Lisa Baertlein

SAN FRANCISCO: Web search leader Google Inc. is focusing investment on expanding advertising services and improving Internet search, the Web search leader said at its first analyst day as a public company.

Google Chief Executive Eric Schmidt said Google's current advertising services are most popular with medium-sized companies and that it is working on products to serve the largest and smallest advertisers.

Google's mid-market advertising business is highly automated and low cost.

Very small advertisers are more likely to not have Web sites or be unfamiliar with Internet search advertising that drives virtually all of Google's revenue.

The company recently increased the number of people devoted to direct sales and to helping large advertising customers track the performance of their Web search ad dollars.

Omid Kordestani, Google's senior vice president of worldwide sales and field operations, said the company is focusing on signing up more local advertisers and beefing up tools that help advertisers better target ads and measure their effectiveness.

He also said the company could do better in the Asia-Pacific region, where it has just three advertising sales offices versus nine in Europe and 12 in the United States.

Google competes with Yahoo Inc. for Web search advertising dollars both in the U.S. and internationally.

New Web search entrant Microsoft Corp. has not said whether it will build its own Web search advertising services. It currently partners with Overture Services, Yahoo's Web search advertising provider.

In all, Google said it would put about 70 percent of its investment toward its core Web search and advertising businesses.

Schmidt said the business side of the company is run in a traditional way while the product development side is more creative.

"We're actually not as unconventional as we say we are," Schmidt said.

"We're in this to make money," said co-founder Larry Page, although he added that Google will not try to drive revenue with each of its products -- which range from local, news and image search to free online e-mail and photo management services.

Google shares closed down 3.6 percent at $191.58 on the Nasdaq, ahead of IPO-related lock-ups expirations that are slated to expire on nearly 177 million shares early next week.