By Eric Auchard
MOUNTAIN VIEW: Google
Inc., facing mounting
competition in the Internet search advertising market from Microsoft Corp.
and Yahoo Inc., expects that rivalry to drive up prices and increase its
revenue, Chief Executive Eric Schmidt said.
"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.