In the Internet's second era of rapid adoption and growth, Google isn't betting on the user. It's betting on all the users, and using their collective activity to better understand how to serve ads.
Google CEO Eric Schmidt took the stage at the Web 2.0 conference in San Francisco yesterday and explained how Google's acquisition of YouTube hints at its strategy for Web 2.0.
Schmidt said Google bought YouTube because the site's huge user base will allow Google's servers to better understand what users want on the Web.
"The underlying draw is to see what users are doing and have computers suggest related or adjacent content. It is a whole new paradigm and important to users," Schmidt said.
The important point to note is that Schmidt is talking about scale. That complements what Google Video project manager Hunter Walk said at the Streaming Media West conference last week: "You can go wrong betting on the user." By that, Walk was suggesting that individuals acting alone can produce a lot of crap. But individuals acting in concert -- i.e., making a video on YouTube the most-viewed video of the day -- can provide excellent data for Google's ad-serving engines.
This strategy is reflected in Google Video's Sponsored Videos program, which relies on producers who have over 1,000 hours of content. It's also reflected in Google's focus on collaboration with Google Docs, its recent acquisition of collaborative software company JotSpot, and even its image-labeling game.
Google's focus on collective action also works well for large advertisers, which continue to buy ads based on a platform's ability to scale. Whereas a company like Deutsche or Avenue A/Razorfish isn't interested in what one user is doing, it's interested in trends. What better zeitgeist predictor than Google?
During his appearance at Web 2.0. Schmidt also attempted to clarify several rumors and assumptions about Google's business practices.
Schmidt denied the rumor that Google has set aside a secret reserve of cash in the event of copyright litigation against YouTube. That rumor was originally published on Mark Cuban's blog.
Schmidt also denied that Google was working on an online office suite that would compete with Microsoft. According to ZDNet, Schmidt said, "We embarked on a strategy to build apps that are search-centric and very sharable ... as something [to] use in normal life. We are not arguing it is an [Microsoft] Office replacement, but a different way of [managing] information. I don't think it replaces Office. The focus we have is casual sharing and usage, and it has one benefit -- it is free."
While Google's productivity apps don't compete directly with Microsoft's apps now, Google has a well-known strategy of betting on the Internet. In other words, as more people move online to do work, Google will be in a prime position to capture those users.
Google has been rolling out productivity applications throughout the year. In October, Google merged its spreadsheets and word processing apps to form Google Docs. Google released Google Spreadsheets in June. Google purchased startup Writely.com, one of the more popular Web 2.0 office applications, last March. Google also released a bundled suite of productivity software called Google Apps for Your Domain in August. Last week, Google started to allow Excel files sent via Gmail to be opened directly in Google Docs.