For example, he said, "The goal of the company isn't to monetize everything. The goal is to change the world." Could you pin that down a little? Sure: "For the better," he said.

In addition, he said Google's "don't be evil" motto is real, though often misunderstood.

"We don't have an evil meter we can apply," he said, but it is a real part of company discussions.

"I thought when I joined the company this was crap--companies don't have these things. I thought it was a joke. It must be a Larry and Sergey thing," Schmidt said, referring to Google co-founders Larry Page and Sergey Brin. "So I was sitting in a room six months in, and an engineer said, 'That's evil.' It's like a bomb goes off in the room. Everybody has a moral and ethical discussion that, by the way, stopped the product."

In addition to trying to better the world, Google has other motivations that don't necessarily rate highly on Wall Street's priority list.

Criticism from Wall Street is "not the signal we respond to," Schmidt said. "We respond to end-user satisfaction."

But Google can afford to pay less attention to the quarterly earnings imperatives that often drive publicly traded companies, Schmidt added.

"We have enough leverage that we have the luxury of time," Schmidt said. "Most businesses can't invest for scale. They have to make money now. That short-term focus does make people sometimes make the wrong trade-off."

At the same time, money still obviously matters: The company decided to move YouTube into a money-making phase. "In January or February we had a big meeting," Schmidt said, at which he delivered the "Come on, guys" message, Schmidt said in remarks to reporters after the talk. YouTube has been a "huge success," but monetization is now the priority

He didn't elaborate on specific YouTube revenue plans, though. "We have a revenue plan, a usage plan, a scale plan, a bandwidth plan," he said, but wouldn't discuss any of the points besides saying YouTube "is now the majority of outbound bandwidth. We had to retool the network."

May 13, 2008 4:13 PM PDT

YouTube ads for viral videos: 'buzz targeting'

by Stephen Shankland
  • 1 comment

Google is starting to share more details about its high priority of making more money off YouTube's popularity, introducing an advertising product on Tuesday called buzz targeting.

The ad product uses an algorithm to find videos that are about to "go viral," when word of mouth (or IM, or blog, or e-mail) promotes a Web site to a phase in which it spreads like wildfire. In this case, ads are overlaid on the bottom fifth of viral videos supplied by YouTube partners who share ad revenue with the search giant.

Making more money off YouTube is Google's "highest priority," Chief Executive Eric Schmidt said in April. The company is working on new YouTube ad possibilities, he said last week.

Until now, YouTube ad campaigns have been more targeted to specific demographics. Buzz targeting adds a broader option, though the ads still are sold as categories such as entertainment or how-to, a YouTube representative said.

Lions Gate was the first advertiser to sign up, using buzz targeting to promote a film, The Forbidden Kingdom, on 500 different videos. "Buzz targeting allowed us to reach a very large, diverse audience," Danielle DePalma, Lions Gate's director of digital media, said in a statement.

May 8, 2008 3:45 PM PDT

Schmidt hints at coming YouTube ads

by Stephen Shankland
  • 1 comment

MOUNTAIN VIEW, Calif.--YouTube users soon will see some new advertisements around their online videos.

Google Chief Executive Eric Schmidt said the company is working on new ads for the video site in a meeting here with reporters before Google's shareholder meeting, but he was cagey with details.

Google CEO Eric Schmidt

(Credit: Elinor Mills/CNET News.com)

"We have new ad products that are not pre-roll and post-roll," he said, referring to ads that show up before and after videos. "We have new approaches. Think of them as ads that are in the context of YouTube. They use the page around YouTube in interesting ways."

The new ads will launch "over the next few months," Schmidt added.

Schmidt has made no secret of his desire to make more money from YouTube, the dominant video site on the Internet; Google acquired YouTube for $1.65 billion. In an interview last week with CNBC, he said about YouTube, "We're working but have not yet in my view gotten a breakthrough around monetization...We're working on that. That's our highest priority this year."

For what it's worth, Google last year experimented with overlay ads that pop up within the YouTube video player itself for a few seconds. They didn't go over too well with some viewers.

Google, which bought YouTube in October 2006 for $1.65 billion in stock, makes the vast majority of its money from text ads that show up next to search results, but in particular through its acquisition of DoubleClick, it's working to improve its business in display ads.

"We are not the leader in display ads. As far as I can tell Yahoo is," Schmidt said.

And of what will make Google's display ads different from the rest of the market, he said, "We always want to be the most targeted. Greater targeting leads to greater advertiser value."

May 8, 2008 12:52 PM PDT

Google addresses antitrust issue on Yahoo ad deal

by Stephen Shankland
  • 3 comments

Update 3:10 p.m. PT: I added more quotations from the Google executives

MOUNTAIN VIEW, Calif.--Google's top executives on Thursday gave a glimpse into how it might try to deflect antitrust concerns of a possible ad-sharing deal with rival Yahoo, advising observers to look at the overall ad market.

"You are narrowly focused on search advertising," co-founder Sergey Brin told reporters at the company's headquarters here before Google's shareholder meeting. "Advertising as a whole is much broader, and Internet advertising is much broader."

The observation has bearing on the issue of whether Google has a monopoly and whether a deal with a rival would therefore reduce competition.

"Advertisers always have multiple choices. It makes sense (for advertisers) to always use more than one," Chief Executive Eric Schmidt added. "It's incorrect to assert there's lock-in or opportunity for dominance in the ad space. Don't map (computer) platform economics to ad economics."

Schmidt wouldn't comment on whether a deal was imminent, but one source familiar with the situation expects an announcement next week.

Co-founder Larry Page also specifically said Yahoo is "strong" in the display ad market. Google's cash comes chiefly from text ads in the form of AdWords, which appear alongside search results, and AdSense, which appear on partners' Web pages; its acquisition of DoubleClick, though, is designed to improve its display-ad business.

When Yahoo and Google announced a two-week test under which Yahoo showed a limited number of Google text ads alongside search results, Microsoft raised antitrust concerns. The partnership also was a major factor in Microsoft's displeasure with Yahoo acquisition talks.

Yahoo-Google ad test a success
The two-week test with Yahoo went well, Brin said.

"We had a really good dynamic. We were able to implement it quickly. The technology teams got along well. They were able to get the protocols working very easily and able to gain a lot of insights," Brin said.

Page also discussed another issue that could come up in antitrust scrutiny, whether customers--in this case advertisers--benefit or are harmed by the partnership. During the test, Page said advertisers contacted him when they saw their ads showing up on Yahoo's search results.

"They were really excited about that," Page said. He added. "AdWords is an auction. We're not setting prices. Auctions are determined by supply and demand. Having more inventory avail to advertisers is really positive for them."

Criticizing Microsoft
Many have noted the irony that Microsoft is raising antitrust concerns. The famously aggressive company was largely unscathed by a years-long antitrust case involving whether it leveraged an operating system monopoly to dominate the Web browser market.

Page struck back at Microsoft's antitrust criticisms, pointing specifically to the company's MSN Internet portal.

"A lot of the traffic to MSN has come through bundling the operating system and the browser," Page said. Bundling is one of those hot-button words in antitrust

"When Microsoft pounced after Yahoo's earnings (report) with their letter, we issued blog post," Schmidt added. "Given Microsoft's history and the extreme market share that would result in some end-user-facing parts of the Internet, we were concerned. We were opposed to (Microsoft's attempt to acquire Yahoo) on that basis."

A helping hand for Yahoo
So perhaps it's not surprising also that Google wanted to help Yahoo withstand Microsoft's acquisition attempt.

"We really believe in companies having choices about their destiny. Certainly a (Silicon) valley company like Yahoo--we want to support their ability to have choice," Brin said. "They were under hostile attack and we want to make sure they have as many options as possible."

Schmidt sees Microsoft as a formidable competitor. "Microsoft is well funded, they're clever they're smart, and they have a number of advantages nobody else does," he said.

April 30, 2008 4:41 PM PDT

Schmidt: Google couldn't keep up with new hires

by Stephen Shankland
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Google slowed its hiring because the company couldn't keep track of what everybody was doing, Chief Executive Eric Schmidt said Wednesday.

Schmidt says Google is slowing down its pace of hiring so employees don't get lost in the cracks.

(Credit: CNBC)

"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," Schmidt said in an interview with CNBC. "The systems in the company, literally who's doing what, what are they doing, seemed to lag our ability to hire these great people."

Though the company slowed hiring later in 2007, that doesn't mean the search and online advertising powerhouse is cutting back much, though. Google still will hire thousands of people this year, he said.

Google had 19,156 full-time employees on March 31, up from 16,805 on December 31, the company said.

And the company still plans to lavish benefits on those it has hired, thanks to Google's so-far recession-proof business and cushy profit margins.

"Every day I turn around, there's some new benefit that we've come up with for our employees," Schmidt said. "It's part of our culture. We're happy to do that. And, of course, we have gross margins to afford it."

April 17, 2008 1:23 PM PDT

Google clears Wall Street profit estimate

by Stephen Shankland
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Google topped pessimistic Wall Street profit expectations Thursday, reporting a net income increase of 31 percent to $1.31 billion for its most recent quarter.

Excluding various items, that meant earnings per share of $4.84, well above the $4.52 expected on average by analysts surveyed by Thomson Financial. Revenue, which benefited an "immaterial" amount from the acquisition of DoubleClick, was $5.2 billion in the quarter ended March 31, compared with $3.7 billion for the same period a year earlier, the company said.

Excluding $1.49 billion in partner commissions called traffic acquisition costs, Google's revenue was $3.7 billion. That result was 46 percent greater than the year-earlier amount and about $100 million more than the $3.6 billion analysts expected.

(Credit: Google)

The company's stock surged more than $76, or 17 percent, to $525 in after-hours trading. That's a significant step back toward the company's all-time high of $747.24 in November.

"Our ongoing innovation in search, ads, and apps (online applications) helped drive healthy growth globally across our product lines, yielding another strong quarter for Google," said Google Chief Executive Eric Schmidt in a statement.

The report comes amid fears that an economic slowdown or recession could be hurting Google's paid-click results, the number of text ads that Web searchers click on.

Recession-proof? So far
Schmidt essentially called those fears baseless.

"It's clear to us that we're well positioned for 2008 and beyond, regardless of the business environment that we find ourselves surrounded by," Schmidt said on a conference call. "We've looked at this really carefully, and we do not see an impact as of this time."

And if economic conditions do deteriorate, Google expects to weather the storm fine, Schmidt added. "Our conclusion is we're well positioned should economics change. We continue to do well because our model is so targeted, and targeted (advertising) does well in most scenarios," he said.

Google's text ads are geared to correspond to search results, presenting ads at what the company calls the "magic moment" when a person's search can indicate interest in a specific subject.

Google has been concentrating on showing fewer ads but making them better-suited to search results, a move it hopes increases the revenue generated by each click. But statistics from ComScore released this week show that compared with the fourth quarter of 2007, paid-click growth slowed in the first quarter for Google and Yahoo and that paid clicks flat-out declined for Microsoft's MSN.

Paid-click growth
Last quarter, Google's financial performance fell short of Wall Street expectations, triggering fears that economic woes might be hurting the company. Schmidt pooh-poohed the idea, at least for that quarter, by saying: "We have not yet seen any negative impact from rumors of future recessions. We'll see what happens."

Google said paid clicks increased 20 percent over the first quarter of 2007 and 4 percent over the fourth quarter of 2007.

Google and ComScore use different methods to measure paid clicks--for example, Google reports global numbers compared to U.S. tallies from ComScore--so it's not possible to directly compare Google's 20 percent quarter-over-quarter increase to the 1.8 percent increase ComScore reported for Google for the same period.

But Schmidt was willing to take a potshot, at least indirectly: "Paid-click growth is much higher than has been speculated by third parties," Schmidt said.

Google kept expenses down to $1.5 billion for the quarter. "We've had good, disciplined management of our operating expenses," Schmidt said.

The Mountain View, Calif.-based company kept hiring down to a mere 800, excluding the 1,500 that arrived with DoubleClick. Total head count now is 19,156, Chief Financial Officer George Reyes said. Google cut DoubleClick's staff by about 10 percent after the acquisition, and "an additional 15 percent, approximately, are expected to leave the company in the U.S. in the near to intermediate term because they are in a transitional role as they move through the system," Reyes said.

New ad frontiers
Google executives had optimistic words for a variety of expansion plans:

• In China, Google lags Baidu.com as the top search engine but hopes to take the lead within five years. Schmidt said Google's made progress in that area.

"We are seeing market-share growth and good revenue growth as we have learned to operate in that environment," Schmidt said. "We have significant new products with respect to Chinese knowledge, Chinese language, Chinese search."

• Most of Google's business comes from text ads, but graphical "display" ads are a priority, particularly with the acquisition of DoubleClick. Where will Google employ such ads?

Display ads in video form are already used on YouTube and Google is evaluating other possibilities. "There are some other Google properties that might be good fits, though we haven't made clear decisions," said co-founder Sergey Brin. Those include "visual sites like Orkut. And there's some potential like Google Images."

• Mobile advertising looks good in areas such as Japan where there are devices with high-resolution screens and responsive networks, Brin said.

"The mobile ads work very well. There's nothing to dissuade me it would be any worse than traditional desktop search," he said.

•  Social networking is a challenge when it comes to advertising. Google ads appear on its own Orkut site and on News Corp.'s MySpace, and there's "a tremendous amount of inventory" to be sold, Brin said.

"It takes some time for some advertisers to realize they're there and target them effectively," Brin said.

Google is working on it. "Social-networking monetization (has) been an area where we applied a lot of new technologies," Brin said. Demographic targeting, which lets advertisers get some idea about what types of people use a site, "has been very successful," he said.

March 17, 2008 4:18 AM PDT

Schmidt: Microhoo would hurt the Net

by Richard Defendorf
  • 6 comments

Not to put too fine a point on it, but Google doesn't want Microsoft to acquire Yahoo.

Speaking to reporters during a visit to Beijing, Google CEO Eric Schmidt said that his company "would be concerned by any kind of acquisition of Yahoo by Microsoft," according to a Reuters story published Monday.

Without citing specifics, Schmidt said his observation is based the "things that (Microsoft) has done that have been so difficult for everyone."

He added: "We would hope that anything they did would be consistent with the openness of the Internet, but I doubt it would be."

We can guess he was referring to, among other things, Microsoft's long history of antitrust battles both at home and with the European Union. The latter has continued to fine the software maker. Microsoft's intransigence on licensing prompted another EU fine, for $1.35 billion, just last month.

The irony here is that the EU's approval last week of Google's $3.1 billion purchase of ad services specialist DoubleClick has probably intensified pressure on Yahoo to consider Microsoft's offer. Microsoft's bid was initially valued at $31 a share, although informal talks said to be taking place between the two companies could reshape the terms of the proposed deal.

February 29, 2008 2:52 PM PST

My stunted interview with Google's Eric Schmidt

by Elinor Mills
  • 56 comments

I've always wanted to interview Google CEO Eric Schmidt one-on-one, and this week I finally got the chance.

Eric Schmidt is all smiles before declining to answer any questions not related to Google Health in a one-on-one interview.

(Credit: Elinor Mills/CNET News.com)
I learned that he was going to be making a big Google Health announcement at a health care trade show on Thursday and a Google spokesman promised me I would get a "one-on-one" interview with him in private afterward if I flew out to Orlando, Fla., from San Francisco for the event.

That Schmidt was sitting down with me proved even billionaires can let bygones be bygones. Our professional relationship got off to a rocky start shortly after I joined CNET News.com in mid-2005. OK, so it was a really rocky start. To refresh your memories: We Googled some personal information about Schmidt and wrote about what we found. He didn't like it, and News.com was on the receiving end of a very stern corporate silent treatment from Google for nearly two months.

Since then, in fairness, my relationship with the search king has been considerably better. But a sit down with Mr. Schmidt? Of course, I'd fly cross-country, even if there's a certain absurdity to flying 2,500 miles to interview a guy who works about 40 miles from my office.

I had a list of questions: I was eager to ask Schmidt about recent disappointing ComScore figures for paid search performance and how Google will weather a recession given that lending companies appear to be cutting their ad spending, how Google's going to monetize YouTube and, of course, how it plans to counter a Microsoft-Yahoo tie-up if that should happen.

My editors agreed to send me to the Healthcare Information and Management Systems Society (HIMSS) 2008 annual conference. I got a last-minute ticket and stocked up with camera, digital recorder, and the list of questions. I arrived a day early to do a preview of the news and get my footing.

The morning of Schmidt's keynote I woke up at 3 a.m. and couldn't get back to sleep, so I was in my near front-row seat well in advance. After covering the keynote and the news conference afterward, I waited for a Google spokesman to take me to see Schmidt. Walking to a green room in the Orange County Convention Center, the Google spokesman told me I could only ask questions about Google Health.

What?! I asked the spokesman if he was serious, and he said "yes." This wasn't what I was expecting. What is Google afraid of?

Schmidt greeted me and agreed to let me take several photos. That was nice. I was told I had 12 minutes and I dove in with several probing questions about Google Health (hey, so you play nice and then try to ask the real questions).

Was it difficult for Google to get health industry players like Aetna, Quest Diagnostics, and Walgreens onboard? "It took a while," he said, adding that Google lined up health experts to be on an advisory health council and they are integrating their systems to work with Google's GData. "It was OK. It wasn't that hard."

How significant to Google was this project? "We prioritized...(looked at) what do people actually do with search in terms of the volume, and the importance of health came out No. 1...We tend to think of Google Health as an extension of search. You could argue it's also an application."

Like with Google News, Schmidt said he hopes that Google Health will lead to more people using Google search and clicking on ads. "Every month we say to ourselves should we add ads to Google News or add more news features to Google News and every month we decide to add more Google news features because...we make so much money from people just using Google search that we don't need to get the extra money from News...A Google News user is more likely to be a Google searcher and therefore clicks on ads more."

This led into a question about Google's reliance on search advertising and how the company would weather a recession. Schmidt cut me off, waved his hand and said, "I'm not going to talk about anything other than Google Health."

Sheepishly, I said, "So, I don't suppose I can ask you about Microsoft and Yahoo?" The answer: "No."

Oh damn. This was bad.

"So what?" you're probably thinking. "Quit your whining, you worthless, note-scribbling toadie and stop annoying this man!" OK, fair point. But give and take with the press is part of being in a position of responsibility at a highly visible public company. Saying everything but the topic at hand is off limits is, well, lame.

When President Bush holds a press conference about, say, buying books for a bunch of sweet school kids in Alabama, he doesn't get to say to the gathered mass of reporters: "I'm happy to take questions, but only if we talk about the books we just bought for these sweet school kids. The economy and the war in Iraq are off limits. So fermez la bouche, Seymour Hersh!"

Of course, he's free to dodge the questions. Some presidents over the years have perfected the art of the dodge. Some, well, they could still use a little work.

Anyway, so back to the interview: Then I said, "um, OK" and looked desperately at my notes and all the questions I had that wouldn't get answered. OK, I'll admit it, I was stymied. I not-so-subtly tried to use Google Health as an entree to other questions.

Can you discuss your strategy with regard to social networks and whether that will play a part in Google Health? "It may over time...It makes sense that people who are in health situations are going to want to have a social community."

And how does this fit in with your mobile strategy? "Everything we do we're doing for the mobile wireless space as well, so the interface you see will be available in our mobile strategies...We'll re-whack the pages a little bit...In mobile, we're having tremendous successes."

Will Google Health work with other Google properties like Gmail and Google Docs, and what about YouTube? I ask him, grasping for any connection to use.

"In YouTube you could imagine that health videos stored on YouTube would be easily indexable...There are a lot of Google Health videos already on YouTube." (Earlier, during his keynote, he had this nugget to say about YouTube: "Ten hours of video is being uploaded into YouTube every minute. God knows what the quality of that video is! But it's coming.")

So, what will search, on Google Health and in general, look like in five years? "It's hard to predict what we'll do in five years...You could imagine eventually we would know how to rank much better health information."

This guy was good. Total talking points. I'm not sure why he declined to answer these "off topic" questions, other than that he could.

I was told I could ask one last question and I asked him what question have I not asked that I should have? Among reporters, this is generally our last-ditch, I-gotta-get-something-good-or-my-editor-is-going-to-kill-me question.

"I don't think you have highlighted sufficiently the platform characteristic of this," Schmidt responded. "Everyone is assuming it is personal health record...I think of it as a platform upon which many services can be built and it is through that platform that the real innovation occurs."

As a follow up to that I squeezed in a question about Microsoft's health care platform HealthVault and how does that differ from Google Health? Getting up from his chair, Schmidt said, "That's it."

Just like that it was over and I was hustled out the door.

So, my one-on-one with Schmidt wasn't exactly what I had hoped it would be. But at least I'm getting closer to a free plane trip somewhere in the continental United States on a non-holiday, non-blackout date in the near future.

February 28, 2008 12:44 PM PST

Questions ahead for Google's Eric Schmidt

by Jim Kerstetter
  • 1 comment

It's fair to say there are plenty of things to chat about with Google CEO Eric Schmidt.

Microsoft may be closing in on its whopper acquisition of Yahoo. Google's stock price has slid dramatically since its 52-week high in November. ComScore says bad stuff's a' brewing in Google's U.S. paid-click performance. And the economy, perhaps the only thing that can really slow Google, seems to be headed south.

Schmidt sat down with CNET News.com earlier Thursday for a brief interview at a medical-trade show Health Information Management Systems Society in Orlando, Fla., where Google unveiled its ambitious Google Health initiative. As is his wont as a billionaire executive with many things to do, Schmidt wanted to stick to the script there in the land of Mickey Mouse. For Schmidt, Thursday was all about health care.

Eric Schmidt (Credit: Dan Farber/CNET News.com)

In fairness, what Google is trying to do in health care is interesting and sure to stoke yet another round of privacy concerns. But let's face it: we want to talk about the other stuff, which Schmidt literally waved aside with a wisp of his left hand.

Oh well. We were hoping for a little "on the state of things" rumination in the vein of the older, more thoughtful Bill Gates. Who knows? Maybe he would have flashed some bravado a la Oracle's Larry Ellison, who once sat in front of about 1,500 people at a company conference, said "OK, shoot," and answered unrehearsed questions from the audience for more than an hour.

No matter, not every successful executive can be colorful. But this will most likely be the year that Schmidt and his Google gang have a chance to prove that they have the chops to manage a company through the bumpy times as well as the good times. Here's what they're facing:

• Microsoft. If Microsoft manages to land Yahoo, it will establish itself as the largest company in a number of Internet categories, including unique monthly visitors, e-mail, and instant messaging. Google will still be the big kahuna of search, with a 56.3 percent share to Microsoft/Yahoo's 31.5 percent share. But landing Yahoo could give Microsoft a better platform from which to launch Web applications and compete with Google in the Webware future.

This has to be just a little personal to Schmidt. After all, it was Microsoft that made his final years in the chief executive's office at software maker Novell miserable. Novell, some of you may recall, enjoyed a brief renaissance when Schmidt took the helm. But Microsoft, as it tends to do, caught up with Novell in that once-fascinating category of network operating systems. I say once-fascinating because Microsoft's utter dominance made it boring until Linux, not Novell's Netware, proved a worthy rival to Windows on the server.

• Trustbusters. It's with no shortage of irony that Schmidt, who was among many who complained about Microsoft's anticompetitive behavior, had to deal with federal and international scrutiny of Google's planned merger with DoubleClick. Payback's a you-know-what. Thankfully for Google, the Federal Trade Commission has signed off on the deal, and European regulators are expected to do the same.

But as Google grows more powerful, scrutiny from Washington is going to be routine. What seems like healthy competition to Google's YouTube today could be tanking competitors looking for a lifeline from their political friends tomorrow. The list of potential bugaboos goes on. When Al Gore was running for president, the rumor making the rounds of Silicon Valley was that Schmidt, an active Gore backer, was going to be his cyberczar. Now he may get that quality time in the capital.

• The economy. In 1965, Gay Talese wrote that a plain-old cold for Frank Sinatra can "send vibrations through the entertainment industry and beyond as surely as a president of the United States, suddenly sick, can shake the national economy."

As Sinatra in his prime was a bellwether for the music industry and all things swingin,' Google has become a bellwether for the Internet economy, and Wall Street is starting to worry that even the mighty search king could be impacted by a souring economy. The Federal Reserve chairman said Thursday that he doesn't expect the ugly "stagflation" of the 1970s, but he acknowledged the coming months could be difficult.

Where does that leave Google? Like Microsoft in desktop software, Cisco Systems in networking equipment, and IBM in, well, everything, Google has grown so big that its health is likely to be indicative of the nation's health. It will take terrific execution to continue to do great while everyone else suffers.

Schmidt's first go-around as a chief executive at Novell was ultimately a disappointment. When things got tough, he got going out the exit. He reportedly for 20 years. The challenges in the coming year and how he responds to them will likely prove whether that's a terribly good idea.

CNET News.com's Elinor Mills contributed to this post.

February 28, 2008 5:56 AM PST

Schmidt: Google Health targets 'the most important search'

by Elinor Mills
  • 6 comments

Updated at 7:40 a.m. PT with Schmidt's news conference comments.

ORLANDO, Fla.--Search giant Google launched Google Health and announced major industry partners on Thursday, aiming to be the Intuit for personal health care, where people can access all their health information in one spot.

Google Chief Executive Eric Schmidt answers reporters' questions after announcing Google Health.

(Credit: Elinor Mills/CNET News.com)

"Why would Google be here?" Google Chief Executive Eric Schmidt said during a keynote speech at the Health Information Management Systems Society trade show, which he said was not one the company has normally attended. "What's the most important search I could do?"

The answer: health. Nearly one out of two Americans has a chronic health condition, he said. Meanwhile, people are already using the Web to get information, including one man, who told Google a search for heart attack symptoms on Google led him to call an ambulance and saved his life, Schmidt said.

"We're going to partner with leaders in health care to cross-connect...and apply the principles of the Internet" to improve the industry, he said. "The first principle is, it's the user's data. The data follows the consumer wherever they go" when they change doctors or insurers.

Currently, there are more than 200 personal health record systems that are closed or tethered to a particular health system, he said.

Google Health aims to untether the 2 billion X-rays taken in the U.S. each year, 62 million CAT scans, and other health data, and put them all online for the patients to access.

Future partners include major hospitals, pharmacies, and insurers, including Walgreen, Aetna, Wal-Mart Stores, the University of California at San Francisco, the American Heart Association, Quest Diagnostics, Long's Drugs, the American Medical Association, Cedars-Sinai Medical Center, and the Lucile Packard Children's Hospital at Stanford University.

Google turned to experts in the field in creating Google Health and formed a health advisory council that included Dean Ornish of the Preventive Medicine Research Institute, Molly Coye of HealthTech, Paul Tan of the Palo Alto Medical Foundation, and Sharon Terry of the Genetic Alliance.

A Google employee who is also an emergency room doctor demonstrated Google Health, which was previewed at Google's booth at the HIMSS show.

The system stores all the health records of a patient and enables users to import records from different health provider systems, as well as search for doctors and get information on conditions from Google Scholar, discussion groups, and other sources.

Google Health lets consumers get information about medical conditions, including illustrations to help identify symptoms, as this screenshot from CEO Eric Schmidt's keynote shows.

(Credit: Elinor Mills/CNET News.com)

Third-party developers have created gadgets that can be embedded in iGoogle home pages for things like alerts to remind patients to take their medicine, and other developers have created interfaces for displaying a weekly view of all the medicines a patient takes.

During a question-and-answer session, a physician told Schmidt that he has "a pang about 'Big Brother Google' knowing so much about me." Schmidt assured him that the system would be safe and secure, and that no information could be shared with anyone without permission from the user.

During a news conference after the keynote speech, Schmidt said that if the government tries to subpoena Google for the consumer records, the company would have to comply, but he hinted in answering a follow-up question that patients could circumvent that by deleting their records.

"We are subject to U.S. law. In the case where we are forced by court to turn over information, we would do it," he said. "If the information were not there, it would be (hard) to subpoena it," he added.

Asked if insurance companies would have access to the data, Schmidt said that barring a law, the only way Google would share with insurers is "if someone were to force us with a gun to do it."

"We have taken a pretty aggressive position with regard to protecting (consumer) privacy in the U.S., but we are subject to U.S. law," he said.

Earlier, an attendee asked whether Google has a "monetization path" for Google Health.

"Not in the short term," Schmidt said, adding that the hope is that people using the site will also use other Google sites and ultimately click on ads there. Google News similarly drives people to search on Google.

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