CEO Eric Schmidt discusses how Google is handling challenges from Microsoft and upstarts Twitter and Facebook — and why search remains its priority.
For all the many projects Google (GOOG) has cooking, from the video site YouTube to a new computer operating system, Internet search remains far and away its most important product. Search advertising, along with related ads that it runs on thousands of partner Web sites, still accounted for nearly all of its $22 billion in revenues last year.
That gold mine utterly depends on how well Google's search engine can maintain its lead. In a close look at the company's search quality group, BusinessWeek found that search remains Google's overriding focus. Several hundred engineers in the group continue to tweak the algorithms that instantly match queries with relevant results, making as many as 500 changes a year to these mysterious mathematical formulas.
But today, Google arguably faces more potent competition than ever, from Microsoft's (MSFT) relaunched search engine, Bing, to upstarts such as Twitter and Facebook that could change the balance of power in the Internet economy. In an interview with Silicon Valley bureau chief Robert Hof, Google Chief Executive Eric Schmidt explained how Google plans to stay ahead in search, and he defended Google against concerns by some investors that its many non search projects could be distracting.
What is Google's biggest strength in search?
Scale is the key. We just have so much scale in terms of the data we can bring to bear.
Are disruptive innovations in search a thing of the past?
The days when you can come in with some new idea and change everything are gone. It's a much more sophisticated set of problems than can be done with a small team coming up with a new development.
There will be disruptive developments, but they will be inserted into the flow. We keep trying to come up with new ideas. One of the ways is you bring in a new viewpoint — some grad student who really has a different view — and we help them get that view implemented.
Is there a danger that Google is focusing too much on sustaining innovations vs. disruptive ones because it has a commanding lead and its system works well as it does? Is it facing the Innovator's Dilemma where it will have trouble disrupting itself?
I think applying the Innovator's Dilemma is too simplistic. You can't throw out the existing system. There's not a need to, because it works well.
That said, in our culture, there's a bias for coming up with new ideas. We know there are significant improvements ahead, so [we tell people to] go look for them.
How much of a challenge for Google are the new real-time and social activities such as on Twitter and Facebook, where the posts are either private or so recent it's tough for Google's algorithms to rank them?
If we can't get the data, it's very, very difficult for us to rank it. Facebook has chosen to keep much of its data behind a wall, that's what it has decided to do. We favor openness, because we think that works best for the users.
Twitter is a good example of something that is very hard to rank. With real-time, we should over time find a proper way to rank them. We implemented Universal Search a while back, even though people thought it would be difficult to include videos and images in the core results. We found a way to blend different kinds of results, and it has worked very, very well. I suspect we'll be able to do the same thing with real-time.
Twitter and Facebook aren't the last things we'll see.
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