Alphabet Inc (GOOG)

[SeriousMoney]

Google CEO sees blue skies of "limitless growth"
Wed May 10, 2006 8:18 PM ET
By Eric Auchard

MOUNTAIN VIEW, California (Reuters) - Google Inc. <GOOG.O>, facing mounting competition in the Internet search advertising market from Microsoft Corp. <MSFT.O> and Yahoo Inc. <YHOO.O>, expects that rivalry to drive up prices and increase its revenue, Chief Executive Eric Schmidt said on Wednesday.

"There is a surprising, if not bizarre (fact that) more competition in auctions can actually produce more revenue, rather than less," Schmidt said at a press briefing at Google's Mountain View, Calif., headquarters.

Schmidt also suggested that in the long run, allowing people to search the Web via mobile phones could be as big a business as its computer Web search business, which last year generated around $6 billion in revenue.

Google is the leader in Web searching, with 60 percent of the global market. It derives virtually all of its revenue from selling text advertisements alongside search query results.

More competition "can in fact cause prices to rise," Schmidt said, adding that this would benefit not just Google but other players as well.

He singled out Microsoft and Yahoo, which in recent weeks have introduced major upgrades to their search technology that will be available later this year.

"There is room for (Microsoft and Yahoo) and more to succeed," he said.

Google's competitive advantage is that the overwhelming focus of its business is on search, he said.

Regarding mobile phone searches, Schmidt said, "As people do more searches, it should balance out" with computer-based searches, but he ruled out speculation that Google may be looking to become a reseller of wireless telephone services.

"No, we are busy," he said bluntly.

Schmidt said Google appears to be benefiting from a "limitless growth model" that shows no signs of ending.

"If this all comes together it will work as a continuous cycle," Schmidt said, noting that more users, more advertisers, and more content will serve to create further demand.

Schmidt said the revolution in advertising that allows Web sites to generate revenue simply by driving traffic to their sites "seems to be turning power relationships on their head." Users are in control of the information they search for, he said, and this is turning economic relationships around.

Executives introduced several new products, including an upgrade of Google Desktop that stitches together computer applications from Google and independent providers.

The company also plans to offer Google Notebook, a simple text and graphics editor that allows users to write or copy information as they search.

It introduced Google Co-op, a way for users to tag, or categorize, information, and a trial product, Google Trends, which allows any user to search for patterns in Google's search database.

Asked whether the Google Desktop platform represents a new level of competition with Microsoft, Schmidt reiterated that the company was not seeking to replace the Windows desktop.

"The cornerstone of our strategy is to solve new problems," he said, adding that advertising and its resulting cash flows give Google the luxury to innovate over time.

However, co-founder and president Sergey Brin underscored the enmity between Google and Microsoft.

"We just certainly see the history of Microsoft behaving anti-competitively, not playing fair (and being) a convicted monopolist," Brin said.

Google executives said billions of dollars of stock sold by the senior executive team over the past year were all part of an ordered selling plan that the company had disclosed in 2004.

Brin said he had sold 20 percent of his original holdings but planned to hang on to the remaining 80 percent. "The vast majority I intend to keep forever," he declared.

Google shares fell $5.82, or 1.4 percent, to close at $402.98 on Nasdaq.

http://today.reuters.com/business/newsarticle.aspx?type=ousiv&storyID=2006-05-11T001800Z_01_N104...