GOOGLE chief executive Eric Schmidt says the US economic situation is "pretty dire". He says he does not expect to see improvement until 2010. "Everyone is assuming 2009 is a tough, tough year," he said during an appearance at the Morgan Stanley Technology Conference in San Francisco.And while Mr Schmidt said that Google and other internet advertising giants may be better positioned than offline counterparts, "we are not immune" to current economic conditions.
"I view the situation as pretty dire," he said, referring to the world’s biggest economy.
The company in January reported surprisingly strong fourth-quarter results that suggested Google's search-advertising business and cost-cutting efforts have enabled it to weather the recession better than rivals.
Mr Schmidt said Google management has spent much of its time lately conducting business reviews aimed at controlling operating costs and evaluating each business unit's ability to generate revenue. Shares in Google closed down less than 1 per cent at $US325.48 in New York.
Google shares fell another 3 per cent to $US314.70 in after-hours trading. Mr Schmidt struck an optimistic note when discussing Google's opportunities in the mobile search and display advertising businesses.
He predicted that mobile search ad revenues would surpass PC-based paid search sales with a "few years," as opposed to a few decades. Mr Schmidt pointed to Japan as a leading mobile market in which Google has established partnerships with two of the top three mobile providers.
He said the company was now attempting to replicate those types of deals, with the "obvious prize" in China. Mr Schmidt avoided addressing speculation that Google might seek to capitalise on the downturn by deploying its Android mobile operating software on low-cost netbook computers.
But he noted that several hardware makers have announced upcoming Android-based products, some of which look like phones and some of which don't look like phones. The CEO also said it makes sense for wireless operators to start subsidising netbooks much like they already subsidise mobile phones. Mr Schmidt also said the search advertising company has a good opportunity to apply the "Google magic" to the display advertising business.
He noted that Google was in the process of building an online advertising exchange, replete with measurement tools that will help display properties figure out which ads to show where and when. He also said display ads must evolve into rich, dynamic spots that have value to consumer. A third challenge for Google will be to build the business relationships with large advertisers. Mr Schmidt also rejected the notion that Google had sewn up the online search market.
He said internal data has shown that users move very quickly from one search engine to another and the majority of people use more than one search engine.
He added the Microsoft has been working to upgrade its search engine.
"There is obviously a lot of innovation ahead of us," he said.
"Search as it is defined, Google is not settled at all." Mr Schmidt, a prominent supporter of President Barack Obama, defended the administration's efforts to boost the US economy with a $US787 billion ($1.2 trillion) stimulus package consisting of tax cuts and spending.
He said the stimulus package allocated $US20 billion in subsides and credits aimed at encouraging the development of high-speed internet infrastructure, as well as a $US20 billion increase in science funding.
"We benefit when our customers have jobs and they buy stuff. Any solution that gets the middle class to feel more confident benefits Google," he said.
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