fashion nova pants
drew schutte: we've been doingthis eight years, as we say. and it was something that thefirst time ken was going to do it i thought would be special. there's a lot of places whereyou meet leaders of industries. but what is more importantthan having leaders of industries, is havingsomeone that can communicate with them well. and that goes to writing greatarticles, and also having
great conversations with them. and ken auletta was someone iadmired from afar, even when i was at wired, and so wantedto associate with that. and now, eight years later,being at new yorker, it's a real thrill to be introducingken myself. and he is one of thefinest writers we have at the new yorker. he lives up to everything westand for, which is pushing the story somewhere different,pushing the story somewhere
unique, pushing the storysomewhere progressive. if it's already been written,you're not going to read about in the new yorker, and keepingthe bar of excellence higher than, i would, say anypublication out there. and ken epitomizes that, so tohave him as our regular host of the series is really,really important. he is working on a book, thefuture of media, which i'm really excited about. because all of usin this room--
you know it's the tech worldmeeting the content world, and that is a powerful story. and that book is comingout in 2010, and we look forward to that. and with that, i will turnit over to ken auletta. ken auletta: thank you, drew. [applause] i had one piece of business orinstruction i'm following-- please turn off your cellphones, if you could.
when eric schmidt first joinedgoogle, there were those who said he was a figurehead. $16.5 billion later, and amarket that exceeds the combination of most of thelargest media companies in the world, you don't hearmuch of that. but what you do hear somethingabout, more and more, is that google is the new microsoft. we want to talk about thattoday, and much else. let me just--
eric schmidt: i prefer-- why can't i just bethe figurehead? [laughter] ken auletta: you can, wouldyou like to be? eric schmidt: it hasits benefits. ken auletta: what doyou really feel? eric schmidt: well, in the firstplace, i want to thank that the newhouse school for-- ken auletta: see, he's actingas a figurehead now.
eric schmidt: i'm not goingto thank you, i'm going to thank them. first of all, i want to thankthe newhouse school. i believe very, very strongly ineducation, and in the kinds of things the schoolrepresents. and i'm happy to bepart of this. and i think you'll be doingthis for a long time. i always feel like with ken,i should interview him. he's the most thorough personi've ever met in life.
and i don't know how big booksare these days, but his will be the biggest, i feellike saying. so what is really going ondeep down inside of that organization? so we'll see what you have tosay when i interview you. ken auletta: so, this isunlike what the chicago tribune guy said yesterday. he said newspaper reporters,that they should get paid by the word, in effect.
well, book people do. eric schmidt: so that'sthe secret. ken auletta: in any case-- eric schmidt: maybe youshould go ahead and ask your question. ken auletta: before i do, let mejust say one thing, format. the format is eric and i willhave a conversation up here for a half hour or so,and then we'll turn out to you for questions.
i'll give you a kind of signalthat they're coming. and we'll do a half hour of thatand then we'll be ready for dinner. you have late breakfastsin san francisco. eric schmidt: googledoesn't really start until about 11:00. we've had our earlybreakfast now. ken auletta: so, one of thethings that increasingly is said about google is that,it's a one trick pony.
and i know you're going to say,it's a pretty good trick. so let me announce-- eric schmidt: you see, he'sdone his research. ken auletta: but what do you sayto those who say you're a one trick pony? search, that's your money. eric schmidt: well, if the trickis internet, then we're happy to have thatbe our trick. google is an innovatorin the internet.
and it turns out that we werefortunate that search is both one of the most interestingproblems on the internet, and also, because of our advertisingmodel, very, very, very, good business. if you're going to pick abusiness to be in, that's a great one to start in. we've got a lot of newthings coming. and we recently, last year,expanded our mission. we used to say we'research and ads.
now we're search,ads, and apps. and we're slowly changing fromjust talking about search, which, of course, got us wherewe are now, to talking really about cloud computing, the waysin which people will live their lives online. as an example of a new trick,think about google maps, google earth, geospatialinformation, the notion of just knowing where you are andbeing able to tell where you are going in a physical sense.
these are really revolutionaryideas on the scale we've done, and they're new since thecompany was founded. ken auletta: but thereare lots of them. and then, as was said aboutyahoo, by one of their executives some years ago, theproblem with yahoo, he said, is that you spread everythingso thin like peanut butter. right now, the one that ismonetizing is the search. but how do you monetizeall these other apps? eric schmidt: but the goal ofthe company is not to monetize
everything. the goal of the company isto change the world. monetization is a techniquewhich allows us to pay for it. but we don't start frommonetization, we start from the standpoint of what problemsdo people have? a long time ago, larry andsergey and i were, four or five years ago, we're sittingaround saying, well, we should have a strategy. and larry and sergey botharticulated the strategy as
trying to solve big problemsthat affect a lot of people. it's a very broad statement. and larry and sergey would arguethat we're not being ambitious enough, we're notdoing enough different things, if you look at the number ofinteresting problems that information can solve. and these new emergingplatforms, whether they be mobile, or pcs or macs, or soforth and so on in mobility-- i mean, an enormous number ofthings that you can now do
that you couldn't do before-- it's very nice that wealso have a very strong advertising business. and, so far, on the internetthere have not been very many monetizable businesses thathave been other than advertising. there's a few, but, frankly, itlooks like the free service model of the internet withtargeted advertising, is still the best model forus to pursue.
ken auletta: for instance, yougave an interview to maria bartiromo at cnbc in march,in which you said that, my priority this year isto figure out how to make money o youtube. and how to make that not justa success in terms of an audience, but a success inmonetization, if i can use that word again. what would be your definitionof success at youtube? eric schmidt: well, youtubeis a good example.
i was trying to think aboutwhat's new, since a year ago, when we talk about search,ads, and apps. and probably the biggestnew thing has been the success of youtube. the number of clips and the-- a statistic that we have beenquoting is that there's 10 hours of video uploaded everyminute on youtube. to spend some time on youtubeand see the diversity of viewpoints, the languages,the usage patterns--
and its usage pattern isgoing up like this-- we don't yet know exactlyhow we're going to make significant amounts ofmoney from youtube. but it seems obvious that, as anaudience business-- we have many people in the audiencehere who are in the media industry-- it seems obvious thatwe should be able make some money from that. and that's a good thing. youtube is a good example.
when we were fortunate enoughto acquire youtube, we said, your goal is to build anincredible audience business, an incredible community, atremendously scalable model. and we're going to help you withthe kind of technology that google is unique for. youtube is now the majorityof our outbound bandwidth. we've had to re-engineer ourinternal networks, because otherwise the internal networkwould have keeled over, because there's so much videobandwidth going in and out of
the company. and it's in our corporatenetworks, or internal production networks. so it's an amazing phenomenon. so hopefully, in the next year,we will come up with some new inventionsof how to do that. ken auletta: but, as the ceo andnot a figurehead, what is the matrix you would use? how would you judge whether atthe end of the year youtube
has succeeded, by your lights? eric schmidt: because ofthe way the company works, we'll know. in youtube's case, we reviewit on a periodic basis. and we measure everything downto the millisecond, so we know exactly, view rates, adoptionrates, and so forth and so on. we know what the distributionlooks like. we've got a number of peoplehere who are actually distributed partners, they'redistributing their
professional content throughyoutube, which we're very excited about. so we can tell. it is the possible creationof a whole new industry, so we'll know. do we have metrics? absolutely, we havea revenue plan. we have a usage plan. we have a scale plan.
we have a bandwidth plan. and we'll see how wego against them. ken auletta: will you sharethe revenue plan with us? eric schmidt: no. no, we don't do guidance. plus, in the case of youtube,we might just wrong. one of the great things aboutgoogle is that we have enough sort of leverage, if youwill, that we have the luxury of time.
i think many people in businessare under such short quarter time pressure, that theycannot invest for scale. they have to makemoney right now. and that kind of short-termfocus, which is an unfortunate reality of the way our systemsare organized, really does make people sometimes makethe wrong trade-off. we have the luxury of time toinvest, and hopefully our systems and our judgment isgood enough, that when we invest in something that isnot going to pay out,
we'll change it. we'll try something else. we know people are watchingthe content. we know the communityis forming. and we know it'svery powerful. ken auletta: your good friendsteve ballmer says that google has been trying to block theirattempt to acquire, or partner with yahoo. for a change is, he correct?
eric schmidt: and so,i feel so sorry. ken auletta: about? eric schmidt: what wasthe allegation again? ken auletta: that google hasbeen trying to block-- this is like interviewing arussian, when they understand english but they ask forthe interpretation. eric schmidt: i just wantto get the quote right. ken auletta: he said that googlehas been trying to block their acquisition, orpartnership with yahoo.
is he right? eric schmidt: it would seem tome that that decision is up to yahoo, not to google. ken auletta: are you-- but has google beenattempting-- eric schmidt: am i missingsomething? ken auletta: yes. my question, actually. ken auletta: has googlestrategized and tried to
figure out how to prevent thatpartnership or acquisition? eric schmidt: it's been widelyreported that we have talked to yahoo since microsoft madeits offer to purchase them. and we've said publicly, and i'mhappy to repeat now, that we think an independent yahoo isbetter for competition, for innovation, and so forth. there are a lot of reasonsto think that. if you look at microsoft'shistory, again, it's well established, well publicized,its ability to use, in
particular windows and themarket power that they have, to essentially inhibit choice,or prevent choice. and we've, again, said this, inbetter ways than i'm saying now, it's perfectly possiblethat under such a merger, or tight arrangement theycould do that. so we think it's in the market'sinterest, and in particular in end users'interests, to have an independent yahoo. we also did a test with yahoo,where we showed that our
advertising would do prettywell with them. and that's sort of where westand with yahoo right now. ken auletta: but in that test,people then raise the question, including microsoft,raised this question and others, that there would beantitrust concerns if-- eric schmidt: microsoftraised this? ken auletta: they did,as you know they did. as they did when you acquireddoubleclick. eric schmidt: i knewabout that.
ken auletta: yes, ok. but when you-- eric schmidt: they then, bythe way, bought the other competitor, closedbefore we did-- ken auletta: for twice asmuch money as you spent. eric schmidt: yeah, there'sa long history there. ken auletta: but the argumentthat was made by others, if google partnered with yahoo,the argument was that this would pose some antitrustquestions.
you said that shouldn'tbe of concern. eric schmidt: well, in thefirst place, we have not announced a deal with yahoo. so it's important to look at thefacts, as opposed to the speculation. if we were to do a deal withyahoo, or other companies like yahoo, we would make sure thatwe structured it in such a way that those were concerns werenot the primary concerns. if you look at industrialstructures--
i'll make a strongerstatement. we have learned in watchinghow both traditional industries have matured, andalso microsoft's historical behavior, that marketsdo mature. people can work togetherand compete. and there are ways of doing themthe right way, and there are ways of doing themthe wrong way. i think it's every reason tobelieve that as the internet matures as a business, you'regoing to see outsourcing,
competition, partnerships,collaborations, mergers, all the kinds of things thatyou're seeing now. and the particular complaintsthat have been raised, have a problem where theydon't understand how the market works. we are a relatively small partof a very, very large advertising network. for example, yahoo, and i hopeeverybody knows, is the number one player, by far, in thedisplay ads business, and, in
fact, in what is, in fact, alarger business than the business that google is in. so that's an example ofone of the things that people tend to ignore. ken auletta: do you, in yourcalculus going forward, assume that in the end microsoft andyahoo will be joined in some way, as businesspartners, or-- eric schmidt: i don't know. everybody here's been reading inthe press about the things
going on at the yahoo board, andmr. icahn, and so forth. i don't understand how allof that plays out. one of the rules that we've beenoperating internally is to try to focus on the future. and i'd like to say veryclearly, internally we do talk about strategy withrespect to this. and what we say is that weshould have a strategy about innovation and our end users,not about our competitors. one of the axioms we useinternally is that companies
that spend their time focusingon their competitors end up being behind them. it's much, much better forus to look forward at our business, our partners, thekinds of things that we can do, and how quickly we canhelp change things. so the media coverage, andindustry coverage, is all obsessed about winnersand losers. it's a little bit like thepresidential campaign. it's nonstop coverage ofthis person, and that
person, and so forth. when, in fact, what's reallyimportant about technology is that you have an opportunityto redefine the game, over, and over, and over again. and the winner redefinesthe game. so we hope that, with theproducts that we have coming out over the next year, we'vegot a whole new set of interesting things forour end users and advertisers to use globally.
and that's what we spendour time on. ken auletta: trying toreconfigure the game, several weeks ago microsoft announceda program called cashback, where they were going togive rebates to their customers or users. to try and attack yourlead in search. your reaction to that? eric schmidt: well, i guessprobably a statement about their quality.
historically those kinds ofsystems have not worked, for one reason or another. but ultimately the end userwants, in our case, the best information. and so that's howwe approach it. another example, we run thecompany on a set of principles, one ofwhich is that we focus on end user quality. another one is we focuson the end user
perceived quality of ads. notice i didn't sayadvertisers. so this focus on end users,which is the characteristic that i think is why the companyhas grown so quickly, is not going to change. ken auletta: but you can make anargument, if you're giving a rebate to the end user, whichmicrosoft is offering, that serves the end user's-- eric schmidt: well, it partlyoffsets some of the payments
that they've madeto microsoft. ken auletta: ok. in the-- eric schmidt: right? ken auletta: in the purchaseof doubleclick, lots of concerns were raised at thetime about privacy. what is the privacy linethat eric schmidt and google will not cross? eric schmidt: there's, again,lots of concern about privacy.
and i think everybody hereknows that these modern computer systems, of whichgoogle is an example, do, in fact, in the normal course ofbusiness, aggregate a lot of they'll know, maybe, wheresomebody is, they'll know their credit card number,they'll know what their searches are, that kindof that stuff. it's gathered in the normalcourse of the way the servers work. we have a natural limit on whatwe do, which has to do
with our end user perception. now if we were to do somethingwhich caused one of you, or all of you to believe that wewere not trustworthy, with respect to personal informationthat you had, private information,what have you, you wouldn't go back to google. you'd go somewhere else thatdidn't have such a, from your perspective, draconianview on privacy. also, if we made a mistake andsomehow we released your
information inappropriately,that would also cause you to move to a competitor. furthermore, google makes astrong statement, that we won't trap you. this is part of this issue aboutcompetitive structures and so forth. we won't trap your data. if you don't like us, you canmove from our choice to a competitor's choice.
we think that produces a bettercompetitive model for all the players. so with respect to privacy, atthe end of the day, the real check is how do you feel aboutwhat we're doing at privacy. we calculate what our users say,doing, is that people are ok with ads targeted on whatthey're doing, but not necessarily with whowe think you are. there's a line there, and we'revery careful about that. we also limit, with a veryaggressive privacy policy, how
much information we keep aboutthe cookie that is put on your computer, the searchesthat we do. and we publish all of that. and, by the way, just so thateveryone understands-- every privacy conversationends up being a long one. there's a subtle issue withgovernments, whereas governments don't want us tokeep information for too long, but they want us to keep it fora little while, in case there's something baddone by somebody.
and they have the right tosubpoena and things like that. so we're trying tofind a balance. and we've ended up where wethink is the right balance. i do believe that privacy isgoing to be an evergreen issue, that these modernsystems, of which google is one, they really do bring thetraditional questions of anonymity, personal freedom,and government rights to the fore. and i also believe thatgovernments, the countries,
will differ on how theyapproach that. ken auletta: you mentionedsubpoenas. does google get a lot ofsubpoenas, or requests from the government for informationon your users? eric schmidt: like all of theemail systems, we get a fair number of, essentially, searchwarrants, because criminals are foolish enough to use emailto commit their crimes. and we are required by law,as everybody else is, and we do that.
it's not overwhelming. i would have thought it wouldhave been worse, but it is a constant factor. ken auletta: you told me lastwinter, that you, as a member of the apple board, recusedyourself from discussions of iphone, because therewere some areas where you were competing. what's the status of that? can stay on the board when it'sobviously a key part of
their business, and you,as a director, recuse yourself from it? eric schmidt: well, it'sobviously something that we do talk about. and under us law a directorof two companies has what is known as-- you have a two hat problem. you actually have to representboth groups. so the legal solution for thatis you do recusal if you find
yourself in a situation wherethere's a potential conflict. i've only done this once ortwice, so it's not as common as it sounds, and in what webelieve was the appropriate situation, so like businessdealings and things like that. both apple and google believethat the mobile space is going to be very large, that manyof us are going to-- it's interesting that you saidturn off your mobile phones at the beginning of the meeting. the fact of the matter is,everyone here has your mobile
phone with you, in yourpocket, or your purse, or what have you. we're so dependentupon them now. and there's a new generation ofsuch devices coming out, of which the iphone is a veryimpressive example, which will become even more centralto our lives. from the standpoint of bothapple and google, both companies agree with that. each company has a differentapproach, and they're quite
different, as to howto go about that. it turns out google has a hugepartnership with apple in many things, including maps. and, in fact, the vast majorityof the google searches that are mobileactually come in on the iphone, which is very good forboth apple and google. on the one hand, we have thisrecusal issue, but on the other hand, you have a lot ofpartnerships that are deep, and are technology centered,that are very,
very end user focused. ken auletta: but, as you havesaid, mobile is a growing business, and one that you seeas a growing business, but so does apple. and increasingly youwill bump into each other at various places. does at some point itbecome untenable for you to remain as--? eric schmidt: well,it has not so far.
and, again, remember in google'scase we're not building a phone. we're building a linux basedoperating system, which has been, again, broadly discussed,which, in our view, will enable a new category ofplatforms, that are likely to be quite differentfrom the iphone. and the iphone, which, ofcourse, i love, is a great product-- there'll be many otherways of doing mobility. and you can imagine--
start doing a list of differentways of doing mobile computing, there aremany, many choices. ken auletta: i mentioned, inmy introduction, that there are some people who likenedgoogle to the new microsoft. if you go out and talk totraditional media companies, oftentimes you will hearcomplaint, that google is trying to dis-intermediatemy business. if i am a publisher, where youhear that complaint, or i am viacom, where you hear thatcomplaint in television land,
and go down the list, andnames several others. eric schmidt: but, viacomactually has responded to the complaint. ken auletta: with a billiondollar lawsuit, yes. but how would you allay myconcerns, that you are not my competitor, you are my partner,which is the favorite phrase at google? eric schmidt: the way i look atthis is that there is a sea change, right?
and a sea change from onemodel to another. and i think many of thecriticisms that i've seen seem to be really about thechange, and google happens to be the messenger. so those changes aregoing to occur independent of google's behavior. people are, and i think it'sterrible, people are reading less print newspapers,some magazines are struggling from ad rates.
we all know the various issuesof modernization. there is a lot of evidence thatpeople are consuming a great deal more media on thesedigital networks, but they're paying, quote paying through adrates, and so forth, less and less for it. not a good situation. bad for google because we arecritically dependent upon high quality content. so for us, this is--
we really do havegoal alignment. what we don't know, and we'venot yet solved, is how to fix that problem. how to come up with productsthat are online, advertising products, whose monetization perhour of media consumption, for example, monetizesat the same rate. so if we were able to inventthat-- and we're working on these things, but we'venot invented it yet-- then i think a lot of theseconcerns would go away.
this is really because there'sa change in modernization, a change in advertising. it affects all of us,and it's bad for all of us, in my opinion. ken auletta: so i am the newyork times, which we all would agree is an important source ofinformation in our society, how are you going to save me? eric schmidt: well, i don't knowthat we're going to save or not save a specificinstitution.
in the new york times' case,they are a large advertising partner on their site. we also index and delivera lot of content. the new york times isa specific example. people, using various googlemechanisms, read articles, and then they have an opportunity togo to the monetizing sites of the new york times. and we have a lotof technology to make that very easy.
so far we're very good at takingthe traffic that comes to google, and sendingit to the sites. we're not as good at takingthe traffic and monetizing it directly. and then giving the money to theother site, as much as the historic model, the printadvertising, and so forth. there is an analogy,involving itunes. cd sales have continued todecline, even though the net margin in itunes is roughlysimilar to a cd.
so you'd say, well, they'rekind of equivalent, right? well, they're not because thegross revenue that goes into that pays for jobs, andbuildings, and people, and distribution, who arestruggling with this change of model. and we certainly don't want tosee that continue in all of these other media industries. ken auletta: social networks,like facebook, you have orkut, have tremendous traffic,but they don't
have tremendous revenue. are you confident that theywill be able to sell advertising, and how? eric schmidt: eventually. we have a deal with myspace thatwe've been working on for quite some time. there's a tremendous amountof use of social networks. and, judging, based on thelook of this audience, my guess is that you don'tspend all day
inside your social network. but there's an awful lotof other people who do. and the traffic is phenomenal. and there will be advertisingproducts, that are in that context, about what people aredoing, where people will learn how to market andsell products. i'm very optimisticabout that. it's taken longer for theindustry to find those mechanisms, but they'reclearly there.
ken auletta: the same is truefor mobile devices? eric schmidt: mobile is actuallyeasier because, if you think about a targeted ad,a mobile phone has a gps, it knows where it is, and it'sa highly personal device. so one of the sea changetransitions going on in advertising is from untargetedto targeted advertising. when you go from untargeted totargeted, revenue goes up because the advertiser willsupport a higher ad rate, if you will.
mobile looks like it willultimately be the highest of the ad rates. that is, it'll be the mosttargetable and the most valuable, based on the initialsuccesses that we've had now. ken auletta: but it may notbe considered traditional advertising, it maybeconsidered service? eric schmidt: well,historically, in advertising everyone was focused ontelevision advertising, for example, many people hereknow all about this.
but there was this muchlarger business, called direct marketing. these were the flyers that youwould get in your mailbox, and things like that. one way of thinking aboutgoogle's success is to think that our primary success was,in fact, in that direct marketing piece, which is quitemeasurable and very, very tactical. we like to say that our mostimportant customer is, in
fact, the vp of sales in acompany, because when the vp of sales signs up, they can see,we're going to get this amount of revenue, and it'svery, very predictable. in the mobile case, it's justan extension of that. there will, of course, bepowerful new mobile ad formats, because as the devices,the mobile devices get more powerful, you'll beable to do things like click-to-play video ads, andother motion things. most people believe thatadvertising is ultimately
about telling stories, right? it's all about narrative, andthese new devices will be able to do very, very powerfulnarratives. again, remember, they know wherethey are, they have a camera, you can play video onthem, and you can talk to the person, right? eric, stop, turn left,you need new pants. i'm looking at them now, andthey have a hole in them. i mean you can imagine thatscenario, it's a very, very
lucrative ad. ken auletta: you mentioned allthese products, and apps, and things you're doing at google. what excites you? what new product, that you havein the pipeline get your juices going? eric schmidt: the ones that ithink are the most impressive are the ones that use artificialintelligence to do things that i cannot imaginewere doable.
the automatic translation thatis being done now, we will eventually do hundred by hundredlanguages, where you can automatically take thisset of languages and immediately convertthem into other. and the translations aredone by computer, not done with humans. that alone will havea phenomenal impact, we hope, on society. so that's one example.
another example that i'm very,very excited, has do with the geopositioning. people now, because of iphonesand blackberries with gpss, all of a sudden you don't haveto be given instructions anymore where you're going,you just sort of figure it out. you could say, i want to goto starbucks, or whatever. there it is, turn left, andso forth and so on. the level of resolution that wecan now achieve, again, is
exciting in and of itself. when you think about it, notso much in our part of the world, in the united states andin europe, but think about all the places that have neverhad reliable maps. and at google we have peoplewho are actually taking satellite photos, and handdrawing the first accurate maps of large, 30 millionpeople, cities, because they've never existed before. what we found was that oursearch business, advertising
and business, often are leadingand lagging with the presence of maps. because geo-mappingis so fundamental. we have a lot of fun things. for example, one of the demosthat we do, is we take a star field that is 13.5 billion yearsold, it's the widest view you can get out of thespace telescope, it was done in so-called deep view series. they go around earth, every oncein a while, and they take
these long exposure pictures. and we go from there all the waydown to a street sign in san francisco. and that view is a viewof 13.5 billion years ago to the present. and it's the largest fieldof view that a human can ever see. it is, literally, the sizeof the universe. this stuff is amazing.
ken auletta: when you think ofgoogle, and you spin forward, what do you worry most about? is it competition, is itsomething within google, something else? eric schmidt: at our scale, andin our position, if you look at the history oftechnology, the problems are set from within. it's not a competitor's movethat ultimately screws up the business, or the franchise,or the institution.
and, just as i was sayingearlier that companies in competitive markets often focuson a competitor rather than what they should be doing,we, because of our market position, because ofour success, we have an opportunity to find ourselvesas we go forward. but there are so many-- andpeople have commented on this a great deal recently-- there's so many obstacles tocontinued success, right? you have scale issues, andgrowth issues, and turnover,
and so forth and so on. but great companies, we hopeto be a great company some day, can overcome them. they get to the next level,the next level, and the next level. that's almost completely determined by internal factors. in our case, we've grownvery quickly. we have a lot of new people.
how do we make sure thatoriginal, incredible culture, which larry and sergey founded,which again, you've studied pretty carefully, howdo we know that that's been replicated uniformly acrossthe 20,000 or so employees that we have and all thecontractors and partners? how do we know that every personis operating at that level and scale? well, we don't. but we have to have systemsto do that.
so i worry a great deal aboutwhether the model, now that it's been set and it appearsto be scalable, will in fact scale. and that's been true fora couple of years now. ken auletta: do you worryabout government? eric schmidt: only in the sensethat they ultimately have the power-- governments can affectthe internet in some remarkable ways.
people have talked-- forexample, there are a number of governments that ban variousforms of google. youtube is periodically bannedby this country-- i can never remember whichcountries are banning youtube at any given time-- for whatever reason. and then we go andwe talk to them. and we explain that, yes, thatvideo, we know you didn't like that video.
and it's not legal here, butthat's only one video, and there's how many other videos,and so forth and so on. and then people put pressure onthem, and they unblock it. so that's an example. and i had never appreciated thatgovernments would see the internet as so important thatthey would begin to block it at the router level. so i worry about that. i think the issues of privacyand competition, that we're
talking about now, at least thewestern governments that we deal with, understand thebalance pretty well. we've been able to navigatethat, as have other internet companies. ken auletta: my last question,before i turn to the audience for questions. you're a relatively young man,but in internet time, you're an old man, you've been arounda long time, and-- eric schmidt: it's the firsttime i've ever been called an
old man, ken. ken auletta: you want meto withdraw the point? or speak it in russian? eric schmidt: no, no,please continue. ken auletta: what is uniqueabout this period? you've been through severalgenerations of change. what is unique about beinga ceo in internet time? eric schmidt: the onlydifference between now and 100 years ago is the compressionof time.
i've studied this for awhile. i looked at what was lifelike 100 years ago. and the equivalent group wassitting in the equivalent ballroom, having the equivalentconversation, but time was different. and, if you look at the historyof technology, what it really does is, itaccelerates time. companies are formed quicker,decisions are made faster, scaling occurs quicker, and,by the way, failure also
occurs more quickly. so one way to think aboutgoogle's success is that it in many ways it's no differentfrom the success of the companies that existed over the,say 30 years previously, that i looked at, that i'mdirectly familiar with, and obviously you'refamiliar with. the difference is it allhappened quicker. if you want to make a list of,what are all our challenges? well you have customer issues,government issues, scalability
issues, innovation issues,aging issues, employee turnovers, and soforth and so on. you can make all that list.the difference is it all occurs at google in six monthsrather than six years. when i was at sun, we had allthe same issues, we just had longer time. another example is that,at sun we had two year product road maps. we have trouble gettinga six month
product road map at google. it's not because the peoplearen't smart, people are very smart, it's just that itchanges so quickly. and my guess is that 20 yearsfrom now or 30 years from now, the next interview, andmaybe you guys will still be doing your-- ken auletta: whenwe're old men. eric schmidt: well, in yourcase, you'll finally be old. they will be saying the samething, oh we had so much time
when we were at google, butnow, in xyz company, god! everything happened inone month, right? and off we go. and the reason the compressionof time occurs is because there's so many more actors. we're seeing a situation nowwhere we, as americans, don't appreciate the effect ofthe industrialization of 2 billion people. and all those peopleare coming online.
they're all usingthe internet. and they're all goingto be players. and we have to listen to themand participate in it. there's not that much differencewhen you go back and you look at thekind of people-- when i first joined google, forexample, i realized that they're exactly-- at the time the people thati was working with were in their late 20s--
these were exactly the samepersonality types that i"d worked with 20 yearsearlier at sun. to the same point where thisperson, who didn't have a house, was sleeping in hiscube, on his futon. and i thought, it's the sameperson 20 years later. we had to put in a rule,by the way, you couldn't live at google. which we had to haveat sun too. ken auletta: questions?
yes. if you'd please just identifyyourselves. do we have microphones coming? there's one comingright behind you. audience: hi, i'm gerry corbett,with red flag, formally hitachi. i've been experimenting with thegoogle health, and i was really surprised at the lackof partners and service providers on the site.
and sort of intriguedwith some of the models that are on there. if you want to get your medicalhistory, you pay a company $25 to fax 100 pages. what's your view of how fastgoogle health is going to grow, and what are theimpediments there? eric schmidt: well, in the firstplace, we just launched it, so i'm glad you'reusing it. and we're in perpetual betawith our products, so we
listen to feedback,we're always changing it and so forth. the most important, i think,with google health will be the connection with your existingservice providers. and i agree with you thatthe list that we have is relatively short. on the other hand, thearchitecture that we built is pretty easy for themto connect to. so we think that with marketing,and the pressure,
and customer demand, because,remember we can bring so many people to it, we thinkpeople will come to it pretty quickly. how long will it take? we never know, but it'scertainly months, not weeks, as try to get more people. we have a whole team now goingout, now that it's public, and stable, and so forth, saying,wouldn't you really like to get your consumers all thatinformation, and all that
health information? the feedback about google healthitself, ignoring the partnership thing, hasbeen phenomenal. and we hope, over the next fewyears, that it will become one of the major ways, or one ofthe major components of the debate that's going tooccur in health care. ken auletta: yes, there. just wait for the microphoneto come please. larry aidem: i'm larry aidemfrom sundance channel.
first off on a personal note,lynn vanderhoek was kind enough to put me at the headtable, a very misguided act, but it is her birthday today,and so you should say happy birthday to her when she-- eric schmidt: happy birthday. larry aidem: she mentioned thatnone of the lowlifes in her family had said anything,so i figure that's the least we can do. i have a quick question juston the scale issue, eric,
because it's sort of a truism oftraditional media companies that the pace that they moveat is disturbingly the opposite of nimble. and yet you have, notwithstanding this spectacular growth, moved very nimbly. and you briefly addressed thepractices, but i'm curious, could you just give a coupleof examples of what you do internally to keep thatentrepreneurial, fast-moving. i think ken interviewed, a fewyears ago, one of your
executives who mentioned oncea week she has office hours where anyone in the companycan come for two hours. and i thought, wow,what a great idea. but could you just talk abouta few other examples that? eric schmidt: again, whenwe're talking about the problems of scale, eventuallyteams go from 3 people to 30 people and you wonder are yougetting 10 times more productivity. so we worry about thosekinds of things.
in our case, we have a number ofarchitectural reasons to be optimistic. every week everyone submitswhat they did in what are called snippets. and if you fail you get abusedby the email system until you tell us what you're doing. we can see that. people have something called20% time where they are encouraged to do thingson their own that are
interesting to them. most of our innovations actuallyoccur from 20% time. we do continual productreviews-- product review after product review. we spend all day sittingin meetings just, how are you doing? why are you not doing better? ken in his coverage of googlewatched one of these where all of a sudden it was obviousthat, in particular, the
founders thought that thisparticular area was just not aggressive enough. and eventually we sent them offand said come back with a more aggressive plan. so i think part of the thingsthat we do are to push harder. i don't think that thecreativity and the innovation occurs naturally. i think it does need tobe executive assisted. and in that context,risk has to be--
it has to be ok to fail. ken auletta: question,corner here. behind you. miguel helft: hi eric, miguelhelft from the new york times. going back to ken's questionabout monetization, media, and the threat that this change isposing to our business, what sense of responsibility, if any,does google have in sort of helping solve thatmonetization problem? and as you've mentioned, if youdon't solve it or somebody
else solves it, they'll be lessinformation in the world and less for you to organize. and if there is a sense ofresponsibility, to what extent does it play a rolein helping design? or how does it constrain youwhen you design a product like google news which a lot ofpublishers, rightly or wrongly, see as competitive? eric schmidt: in the case ofgoogle news, after a lot of discussions with the publishersof the key
newspapers we agreed that onbalance google news sent more traffic to the sites thancannibalization of the sites. so on balance we concludedthat it was positive. it's important to know thatthe publishers who go into google news have an opportunityto opt out. in other words, they'renot forced into this. because it's easy if you don'twant to be part of the index. so the consensus after a lot ofconversations was that on balance it was positive.
that's not an answer to youroverall question, but it's a specific answer. the overall question of what arewe doing, it's a huge, in my view, moral imperativefor google to help here. and a lot of the issues arounddoubleclick were really about historically google has hadadsense for content product which allowed you to monetizeessentially largely remnant inventory and other sort of websites inventory that was not directly sold.
by combining the doubleclickarchitecture with that architecture, we can offer asingle essentially exchange and platform for publishers,which over time we believe will begin to generate some verysignificant revenue for online publishers such as thenew york times and the new york times' competitors. it's a very large businessopportunity for us. it's very, very competitive. as i mentioned, yahoois a leader there.
microsoft has a significantoffering there. and there's a couple ofother companies as well, including aol. ken auletta: ben? just stand up. you got it. ben schachter: hi. ben schachter, i'm a financialanalyst at ubs. but i won't ask you aboutthe quarter so
don't worry about that. a more broad-based questionabout passion, and that is early stages of the company,really there was a passion about organizing information. and you sort of found a way,in a lot of ways copied a model, about how to pay forit around advertising. but the passionate reallywasn't for advertising. so the two questions are-- is the passion for you and fora lot of at the company, has
it always been around the ideaof cloud computing, and the network, and that you'recontinuing to evolve that? and the second question is howdo you keep the financial discipline around paying for thebuild out of that cloud? eric schmidt: the passion on theadvertising side is very strong still. and it's around new advertisingapproaches to targeted advertising. every time i see an ad thatmakes no sense to me, i think
why did that advertiser botherpaying what are pretty significant ad rates when theycould have used a more targeted approach. we have many product ideas ofthings that we can do that will produce fewer,more targeted ads. and that model we think has verysignificant sort of legs, if you will. lots of future. the cloud computing is a wayof expressing, imperfectly
perhaps, the notion that googleis becoming more and more central to a lot ofaspects of the way the internet is working ifyou're a daily user. there is a new way of buildingapplications that's not the monolithic windows-basedmodel. if you think about the oldmodel, you had this huge development tool. you built the dlls, youdistributed it and so forth. this new model is much moreof a sharing model.
so we're trying to comeup with language that explains that. if you don't care if thetechnology, you can see this if you use, for example,google calendar. and i thought calendars arenot very interesting. but the calendars that we offerare phenomenal because they're so easy to crosslink. or spreadsheets similarly. in a spreadsheet cell you canhave an automatic search which
automatically changes the celland so forth and so on. we just had a developerconference here across the street a few weeks ago wherethousands of people came to learn how to build in this newapplications platform. how does that relate thatto advertising? all of those platforms willneed to be monetized. all of those platforms are goingto at least consider using advertising as away of making money. some of them will be enormouslysuccessful, of
course we don't know whichones right now. audience: yes, thisgentleman here. we'll come to you. adam lashinsky: thank you. hi eric, adam lashinskiwith fortune magazine. you said that the vast majorityof mobile searches on google are comingfrom the iphone. which is a fascinating commentsince the iphone is a tiny market share of cell phones.
could you quantifythat in any way? and i understood your to ken-- i want to know if i understoodyou correctly that you don't necessarily need to recuseyourself every time discussion of the iphone comes up at theapple board meetings. and one other quick question,you also said that google is working on ways to help thisproblem continuing to get high quality content given that therevenue stream is decreasing for the overall media.
would you give a couple examplesof what google is doing to help fixthat problem? eric schmidt: in reverse order,the easiest examples have to do with some of theproducts that doubleclick will be offering. publishers use doubleclick andnow can monetize their websites more by the integratedoffering that we're busy building. with respect to that iphone idon't know the exact number,
but it's on the order of afactor of 10 or more searches. and the reason simplyis that the iphone has a better browser. and we hope that as othercompetitors for the iphone bring out more scalable and morepowerful browsers we will also see very significantgrowth. my guess is most of you haveeither never used the browser that's in the mobile phone thatyou use or it doesn't work at all.
or in any case youcan't find it. if you are an iphone user today,it's easy to find. and that's the distinction thati was trying to make. and on the recusal issues, yeah,that's roughly right. ken auletta: ok, adam? yes, ma'am. christa quarles: i guess whenmarketers figure out which half of their ad budgets they'rewasting, do they just spend half?
is the ad market goingto get cut in half i guess when that happens? and then the second part ofthat question is as the ad market becomes maybe too small,is that why we're potentially seeing focus creepto the extent that you're looking at renewable energy? i guess how does that fit intoorganizing the world's information? so any comments there?
male speaker: say who you are. christa quarles: oh,sorry, christa quarles with thomas weisel. eric schmidt: yes, hi, chris. i disagree that renewableenergy is focus creep. when you realize how much energygoogle uses, it's the least we should be doing. these data centers that we'rebuilding unfortunately use an enormous amount of power.
we try to put them nextto renewable-- like next to dams. presumablynot downstream from the dam but sort of next to the dam. and things like that. because we're very aware of theenvironmental impact of the data centers. one of the studies is thatabout 1 and 1/2% of us electricity is in factnow going to data centers as a whole.
so it's an important issue andsomething we care a lot about. ken auletta: did you say half? eric schmidt: 1.5%. ken auletta: oh, 1.5%. eric schmidt: 1.5% was themost recent study i saw. christa, could you repeatyour first question. christa quarles: whenthe marketers figure out which half-- eric schmidt: yeah, whichhalf, will it go down?
the evidence is that budgetsgo up, not down, in this situation becauseof the linkage. think about why dopeople advertise. they don't advertise just forfun, and they certainly don't advertise just to see their adson tv. they advertise in order to sell stuff. and so when we can show alinkage for direct marketing spending for sales,the budgets go up. now so far, the question that'sasked overall is what
happens to total ad budgets. and we don't know. we know that the advertisingindustry is on the order of $750 billion, roughly half inthe us and half elsewhere. we know that it's is growingslowly, not a lot. we know that the online part isgrowing very dramatically. some of that is taking share. so you're seeing a shift fromuntargeted to targeted ads. and i think that will continuefor many, many years--
20 years, 30 years. ken auletta: yes, sir? audience: hi, i'm[? stefan busick ?], newhouse class of 1980, now serving atcomcast. you had said earlier in your remarks, perhapsoff-handedly, that one of the goals at google was tochange the world. to what end? eric schmidt: to be better. audience: that's a lofty goal.
that kind of power can be usedfor good or not so good. what is you're-- eric schmidt: well we're notplanning on doing bad things. audience: well yeah. i was just wondering what isyour idea of creating a better world through google? eric schmidt: well a lot of theworld is organized around lack of information, and inparticular trying to prevent people from knowingwhat's going on.
in the technology generationthat i've been part of the biggest story has been theempowerment of individuals to use digital technologyto find out things. i talked about theyoutube growth. another thing that's growingvery quickly is the uploading of digital photographs. our estimates are we getsomewhere between 15 and 30 million photographs uploadedevery day. that number is growingvery dramatically.
and those photographs,by the way, are almost all about people. so people are obsessed withtheir friends and what's going on and so forth and so on. that photographic record hasenormous value to open society and is ultimately threateningto closed societies. so we take the position thatthe empowerment of the individual with all the kind ofinformation that we see is ultimately an improvement.
my personal view is that you'regoing to get better governance with moretransparency. you're going to get bettergovernance in the political sphere, businesses, and soforth, to the degree that your model allows you to talk aboutwhat you're doing and to let people know about it. we have tried within-- and google started off, and anumber of the reporters here know, pretty secretive.
and we've tried as hard as wecan to change that culturally, to write down exactly whatour policy is, exactly what we're doing it. because the world is betterwhen you know what people are doing. ken auletta: let's takeone more question. this side of the room. yes, sir? justin resuello: thank you.
hi, my name is justin resuellowith moody's investor service. i'm wondering if you couldtalk about the mission of don't be evil, perhaps inrelation to google.org, and the challenges the firm faceswith commodity costs and supply issues. where does google.orgfit in and is it becoming more important? eric schmidt: as partof going public-- we debated going public.
as you know, it was a bigdecision for the company. ultimately we really didn'thave a choice. we decided that as part of thewealth that was going to be created we wanted to pay some ofthat back into society, and a commitment was made thatroughly 1% of equity value and 1% of profits would go in. and google.org was createdas a result. google.org has identified fiverough errors they're focusing on, and they have projectsin each one of them.
one is in renewable energyas previously discussed. another one has to do withsmall businesses. another one has to do withtransparency in governance in third world countries. and there are a coupleof others. i won't do justice, but ifyou go to their website you'll see them all. and a lot of google employeesare volunteering their time with it.
it's an example ofdon't be evil. don't be evil is oftenmisunderstood. we don't have an evil meterthat we can sort of apply. this is-- you know, you were sayingearlier about what is good or evil. but the rule of don't be evilallows for a conversation. and i thought when i joined thecompany this crap, right? companies don't reallyhave these things.
it must be a joke. it must one of thesesort of larry and sergey humorous things. so we're sitting in a roomin the first six months. and we're sitting around havinga discussion about advertising and one of theengineers says, that's evil. and it's like a bomb goesoff in the room, right? everything stops and everyonethen has a moral and ethical conversation, which, by theway, stopped the product.
i saw it with my own eyes. so it's a cultural rule. it's a way of forcing aconversation, especially in areas which are ambiguous. ken auletta: i wantto thank eric. i think we've seen why he'snot a figurehead. eric schmidt: oh, thankyou very much, ken. happy to do this andthank you all. drew schutte: i just want tothank eric and ken and thank
our sponsors, ubs and thenewhouse school for making this happen and thankyou all for coming. have a great day.
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