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March 6, 2007

"The market for targeted advertising is still very young, with lots of innovation and lots of improvement still to come," said Eric Schmidt, CEO of Google.

Schmidt was addressing an investors group yesterday when he said that statement.

"Google and the rest of the search industry are just at the beginning of our ability to target specific ads. Overall, there are many new technologies to come real soon," Schmidt said in a presentation and Q&A session at the Morgan Stanley Technology Conference in San Francisco.

Despite a few large companies dominating the search and online ad space such as Yahoo, Google and MSN, Schmidt added it's way too early to talk about any consolidation. He pointed to more mature industries, like enterprise software, as better candidates for consolidations.

Schmidt also pointed to Oracle's many moves in consolidating by acquisitions, "and doing a fairly good job as far as I can tell." But Schmidt also predicted an explosion of innovation related to targeted advertising over the next several years.

"On average, there are so many new places for targeted advertising, it's not the time for consolidation," he said.

One of those places is mobile phones and devices. Schmidt spoke highly of the forthcoming iPhone and mobile phones in general as "the first highly targetable devices." "The iPhone is an incredible product. It's the first full-featured phone that's a music player, Internet browser and computer," said Schmidt. "I'm sure there will be many more of these kind of devices coming soon."

On the subject of a different platform, Schmidt said about 90 to 95 percent of TV viewers are already exposed to random ads. "It's a constant barrage of ads that aren't relevant. Pet food for people without pets, baby products for families without kids, etc. Even a small improvement in relevancy would have a very large overall impact."

Schmidt said Google is exploring ways to better target TV advertising and leverage the fact that an increasing number of consumers have IP addressable set top boxes. As regards Apple, Schmidt noted he is on the board representing shareholders and isn't directing any product strategy. But he applauded Apple for what he called the success of its "clear strategy."

"Google and Apple are doing more and more things together," he said. "Apple remains one of the great innovators for now. We have similar goals, similar idealogies and similar competitors."

Speaking more broadly on the shift to software and storage "in the cloud," or at a remote facility, Schmidt said the trend is largely inevitable. "If you drop your computer, it's a disaster," said Schmidt. "Any rational person would want to put his or her data somewhere else. That transition is happening right now and I think it will intensify over time."

He also noted that it's a real struggle for Google to keep up with demand, because it has more traffic and a larger search index than anyone else. "At Google we have a number of shortages inside the company. One of the most acute is overall data center capacity. Google has made large investments in hosting and storage facilities, and proprietary hardware design to help address this inherent problem," said Schmidt.

He added that Google would be able to get enough computing power for the foreseeable future. He said the company is willing to pay a reasonable premium for the "right kind of power" pointing to green technologies and tapping hydro electric plans with excess capacity.

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Source: Internet News