CEO Schmidt: Many People are Very Happy with Google Search

Part two of Andrew Goodman’s coverage of Danny Sullivan’s SES keynote conversation with Google chief executive Eric Schmidt. Part one is Google CEO Maps Missions, Stays on Message.

Speaking of Google’s recent deal to serve ads on MySpace, Schmidt explained that the social networking space is currently undermonetized, and Google can help a large one like MySpace optimize its revenue. Moreover, the deal helps advertisers reach an audience they currently cannot reach. It’s more inventory added to the overall picture, especially for those targeting youth.

Sullivan pulled no punches in his skepticism of new ad formats. What everyone looks at in search marketing, he reminded Schmidt, is “measurable ads—will these new ads be measurable? The metrics in these fields compared to search—they’re laughable!”

Schmidt countered that properly targeted radio ads were in fact going to be a brand new product, and that we have yet to discover how competitive such properly-targeted radio spots can be. He also asserted that the smartest advertisers would figure out how to measure response on metrics such as cost per customer acquisition, tied directly back to those spots. Presumably they’d also be able to track what times of day “converted” best, which markets converted best, etc. Schmidt’s pat scenario was light on the specifics of how someone might actually construct a campaign that might be measurable in a granular fashion akin to current AdWords campaigns. To his credit, however, he did not rely entirely on brand lift promises when anticipating the rapid growth of Google’s radio product when it goes into full launch. He also stated that Google would make a “big and long investment” in radio ads.

Sullivan raised another hot button issue that hasn’t escaped anyone’s attention of late. “AdSense has been a huge boon for publishers—people who couldn’t make a go of it by placing a few Amazon affiliate links are now making a living.” He went on to note that in light of the low quality sites that have popped up seeking this income, Google now has to “fight to keep them out of both the paid and unpaid sides.” Should Google be “stomping down harder on some of these sources” of low quality sites and low quality ads driving users to such sites? Schmidt played politics on this one, not wanting to alienate the publishers and advertisers in attendance—in particular those who often self-identify as “webmasters.” He noted the various algorithmic initiatives that Google has introduced, such as smart pricing on content, quality-based bidding, and so on, but agreed that no system would ever catch all the bad guys. “We are now trying a lot harder to catch them, because there are a lot more bad guys now.” Google is also “getting smarter.”

(In a later press Q&A, Schmidt talked significantly tougher when it came to assessing advertiser quality, with specific reference to ads taking users to misleading landing pages full of ad links—commonly known as click arbitrage. In that session, he sounded annoyed at the prospect of users landing on such “arbitrary agglomerations of ad links,” and asserted that “we don’t believe it is healthy.”)

Search engines, in recent years, have been drifting away from common standards, Sullivan noted, but recently there seems to be an interest in cooperating to introduce standards such as the nofollow protocol that can allow webmasters to remove the incentive for comment spam. “Why now?” asked Sullivan. “Did something suddenly change?”

Schmidt claimed that “more cooperation has always been a goal, but sometimes it takes time.” He downplayed the competitive aspect of the business. “All the companies in the space are benefiting from the ‘cloud model’… anything about indexing and aggregating information that places lower loads on our sites, or standard ad formats through the IAB [that help us gain more advertisers quickly”, it’s all good for all of us. You’ll see more standardization.”

Sullivan’s next question tried to stretch the dialogue. “Search feels like it’s boring. I go to this page, I put in a search in a box. It’s similar to Open Text or Alta Vista many years ago…”

“People actually like that!” interjected Schmidt, to audience laughter.

“I like it, of course, because that’s me, but it doesn’t feel new or exciting to many,” clarified Sullivan. “Analysts and reporters want to know what’s the next big thing—but that’s like saying what’s the next big thing in a TV set. Yes we have HDTV and a few more channels, but it’s still a TV set after all these years. Is search going to be like that?” (Sullivan, evidently, is neither analyst nor reporter—or is both, and Danny Sullivan, to boot. So remember—it’s not Danny asking the devil’s advocate questions, it’s those pesky analysts and reporters! Yours truly is neither analyst nor reporter, either.)

Responding that “many people are very happy with Google Search,” Schmidt went on to describe some personalization options, including personalized home pages and developer-customizable tools, that are available. He also mentioned that “search combined with social networking” (referring, again, to MySpace, not Google’s Orkut) will be important in the future. Rather than having to use a single type of interface to leverage the power of search, “people will have a choice.”

Back to controversy, Sullivan asked Schmidt whether Google could effectively police “the link economy,” or whether they might as well give up on doing so. Expectedly, Schmidt alluded to “highly proprietary means of using information that isn’t link-based” to improve the answers users get from search queries. Similar to the formula for Coke, the “precise ranking formula is known only to a small group in the company. I don’t know it, and have chosen not to know it.” Schmidt later clarified that he understands the formula but has taken care not to be privy to its exact details.

Sullivan pressed on. Because Google aggregates other companies’ content to provide its users with results, some content providers (Agence France-Presse) have resorted to litigation or public relations campaigns against the company. “Will the way forward in future be to not launch products quickly and then deal with the fallout?,” inquired Sullivan. Schmidt admitted that Google’s size and “people’s propensity to sue us” are making them think twice about the pace of product rollouts in light of the rights of content owners and other stakeholders. But he didn’t seem to think Google would back down very far from its thus-far aggressive habits, making it clear that they would continue to stick to their view of the doctrine of “fair use” of copyright material, and noting that there are clear divisions in the legal community on such matter. In Schmidt’s opinion, some of the recent litigious events were “business negotiations conducted through the press or in a courtroom.”

In light of the tone of press coverage of many of Google’s initiatives and public statements, including some of that covering the keynote conversation, you wouldn’t blame Schmidt for feeling that way about a lot of news stories about the company. A reporter recently zeroed in on the click fraud issue, leaving aside much else that was said in the keynote. Without documenting the full exchange, she labeled Schmidt’s comments on click fraud as “wishy-washy.”

Given that Google is fast becoming the world’s largest media company, it appears that coverage of the company must constantly be interpreted through the lens of an ongoing business negotiation, debate about business paradigms and consumer news consumption patterns, or flat-out struggle for market share—a negotiation being tacitly conducted with the very organizations that report on Google’s activities for public consumption!. The possibility that a $900 million deal with News Corp. for MySpace ad placement could also indirectly buy a shift in the tone of news coverage (or parody, for that matter) across the company’s many properties can’t be dismissed entirely. So while any sane company would need to take its time digesting a deal of this magnitude, Google’s need for distribution partners and its interest in a more stable public relations ecosystem seems to guarantee that other large deals will be hammered out in the next couple of years.

The fact that Google now positions itself not only as a search company, but a media giant, was emphasized by Schmidt’s closing comment. He stressed that [Google co-founder” “Larry Page reminds us that ads have value in and of themselves.”

Andrew Goodman is the founder and principal of Page Zero Media and author of Winning Results with Google AdWords.

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