Google Educational Webcast on Mobile Part 2

>> GUNDOTRA: ...patient can make ads even more relevant. Okay with that, lets move to
question and answer and I'll invite Patrick and Mario up on stage with me.
>> PICHETTE: Mario. >> QUEIROZ: Patrick.
>> PITCHETTE: So, Maria will be reading us the questions that she is getting on the,
what I call, the doily page, and so why don't we take the first question, Maria.
>> MARIA: The first question is, how confident are you that Google will be able to drive
material revenue for mobile search within two to three years? How much may be incremental
to desktops search? What are CPC levels and trends for mobile versus desktop? And what
are your learnings from Japan? >> GUNDOTRA: So, we are very excited to kind
of report that, and we said this publicly previously, that mobile searches appear to
be additive and incremental to our business. In other words, they're inversely correlated
to desktop. Just when we see desktop search usage patterns decline, for example, when
people go out to lunch, that's exactly when we see mobile spike. And so, we think these
are brand new searches, searches people do when they're out and about and on the go that
we never would have seen previously but now are seeing. And in terms CPC levels, it's
important to note that prior to the arrival and the mainstreaming of smartphones, when
you're talking about the feature phone era, CPCs were, in fact, dramatically lower than
that of desktop. With the arrival of smartphones, we've seen CPCs rise dramatically. And, as
I mentioned earlier, with the increase–-with the improved technology like location and
other attributes that a mobile device provides, we hope and believe that there's even a chance
that we could exceed desktop in the future. >> MARIA: Great. So, next question is how
do you see wireless phones and mobile device distribution evolving? What have you learned
from the Nexus One launch? >> QUEIROZ: I'll go ahead and take that one.
So, we think that the existing models of distribution, which in most of the world, are operator-centric
are very effective at delivering great mobile phones to consumers. We also see an emerging
trend in consumers wanting to pick a great device and then choose his or her operator
of choice. And that's a need that's being fulfilled by some innovative companies in
different parts of the world, Carphone Warehouse, for example, in the UK, and different independent
retailers in the US. And that's also the need which we chose to address with the launch
of the Nexus One through our Google-hosted webstore in January. Now, you questioned about
what we've learned from the Nexus One launch? We chose to launch the Nexus One through an
online channel because that's the fastest and most effective way for us to learn from
consumers, so that we can iterate and make improvements. We've made significant improvements
to our purchasing flows as well as to our customer support processes, and we're pretty
pleased with the results so far. So, pleased that, as we mentioned in January, our intent
is to expand the program in terms of more devices, more operators, and more countries.
>> MARIA: Great. The next question is about China. What is the outlook for Android and
Chrome OS in China given recent Google search dynamics?
>> PICHETTE: So, why don't I take this one. I think that there's, in its simplest form,
this about Android platform. Android platform is available to everybody and all of the carriers,
all the handset providers can actually use the Android platform, it's an open source
platform. And so, China is, obviously, you know, another great market in which Android
should flourish. So, we look forward to that. Maria, next question?
>> MARIA: Great. The next question is looking at five years, the mobile device market will
likely be bigger than the mobile phone market. In general, talk about Google's OS market
share objectives in each of these categories, Android versus Chrome OS.
>> GUNDOTRA: So, why don't talk broadly then you can talk about Android. It is–-we agree
with the sentiment expressed in the question, that looking forward in a half a decade or
so, there will be many mobile devices that are bigger than what we consider the mobile
phone market to be. And those mobile devices will vary in size, from small phones up to
larger form factors. But what we think is critical is that regardless of manufacturer,
in fact, regardless of even platform, what will be the common element across these new
emerging web endpoints will be powerful browsers. And so, we're working very hard, not only
to move HTML 5 forward on the desktop, but to make sure that we see even faster innovation
across these endpoints with the web browser. >> QUEIROZ: Okay, so I'll add to that, in
mentioning that. Specifically to Android, one of the strengths of Android is that it
can–-it's open and it's flexible and it can be adapted very quickly by hardware partners
to a broad range of form factors, display sizes, display resolutions, chip sets, keyboard
types, input methods and so forth. And so, we believe that Android, specifically, will
play a big role across a very broad range of device formats. And as far as Android and
Chrome OS, our two-pronged operating system strategy really allows us to take advantage
and contribute to what Vic just described, which is to enabling a better web and enabling
great applications to run on the web and run in the browser. And through Android, we're
also offering a powerful application framework which for consumer electronic types of devices
like mobile phones, also allows developers to build some great apps which run natively
on those platforms. >> MARIA: Okay. Next question is how big is
Google's mobile monetization opportunity in the corporate world? What are your views of
the enterprise concerns regarding security in the cloud? Will Google's mobile success
be based on open platform and web apps or closed and native app-based offerings?
>> GUNDOTRA: So, you know, when you talk about the enterprise, it's important to understand
the sea change that's occurring. And that sea change is that enterprises are increasingly
building software for their own employees and for their customers that are based on
the web, that are cloud-based apps. And as they shift away from proprietary operating
systems and applications that reside on those proprietary applications, then that's a great
thing. And Google's mobile strategy as well as its Chrome strategy is really designed
to push that web forward which will enable enterprises to build even more powerful apps
and really continue the path that is so exciting. The second part of that question asked, open
platform versus native app-based offerings. And we believe that there's room for both.
As excited as we are about the web platform, we're also very pragmatic. We recognized that
the web platform today, even with the emerging centers like HTML 5, often don't give developers
the full access for certain classes of apps, like games. And in those cases, we think writing
to the native platform is the only option. In fact, Google's pragmatic nature can be
seen by looking at our own apps, whether it be Youtube, which we offer as a web-based
mobile version and a native app, or Google maps, which we offer as a web-based app and
a native app. And so, we believe for the next several years, as the web evolve, developers
will do both depending on what their apps need.
>> MARIA: Great. Next question is about AdMob. How does AdMob fit in your mobile strategy
and how critical is it to your monetization plans?
>> GUNDOTRA: So, because we're currently in regulatory review on AdMob, I'm going to limit
my comments to just to two comments. One is, obviously, the space is highly competitive,
as Apples' recent acquisition of Quattro demonstrates. And then secondly, concerning AdMob itself,
we were work incredibly and continue to be very impressed by the quality of people at
AdMob, including the engineering team, and we look forward to having a chance to work
with them in the space. >> MARIA: Great. What percentage of search
queries are coming from mobile? How is that trended over the past four quarters, and can
you compare and contrast click through rates on mobile versus desktops search?
>> GUNDOTRA: So, we don't breakout the number of queries versus–-or mobile versus desktop.
But we will tell you that our search query volume has gone up five times in two years
at an accelerated pace. That, obviously, is a growth rate that's pretty dramatically higher
than desktop. And so over time, it's only natural to assume that that will continue
and will represent a bigger and bigger portion of our business. As to CPC and CTR, as I mentioned,
you know, three or four years ago, they were dramatically lower. The emergence of smart
phones has change the dynamics totally, and while we don't give out specifics, we're very
encouraged about what we think we can do in making these apps more relevant, which will
drive both of these metrics. >> MARIA: What percentage of mobile search
come through Google.com versus an app or the search boxes that Google pays to have on deck?
>> GUNDOTRA: So, I think that depends upon the phone. And even in phones like the iPhone,
I suspect the number of queries coming–-by people going to the browser and typing in
www.google.com is a surprisingly high number. So, we're excited about the choice that users
have of opening their browser on their mobile device and typing in www.google.com to come
to Google. >> MARIA: Okay. And what percentage of Google
advertisers are bidding on mobile today? >> GUNDOTRA: We don't have–-we don't publish
the percent of advertisers. But it is in increasingly large number and there's a dramatic amount
of interest in mobile. And we see that reflected in the movement of advertisers actually running
mobile-optimized campaigns. >> MARIA: Next question is on Android. Do
you have any comments on the handset manufacturer relationships and different dynamics by geography?
What are your views about concerns regarding version control issues for Android overstated
owing to the ability to automatically update the operating system?
>> QUEIROZ: So, our handset manufacture relationships are very strong around the globe. These are
global companies and we are–-we've been working very closely with all of them who
are members of the Open Handset Alliance. And they or have brought a lot of products
to market which have been successful and we see roadmaps which are very, very rich. So,
generally speaking, we're very happy. We won't comment, specifically, on device numbers by
region. But I will say that in North America and in Europe, for example, our relationships
with the handset makers as well as the operators are such that all major operators have announced
Android phones in those two geographies. I'll give an example, from Asia where the launch
of Android phone in Korea has led to results which we're very, very pleased with, and this
was just last month. And as far as version control issues, we––there are two aspects
of this. First of all, when we launched a version--a new version of the operating system,
we spend a lot of effort making sure that there is backwards compatibility to the right
devices as well as using our–-what we think is a very important capability which is over-the-air
updates so that these existing devices are getting the latest software very quickly without
the need to plug any cables or anything, and that we're making these devices as evergreen
as possible. And our engineers are also then focusing on the latest and greatest hardware
so that the future versions of the operating system are taking full advantage of what's
available in these devices. >> MARIA: Great. How do you ensure that Android
in open source system is free of any patent infringement risks from competitors, namely
Apple? Why wouldn't the patent infringement lawsuit against HCC slowdown the evolution
and adoption of Android? >> QUEIROZ: Well, we're not a party to this
lawsuit. But I will say that we stand behind the Android operating system and the partners
who have worked very closely with us to develop it.
>> MARIA: Your product search on Mobile now includes Blue Dots that show if the item is
available from nearby stores. How are you monetizing this feature? Would the retailer
pay you per click or per call? >> GUNDOTRA: So, we are very excited about
bringing that kind of innovation to users. We could find products right by where they
are. Today, we monetize that just like we do our other search pages, with ads that may
serve at the top or bottom of that page. Going forward, however, we are experimenting and
contemplating different methods of monetization. But our primary focus right now is building
a product that users just love and use. >> MARIA: Do you consider the iPad a mobile
device? What about eReaders? Are Netbooks mobile devices? What are the basic standards
for a mobile device? >> GUNDOTRA: Well, this is an interesting
question because I don't believe there's a crisp answer. I think you have to look at
the device itself. Does it have a connection to a network? Is it something that can be
used outside of just where Wi-Fi is served? Does it have a mobile Web browser? Does it
support desktop capabilities like Flash? And I think there's many, many variables that
go into this, and we're going to have to look at each device on a case-by-case basis. But
in any case, whether it's mobile or not, Google's goal is the same, the best search results
we can deliver as quickly as possible. >> MARIA: This is an Android Nexus One question.
Will Google be taking inventory risk with the Nexus One? Who sets pricing on the device
in the different channels it sells in? Will Google recognize revenue on sell-in to the
carrier or when the carrier sells that item to the consumer?
>> QUEIROZ: Okay. You want that one? >> PICHETTE: Yes. I'll just start with the
backend of it which is we–-as we had mentioned before on other public statements, right,
we recognize the full revenue, that's the market revenue sort of 529, I think was the
last price for the device. And that's what we've looked at the revenue line for us. And
in terms of inventory, we have very, very little inventory risk. I mean, it's very,
very small, so we don't have that either. Was there another part of that question?
>> QUEIROZ: Yes, the pricing. And in terms of setting prices on the device–-we set
prices based on market conditions and, of course, operators who offer service for the
Nexus One set their prices for their service with consumers.
>> PICHETTE: There you go. Next question, Maria?
>> MARIA: What are you doing to help the developers of apps on the iPhone make their apps work
on the Android? >> GUNDOTRA: So, we are very interested in
making sure that developers of all kinds can build applications for Android. The reality
is we're actually humbled and amazed at the adoption that Android has had from developers
in the past year; after all, we've only have the product out for about a year and a half
and to have what is arguably the second most popular app store in the world delights us.
We think we're doing the right things, whether that be through technical education at events
like Google IO, which this year is sold out ten weeks early, whether it would be through
Google days––developer days we do throughout the world or whether it would be through our
advocate team who reaches out to developers and engages with them in a very deep way,
we continue to invest in that area. >> QUEIROZ: Can I add to that? So, what I
will add to that is it really is not whether an app is going to be developed for one platform
and brought over into Android. Right now, with more than 24,000 applications in the
Android market, you can pretty much get all of the high-end, all the quality apps that
you're looking for for your Android device. And we actually see some developers, a number
of developers, starting to develop for Android first for a number of reasons. First of all,
the device volumes, and Eric Schmidt quoted some device volumes when we where in Barcelona,
device volumes have really reached critical mass. The technical advantages of the Android
platform in terms of supporting multitasking apps calling each other, the support for Flash
which was also announced in Barcelona, is really bringing developers into the platform;
and just as importantly, the fact that Android marketing, which is our–-Android market
which is our publishing platform is really--has no friction in terms of the publishing of
an app. You can create your app, you can publish is very easily. If you wake up in the morning,
you think of a feature you want to add to your app, you code it and by the afternoon,
your app is live. There's no cumbersome bureaucratic approval process whether it is for adding
a feature or for fixing a bug. And so, meaning these are very, very attractive for developers;
and it's not a matter of developers supporting from one platform to Android. More and more
developers are thinking about Android first. >> MARIA: Great.
>> PICHETTE: The benefit of open. >> QUEIROZ: Always.
>> GUNDOTRA: Yes. >> PICHETTE: Next question, Maria.
>> MARIA: What portion of your mobile queries are from iPhone users versus Android users?
Is your ability to monetize an Android user the same as an iPhone user today?
>> GUNDOTRA: So our monetization across both platforms looks very, very similar. This is
the same class of consumer who uses a powerful WebKit-based browser so it's not surprising
that these numbers look comparable. In terms of queries from iPhones versus Android, you
know, that's a dynamic and fluid changing number as both platforms are selling. What
we think is more interesting is that the searches that come from the iPhone and Android are
up to 30 to 50 times greater in volume; more searches than we saw from feature phones.
And so as the market shifts from feature phones to these, what we used to call smart phones
now that are now becoming mainstream, we think that is the material impact on the business.
>> MARIA: Okay. So the next two questions are about Japan. How does the number of total
Google searches, desktop plus mobile per user in Japan compare to the US, and what percentage
of Google searches in Japan are from mobile devices?
>> GUNDOTRA: So, Japan is an interesting case study in that a different Internet developed
in Japan, a WAP-based internet called IMO. The rest of the world really has moved to
having the real Web on these mobile phones. And so, now we're seeing growth, search dynamics,
usage, in other regions of the world that notch or exceed Japan. And North America is
one example where we have seen usage just skyrocket over the past several years that
has even surprised--the volume and rate of growth has even surprised us.
>> MARIA: Okay. How had the number of apps in the Android marketplace trended, accelerating
post the Motorola DROID launch and the Nexus One launch?
>> QUEIROZ: Well, I think we've been communicating the number of apps in Android market so you
can probably take those numbers and figure out percentage growth. It's not just about–-the
Motorola DROID is, of course, a fabulous device, but it's not just about one device. It really
is about all of the devices across the ecosystem and the volumes that we were talking about
before. So, the combination of the volume of devices and the technical capabilities
of these phones, the Nexus One, for example, with its hardware capabilities enables incredibly
rich multi-user games to run on it. And so, it really is the combination of the things
that I was talking about before, the volumes, the technical capabilities of the platform
and the openness, which are causing the number of apps and the number of developers to grow
very fast. >> MARIA: How do you...
>> PITCHETTE: Maria, I just suggest we take another one or two questions.
>> MARIA: Okay. How do you encourage carriers and OEMs that develop Android devices to highlight
Google search and other services? >> QUEIROZ: Well, we–-Android is an open
platform and so OEMs and carriers are free to build a product in the way they see fit.
We offer a lot of flexibility. We do spend a lot of time making sure that devices are
compatible, compatible through–-we publish a compatibility definition document, we have
a compatibility test suite. We want to make that for the consumer as well as for developers,
Android is–-Android devices are compatible so that apps and the product will function
predictably. But in terms of–-and so we–-that's what we do. It's an open platform and we are–-we
strive to make sure that whatever device is being built is supported by an operating system
that's going to deliver a great customer experience regardless of what applications are going
to be on there. >> MARIA: Okay. And our last question will
be, when will Google be educating its advertisers about Mobile, given you have already automatically
extended the default campaign serving settings for their AdWords and Adsense campaigns to
Mobile? >> GUNDOTRA: So, we are, of course, incredibly
excited about the feedback we've been getting from advertisers. We explain on our blog where
we talk to advertisers about these capabilities before we enable them, and we continue to
engage with advertisers. And so you should expect on the traditional blogs that we use
to talk to advertisers, you should expect more and more of our global features being
released and discussed there. >> PITCHETTE: Great. Let me have the closing
comments. Vic, it's always an incredible surprise. You always come in with these surprises that
never stop to amaze me in terms of innovation. Thank you very much for taking the time with
us this afternoon. Mario, again, Nexus One and all the great promise of Nexus is terrific.
I hope you found this webcast interesting. Thank you very much for taking the time to
join us today. And I think we'll have another one of these. You can give your comments.
So please circle back with the IR folks and thanks again for taking the time today. We'll
talk to you soon. Cheers.