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Friday, December 03, 2004

Google, Value & Scale Up

Fortune has published an interview with Eric Schmidt,CEO, Google. Excerpts from the interview:

What people do not understand about Google: The thing that people seem to miss about not just Google, but also our competitors, Yahoo, eBay and so forth, is that there's an awful lot of communities that have never been served by traditional media. There's a tremendous number of small businesses that have been able to get tremendous economic returns because all of a sudden their market is no longer a local market. But it's a global market of like-minded small businesses in a specific area. The sum of that market, if you include the large companies and the small companies throughout the world, is the world's gross domestic product--so, yes. And I think our financial results show that. We've seen tremendous growth in these sort of very small micro markets. There are so many of them that the numbers are very, very large.

About broadband:The first is that we see broadband users use Google a lot more. Now, we don't know what is the causality. We don't know whether it's the broadband that allows it, or whether it's a demographic profile or something, but we do know that broadband users use Google much more and they buy more things. They live on the Internet because of broadband. So, it is strategic for Google to have broadband deployment worldwide. Every person who converts from narrowband to broadband is more likely to be using Google and its services. You can imagine a lot of services with broadband that are difficult to do on narrowband. We have, for example, announced a relatively limited image ads product. You could imagine the evolution of the image ads to take more and more advantage of broadband. But you have to be careful not do it in such a way that it doesn't work on narrowband, because people will have narrowband for a long time, too, especially in the Third World. So you have to do both. We're in a situation where most of our products will have to know how fast is the connection and then adjust. The longer term goal is to have businesses give us very timely local information. So, for example, they'll say we have too much of this or too much of that product, and we want to have a sale. The goal is to have the computers arrange that real time and send out targeted advertising to interested parties nearby. (it's starting to look like allowing merchants to use Google to sell their products.)

On Future Search Beyond Keywords : Today, we buy and sell keywords, but what you really want to do is move to concepts or themes or groups or something. It's a difficult area because it's hard to automate that, but what we would like is we would like customers to be able to say, 'I'm in this industry, please help me.' We already have a keyword suggestion tool. The average person doesn’t want to figure out the right keywords. This turns out to be incredibly popular, big surprise. If you didn't know what you were doing when you started, and you're new to the industry, you'll try the suggestions, so we like that.

On Google Applications: Well, we actually build applications from the bottom up, as I think you know, and we've said publicly many times. We have this unusual way of managing engineering. Our engineers are encouraged to spend 20% of their time exploring new applications in the general area of information. Virtually all of the interesting new applications at Google have come out of that process. An engineer will get excited about something, they'll build a demo, we'll look at it and say this is great, why don't you see if you could take it to the next level. It's very Darwinian. There are plenty of such ideas that just don't get past that. It's very hard to estimate, but it's certainly not 80%, it's probably more in the one out of three, one out of five. Gmail is hugely successful, came out of the 20% time of a particular engineer who just got interested in a new way of doing e-mail. And as it's taken off, we obviously have a significant team on it and a significant investment, but it didn't start off that way.

On Google Infrastructure Scaling Up: For the systems, which were not going to scale to the scale that we're now operating, we had to replace them. Those are essentially computer systems. For example, we build our own computers, we build a lot more now, so we have a whole assembly line, and it's managed properly and professionally.
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