Outside the Lines

During a CNBC interview Wednesday with Mad Money's amped-up Jim Cramer, Google CEO Eric Schmidt was asked about placing ads on the home page of the leading search engine. He said Google wouldn't allow ads on the home page, even though it could bring in "some number of billions of dollars."

Let's say that some number of billions is $2 billion annually, which would be close to a 10 percent bump in revenue for violating the home page with ads.

"People wouldn't like it. We prioritize the end user over the advertiser," Schmidt responded. The simple, unadorned home page has been a hallmark of the search service since its humble beginnings a decade ago.

But would the "end users" really abandon Google if the home page had advertising? How about contextual, targeted advertising for users who opt-in to such a program, similar to Amazon's recommendations, or themed ads such as for the current Olympics. Check out the examples I created below. Are ads on the home page offensive or against the Google credo of "Do no evil"? Shareholders probably wouldn't mind a few more billion in highly profitable revenue.

Writer and New Yorker columnist Ken Auletta is interviewing Google Chairman and CEO Eric Schmidt in San Francisco as part a program from the Newhouse School, The New Yorker and Conde Nast. Following are some highlights:

Ken Auletta and Eric Schmidt

(Credit: Dan Farber)

The goal of the company is not to monetize everything. Our goal is to change the world. Monetization is a technology to pay for it.

Google's ambition is to solve big problems that impact a lot of people.

Privacy at the end of the day is how you feel about your privacy. People feel ok with ads about what you are doing but not about who you are. Privacy will be an evergreen issue.

Frankly, the free service model with free advertising is still the best model.

The goal for YouTube is to build a tremendous community....In the case of YouTube we might be wrong. We have enough leverage that we have the leverage of time. We can invest for scale and not have to make money right now, he said. Hopefully our system and judgment is good enough if something is not going to pay out, we can change it.

Hopefully in the next year we will come up with some new inventions.

How to allay concern about being a competitor to partners?: There is a sea change from one model to another. Google happens to be the messenger. People are reading less print newspapers and magazines. People are consuming more on digital networks and paying less in ad rates. What we don't know or haven't solved it to come up with on line ad products that monetize as same rate as offline. If we invent that a lot of those concerns go away.

There is a tremendous amount of use of social networks...the traffic is phenomenal...and there will be advertising products in that context...it's taken longer for the industry to find those devices but they are clearly there.

Our primary success was in the direct marketing piece that is quite measurable and tactical. The mobile case is just an extension of that. As mobile devices get more powerful you can do click to play ads. Mobile devices will be able to do powerful narratives...cameras, GPS...it will tell you need new pants.

The most impressive products are those that use artificial intelligence that I cannot imagine are doable. Automatic language translation by computers...we will eventually do 100 languages. Another example, I am very excited about is geo-positioning.

We think independent Yahoo is better for competition.

What does Schmidt worry about? At our scale and position the problems are set from within. It's not a competitor's move that screws things up. Because of our market position and success we can define ourselves as we move forward. The great companies can overcome barriers...almost always determined by internal factors. Replicating the Google culture across 20,000 people is a challenge.

I worry a great deal that the Google model is set, that it can scale.

We try to focus on the future...internally we do talk about strategy and innovation..not about competitors. It's much better to look forward to the kinds of things we can do. Media coverage is all obsessed about winners and losers. In fact what is really important about technology is you have the opportunity to redefine the game over and over...and the winner redefines the game.

Google is not different than the success of companies 30 years previously. The difference is it all happened quicker. It all happens in six months, not six years. At Sun we had two-year product roadmaps...at Google we have trouble doing six-month roadmaps.

The compression of time occurs because there are so many more actors. The industrialization of 2 billion players coming online...we have to listen to them.

Q&A session:

The combination of DoubleClick and the Google's ad platform will create a single exchange and platform for publishers that over time will begin to generate significant revenue to the New York Times and other competitors. Yahoo is the leader in display advertising (online).

A lot of the world is organized around the lack of information and trying to prevent people from knowing what is going on.

We get between 15 and 30 million photos uploaded every day...and they are about people..they have a tremendous value to open societies and are a threat to closed societies...you will getter better governance with more transparency.

"Don't be evil" is misunderstood. We don't have an evil meter...the rule allows for conversation. I thought when I joined the company this was crap...it must be a joke. I was sitting in a room in first six months ...talking about some advertising...and someone said that it is evil. It stopped the product. It's a cultural rule, a way of forcing the conversation especially in areas that are ambiguous.

LOS ANGELES--Google Chief Executive Eric Schmidt gave a speech and chatted with IBM's CEO Sam Palmisano onstage Thursday at IBM's Business Partner Leadership Conference here. The two talked up their relationship, which primarily involves a joint research project. In October, Google and IBM announced a cloud computing initiative, based on Google's expertise in distributed, parallel computing and IBM's industrial enterprise management technologies, for public use by universities.

IBM is taking some of the learnings from the project and plans to operate a cloud that will allow partners to house their Web-based applications and sell them to customers, Palmisano said. "It is the first time we have taken something from the consumer arena and applied it to the enterprise," he said.

Google CEO Eric Schmidt joins hands with IBM CEO Sam Palmisano.

(Credit: Dan Farber/CNET News.com)

Schmidt said that over time there won't be much differentiation between consumer and enterprise architectures. The major difference is that enterprise customers will pay for software and services, with required security and other features, and consumers won't.

Schmidt gave IBM lots of credit for pioneering many of the technologies that underlie today's computing architectures. He noted that IBM, which has about 87 years on Google, has figured out that the underlying platform is a server and Web services.

"Cloud computing is the story of our lifetime," Schmidt said. "Eventually all devices will be on the network." Both IBM and Google, and a host of competitors, have the same idea, which was actually first promoted by Sun with its "the network is the computer" slogan. Google figured out how to monetize the fruits of the pages its massively parallel servers manage.

IBM wants to provide the infrastructure and support services to the planet, and Google wants to provide the world's information, and some applications, on its platform. "The two companies are great and have lots of innovation in their gene pool," Palmisano said. "There isn't a lot of overlap in the strategies." Both are committed to open standards and an open Internet, and they are both going in the same direction, he added.

Google's YouTube captures 10 hours of video every 60 seconds, and IBM might like that business if it could figure out how to make money at it. But eventually, IBM, Microsoft, Sun, Google, and other big players will look more similar in their technical architectures and business models.

Google and IBM have more in common than a shared view of the world and an academic research project. It turns out that Google outsources its accounting to IBM and that Schmidt considers IBM's sales organization important to Google's enterprise software efforts.

As more companies look for Web-based tools, mashups, and standard applications, such as word processors, Google stands to benefit. "IBM is one of the key planks of our strategy--otherwise we couldn't reach enterprise customers," Schmidt said.

While IBM isn't selling directly for Google in the enterprise, IBM's software division and business partners are integrating Google applications and widgets into custom software solutions based on IBM's development framework. The "business context" is the secret of the Google and IBM collaboration, Schmidt said. Embedding Google Gadgets in business applications, that can work on any device, is a common theme for both Google and IBM.

Currently, Salesforce.com is selling Google Apps as an integrated part of its platform. It's not far-fetched to think that Google would seek out IBM's help with its business partners to spread the Google word in the enterprise.

LOS ANGELES--Speaking at IBM's Business Partner Leadership Conference here, Google CEO Eric Schmidt reiterated his position that social networks are still too closed. "If it's not searchable by Google, it's not open, and open is best for the consumer," he said.

Google CEO Eric Schmidt believes that people should be able to move from place to place on the Web with their data.

He added that "searchable by Google" means also searchable by other search engines, such as Yahoo. "People should be able to move from place to place, and their data is available everywhere," Schmidt said. "Social networks are a real phenomenon of people living their lives online, and it has has legs. We will have to deal with it as a society."

Google has focused efforts on creating code, such as the open source OpenSocial APIs and the Social Graph API, to make social data more portable and accessible to applications. So far, Facebook is the only major social network that has not endorsed the OpenSocial initiative, which is now managed by an independent organization, the OpenSocial Foundation.

Check out Google CEO Eric Schmidt's keynote presentation at the Healthcare Information and Management Systems Society conference (see the video below). He makes the argument for Google harnessing its search platform for dealing with the major inefficiencies and ills of the healthcare system.

The first principle, "It's the consumers data," Schmidt said. "Users can access the data and can control who can see it." And, because the data is in the cloud, it can be accessed anytime, anywhere.

With both Google and Microsoft, with its HealthVault, investing heavily in gaining converts to their respective health initiatives, progress will be made, especially if the two platforms interoperate. The two companies have not ruled out cooperation, according to BusinessWeek.

The obvious issues of maintaining privacy and security are problematic at this point, but the cost of not using the Web as a platform to attack a myriad of healthcare industry issues, including electronic health records, is far too high.

Schmidt compared the future acceptance of electronic health records to how people have become comfortable placing their credit cards online. A comfort-level will be reached over time, based on what we have seen in the first decade of the consumer Internet, but a breach of health records data is going to be far more polarizing, and a deterrent to progress, than leaked credit card or social security numbers.

One of the concerns expressed is having for-profit, private companies that generate revenue from data mining storing health records. For Google and Microsoft to be successful in this arena, they will have to demonstrate that they can be trusted, which will be a difficult task, with such highly personal data.

The two giants understand that they are in a marathon, not a sprint, to bring healthcare fully into the Internet age. Government, the healthcare industry and the private sector participants will have to come up a plan and architecture that consumers believe is totally protective of their personal data.

See also: Schmidt: Google Health targets 'the most important search'

And, I would still like to know what Schmidt thinks about the recent downward trend in paid search clicks and if he believes that a Microsoft-Yahoo combo would result in monopolistic practices.

It's been a busy week in the tech world, but the newsroom highlight of the week had more to do with what was not said. Our own Elinor Mills was dispatched on short notice from San Francisco to Orlando, Fla., to interview Google CEO Eric Schmidt. He was in the land of Mickey Mouse East to tout Google Health initiatives, which hold promise for advancing the cause of improved health care.

(Credit: Elinor Mills)

Elinor came ready to discuss Google Health with Schmidt, as well as other topics, such as what's up with the paid click ad business, the economy, YouTube, and of course, the proposed Microsoft-Yahoo union.

A few minutes before the interview, she was told by a Google spokesman that Schmidt would only answer questions about Google Health.

He certainly has the right to refuse to take questions, but it's unclear what led him to stonewall. Schmidt doesn't seem like a CEO who is afraid to go toe to toe with the press. Perhaps he wanted to make sure the message got out on Google Health, but Elinor had already heard all the details at the Orlando presentation and press conference.

In any case, the context of the event shouldn't exclude Schmidt from responding to the basic questions on the minds of Google watchers, reporters, bloggers, investors, and employees. He is practiced enough in the art of interviewing to evade any question that he doesn't want to answer directly.

He even declined to respond to a question about how Microsoft's health care platform HealthVault differs from Google Health.

The notions of transparency, conversation, and openness are part of the Web culture. Google is the "Do No Evil" company. Speaking to the press without putting restrictions on what can be asked (outside of regulatory prohibitions) is "good." We aren't talking about disclosing state secrets, just responding to what are largely anticipated queries.

You have to wonder what drives such behavior. Is it arrogance or just a bit of control freakishness? Whatever, it comes off as Putinesque, which I doubt is what Google PR or Schmidt intended.