Google CEO Eric Schmidt Talks Future, Economic Trouble

Google CEO Eric Schmidt takes some time during the Morgan Stanley Technology Conference in San Francisco to discuss Google wrestling with the current economic doldrums, cloud computing, netbooks, and where ad revenue will flow from over the next few years. Microsoft and Yahoo are still viewed as viable competitors for Google's search business, says Schmidt.

Google CEO Eric Schmidt launched into a wide-ranging presentation during the Morgan Stanley Technology Conference in San Francisco on March 3, covering everything from how Google is dealing with the current economy to the rise of mininotebooks, known popularly as netbooks.

Given how the current recession seems to be on the forefront of every company's mind these days, Schmidt took several minutes to discuss how Google will potentially be affected.

For the online world, "the next few quarters, things are going to be very, very tough," he said during the conference, and predicted that it would be 2010 before the industry saw a turnaround.

"We are not immune to this," he added.

According to some analysts, Schmidt's straightforward discussion of Google's potential economic peril serves a purpose.
"Over the past 12 months, as the economy has continued to spiral down, we've seen CEOs that have tried to finesse the truth, and they've been punished for that willingness to be less than truthful," Charles King, an analyst with Pund-IT Research, said in an interview. "So it's important for C-level executives to be straight with people about the economy and how their companies are affected."

"From the standpoint of base realism, we've seen a slowdown in the amount of money that people are spending to buy things," King added. "So even companies like Google, whose revenues are advertising-based, are going to take a hit."

However, even economic devastation comes with a bit of a silver lining, at least if you're Google.

"There's an increasing willingness to try new systems in the enterprise. We have a set of enterprise offerings [that center] around information, mail applications and documents," said Schmidt. "We've been pleased with the willingness of customers to now accelerate their trials .... [T]heir budgets are very, very tight and our stuff is just a lot cheaper."

Schmidt also dismissed ideas that the search engine wars were settled, citing both the rise of new players in the arena and the continued attempts by old ones to gain market share.

"Microsoft is working very hard to build a search engine," he warned.

As for another major player in the search business, Schmidt took a moment to refer to the newly appointed Carol Bartz as a "fine and able" CEO for Yahoo.

Earlier on March 3, Bartz also engaged in a broad discussion with audience members at the conference, in which she said that any negotiations with Microsoft about Yahoo search would be conducted "privately."

And cloud computing is coming, Schmidt said.

"Cloud computing is one of those changes that's going to happen regardless of whether companies that are participating in the ecosystem allow it, because the technology will make it happen," he elaborated.

This is ultimately good for Google: With everybody online, "you can get a lot of information about user behavior that you can mine or build interesting products for."

Some have been predicting that 2009 is the year that Google and Microsoft start duking it out over cloud computing.

As for the future, "mobile devices are going to be the majority of the way people get information." Citing Moore's Law, Schmidt seemed confident that it would be "a few years, but not a few decades" before phones with the processor capacity of a computer allowed users to do everything they now do on a PC, including media-intensive applications.

At that point, he predicted, ad revenue from displays on mobile devices will pass revenue from ads displayed on traditional PCs.

Future mobile devices "have a GPS on them, and they're personal-so they know what you've seen and won't show the same thing over and over again like my television," he said. "That's a huge change in the business model. Those products are getting built, and the challenge and opportunity is how you get money out of that."

In true CEO fashion, Schmidt envisioned a price structure for this future branch of computing: "The monetization of the ads should be higher, because they're targeted."

Editor's note: This article has been updated with comments from an analyst.