2011 Annual Stockholder's Meeting

>>> Ladies and gentlemen, please take your seats and ensure your cell phones are turned
off or are in silent mode. The program is about to begin.
>>> Ladies and gentlemen, please welcome executive chairman, Dr. Eric Schmidt.
[ Applause ] >>Eric Schmidt: Thank you.
Now, I want some feedback. Did everybody have a chance to have lunch?
Yes! My favorite part of Google.
[ Laughter ] >>Eric Schmidt: The lunches here are fantastic.
And, by the way, the breakfasts and dinners are pretty good, too.
What I wanted to do is to welcome everybody, and in particular, welcome you to our 2011
shareholders meeting. I think you know who I am. I'll be presiding on the meeting.
Each of you have supposed to have registered at the arrival. If you haven't, if you could
register so we have a formal record of your attendance, that would be helpful. We've given
everybody an agenda, which we've been following in previous years. You have a set of rules
of conduct and all that kind of thing. I am going to call the meeting to order at
this time. I wanted to introduce a couple of people in
the audience. I see, for example, Ram Shriram, one of our long-serving directors, here in
the room. [ Applause ]
>>Eric Schmidt: And I see -- I know, I know. I'm -- I was going to embarrass you, Ram,
but instead, I'll talk about John Hennessy, who is also here on the right, also another
long-serving director and our external independent director.
Let's see. I see David Drummond I'll be introducing. Patrick, of course, will be here. And Larry
is on his way. Also with us is -- oh, in fact, there's Susan,
Susan just came in as well. She's hiding behind the corner. And she'll be with us as well.
Also with us is Debra Kelly, who is a represent from Computershare, who will act as our inspector
of elections -- so please inspect correctly -- and Matthew Taggart and Barbara Marchini,
our representatives of Ernst & Young, who are our independent accountants, which we've
also had for many years. What I'd like to do is to introduce David.
David Drummond, of course, has worked in the company for more than a decade. He's Google's
Senior Vice President, Corporate Development, Chief Legal Officer, and Secretary.
David, will you please conduct the formal business of the meeting.
Thank you. [ Applause ]
>>David Drummond: Thank you, Eric. Thanks, Eric. And good afternoon, everybody.
Glad to see you here once again for our annual meeting.
So a couple of quick notes before we get to the business.
In terms of stockholder questions, the rules of conduct, which you've seen, stockholders
shouldn't address the meeting until you're recognized. We'll have a Q&A session at the
end with a number of folks up here on the stage. So you can ask questions after we finish
the formal business and after Eric and Larry's presentations.
So if you'd like to ask a question during the Q&A period, just move to one of the microphones
here, and we'll recognize you. When you're recognized, please identify yourself, and
identify yourself as a stockholder or a representative of a stockholder, and then go ahead and ask
your question. So thanks very much for your cooperation here.
So, let's get started. I've received the affidavit of mailing of Computershare, which states
that the notice of meeting, the proxy materials, and the annual report were mailed to stakeholders
of record as of April 4th, 2011, which is the record date for the meeting.
I've also been advised by the inspector of elections that holders of our outstanding
class A and class B common stock, representing at least a majority of the voting power of
our outstanding capital stock that's entitled to vote in person or by proxy today is actually
here. So we've got a quorum present. The meeting's
duly constituted. And the business may proceed. So the first item of business is the election
of directors. We have nine directors who will be elected
today. The directors elected today will hold office until the 2012 annual meeting and until
their successors are duly elected and qualified. So the board of directors has nominated the
following persons: Larry Page, Sergey Brin, Eric Schmidt, John Doerr, John Hennessy, Ann
Mather, Paul Otellini, Ram Shriram, and Shirley Tilghman. Our bylaws require that stakeholders
provide advanced notice of their intent to nominate anybody as a director. We received
no such notices. So, accordingly, I declare the nominations for directors closed.
Now, the second matter being submitted today is the ratification of the appointment by
the board of Ernst & Young as our independent registered public accounting firm.
Our board of directors has recommended that our stockholders ratify the appointment of
Ernst & Young for the 2011 fiscal year. The third matter being submitted to stakeholders
today is the approval of an amendment to our 2004 stock plan, which will increase the number
of shares of class A common stock available for issuance under that plan by 1,500,000
shares. And our board of directors has also recommended that you vote in favor of that
amendment. The fourth matter being submitted is the approval
of our 2010 compensation awarded to our named executive officers. And you'll see that described
in our proxy statement. Our directors have recommended the stockholders
vote for the approval of the 2010 compensation to these officers.
Now, the fifth matter is the determination of the frequency of future stockholder advisory
votes regarding compensation awarded to our named executive officers, such as the vote
we're taking today. Now, our board has recommended that our stockholders vote on that matter
in a frequency of once every three years for these future advisory votes on compensation
for named executive officers. There are three other items that are being
submitted today, and all three of those are stockholder proposals that are addressed in
the proxy statement that you all received. Now, our board of directors has unanimously
recommended that our stockholders vote against the three stockholder proposals that you'll
hear presented. The first proposal is being brought by Harrington
Investments, Inc. And at this time, I'd like to recognize John Harrington, who is a representative
of Harrington Investments -- there you are, John -- to represent this proposal. So, Mr.
Harrington, you've got three minutes. And I'll advise you as time is running out.
>>> >>John Harrington: Thank you very much, Mr.
Chairman, members -- fellow stockholders. I'm sorry I'm turning my back away from the
mike to my fellow shareholders. I'm sure that our company would never turn its back to any
of the shareholders. I represent Harrington Investments, from the
Napa Valley. We do more than grow grapes and drink wine, though there's nothing wrong with
doing either of those things. We have invested in Google, we believe in
your financial, your environmental, and your social standards and criteria. We applaud
your proactive work on behalf of human rights throughout the world, especially China. We
applaud your commitment to environmental sustainability throughout the company.
However, we are looking not to look at your sustainability programs, but to actually attempt
to insert into the DNA of this company a commitment, a policy commitment, long term, as a fiduciary
duty to environmental sustainability. When we introduced this resolution to Intel
a couple of years ago, they were very defensive about it. But last year, I have to say, we
had a great negotiation, and we were able to have Intel amend their company committee
charter to include environmental sustainability. And the way you insert into the DNA of the
company a commitment, policy commitment, to sustainability is, you can do it two ways:
You can either amend your bylaws, your articles of incorporation, which means that that's
a fiduciary duty of the directors, not just the company, but the directors, to take environmental
sustainability very seriously policy-wise. Or you can actually amend your charter, your
committee charter, as did Intel, in amending their nominating and corporate governance
charter. They did this -- and I'll read the language that they used, which I think is
very -- very informative and very progressive. They would review and report to the board
on a periodic basis with regard to matters of corporate responsibility and sustainability
performance, including potential long- and short-term trends and impacts to our business
of environmental, social, and governance issues, including the company's public reporting on
these topics. As part of our discussion, which I think was
very -- again, very informed and very progressive, they were able to also secure a legal opinion
from outside counsel which indicated that once this was in the charter, this was actually
a fiduciary duty. And in some discussions with another company,
would you believe Monsanto company, they actually not only agreed to amend their bylaws, or,
excuse me, their charter, their committee charter, but they provided us with an internal
legal opinion indicating that that was also their fiduciary duty. We think it's extremely
important in looking at this issue long term. And I want --
>>David Drummond: Mr. Harrington, I don't want to interrupt, but you have 30 more seconds.
>>John Harrington: -- yes, I want to be clear that (indiscernible) are very important, and
we appreciate them. Thank you very much, Mr. Chairman.
>>David Drummond: Thanks very much, Mr. Harrington. [ Applause ]
>>David Drummond: As you all know, we have -- Google has an opposing statement to the
proposal in the proxy statement, which is there for your review.
With that, I'd like to move on to the second stockholder proposal, which is being brought
by Mr. John Chevedden. Now, it turns out that Mr. Chevedden was unable to make it. So Mr.
Harrington has a repeat performance at the mike to present the proposal on behalf of
Mr. Chevedden. So once again.
>>John Harrington: Lucky you. Thank you very much. I'm sorry to bore you once again, but
I suggested that John provide a statement that I would be willing to read. And John
Chevedden, from Redondo Beach, is a good friend and colleague.
And, resolved, shareholders request that our board take the steps necessary so that each
shareholder voting requirement impacting our company that calls for a greater than simple
majority vote be changed to a majority of the votes cast for and against a proposal.
Share owners are willing to pay a premium for shares of corporations that have excellent
corporate governance. Supermajority voting requirements have been found to be one of
six entrenching mechanisms that are negatively related to company performance according to
professor Lucien Bebchuk of Harvard Law School. This proposal topic won from 74 to 88% support
at the following companies, Weyerhaeuser, Alcoa, Waste Management, Goldman Sachs -- whoa,
Goldman Sachs -- First Energy, McGraw-Hill, and Macy's. If our company were to remove
required supermajority, it would be a strong statement that our company is committed to
good corporate governance and our long-term financial performance. Please encourage our
board to respond positively to this proposal in support of improved company performance.
Thank you, Mr. Chairman, and fellow shareholders. [ Applause ]
>>David Drummond: Thanks very much, Mr. Harrington, for the second proposal. Once again, as you
know, the board has recommended the shareholders vote against it for the reasons that are set
out in the opposing statement. So we have one more stockholder proposal,
which is being brought by the National Center for Public Policy Research. And I'd like to
introduce Mr. Justin Danhof, who is a representative from that organization, to present his proposal.
Mr. Danhof. >>Justin Danhof: Good afternoon. Unless Mr.
Harrington wants to come up and do another one.
>>John Harrington: No. >>Justin Danhof: As was said, my name is Justin
Danhof, and I'm general counsel with the National Center for Public Policy Research. We're a
free market think tank and a Google shareholder. Thank you for allowing me to present this
proposal. We urge fellow shareholders to vote for our
proposal calling for the company to disclose the investments of board members that could
reasonably be viewed as a conflict of interest and to report any violations of Google's code
of conduct policy. As shareholders, we support transparency and
accountability regarding the company's board of directors.
Absent such a system, company assets could be wasted on objectives not in Google's best
interests. Google's current disclosure is insufficient to ensure that the board acts
in the best interest of shareholders. We are specifically concerned that shareholder
money is being used to personally benefit a member of the board, in violation of Google's
conflict of interest policy. Google board member John Doerr has a long
history in alternative energy and is heavily invested in alternative energy. Doerr is a
partner at Kleiner, Perkins, Caufield & Byers, a venture capital firm with a green energy
focus. Doerr is also a member of President Obama's Economic Recovery Advisory Board,
and President Obama's stimulus bill allocated $80 billion for clean energy.
In California, Doerr has been a leader and very active in the cap and trade movement.
All of Mr. Doerr's actions standing alone are above bar and some would even say laudable.
However, recently, Google has jumped into the alternative energy marketplace, and some
of the company's investments raise ethical questions. In recent years, Google has invested
millions of shareholder dollars in wind and other alternative energy projects. These ventures
are risky and not in line with Google's core business.
A 2009 GigaOM news report disclosed that AltaRock, which is a small geothermal company, received
significant investments from both Doerr's firm and Google. This gives the impression
that Google is using shareholder money to boot the investments of one of its board members.
Perhaps that is not the case. However, without transparency, shareholders are left to believe
either that Doerr is pulling the strings on Google's green energy investments for his
own benefit or that Google is bailing out one of its own.
As a board member, Doerr has a fiduciary duty to Google shareholders, not to his own wallet.
Google shareholders have a right to know if Doerr's actions breach the company's code
of conduct policy. The code of conduct policy specifically includes conflicts of interest
that relate to financial conflicts involving personal investments. If they have nothing
to hide and Doerr's motives are pure, why would the board of directors recommend a vote
against this proposal? The disclosure we are requesting may also
shed light on Google's curious investments in green energy. Alternative energy investments
are speculative and Google should not use shareholder money to bail out Doerr's risky
moves or follow his wide-eyed supposition. Mr. Doerr should be personally commended for
his previous investments in Amazon and Google. However, your company and Amazon compete in
the marketplace. Green energy companies do not. Without strong government subsidies and
renewable energy standards, green energy companies would go under. Google should focus on its
core technology and Internet business and not risk shareholder value in the volatile
energy markets. In closing, nothing truly worthwhile hides
in the dark. I hope my fellow shareholders join me in voting for transparency and that
Google's leadership sees the light and decides to be honest with the company's true owners,
the shareholders. Thank you.
[ Applause ] >>David Drummond: Thank you very much, Mr.
Danhof. And, once again, as the reasons for the board's
-- the board's recommendation that you vote against the proposal are stated in the proxy,
along with our commitments to transparency and the policing, enforcing of our codes of
conduct. So that -- because there's no further business
scheduled to come before the meeting, I now declare the polls to be open. And if you've
previously voted by proxy, you don't need to vote again today unless you wish to change
your vote. And you should also know, as we tell you -- we've
told new previous meetings, that we've received sufficient proxies before the meeting to know
that the proposals we've discussed today will pass or fail in accordance with the recommendations
that were made by our board and that are set forth in the proxy statement.
However, we do want to make sure that everyone gets a chance to vote, so if you haven't done
so and would like to do so, please raise your hand, and we can get you a ballot and you
can complete it, and we will collect those. Okay. Has everyone who wants to vote gotten
a chance? Then perhaps we could have the ballots brought up to the inspector of elections and
we can keep going.
Excellent. Why don't we proceed. It looks like everyone has had a chance to turn in
their ballots. So let's proceed with the results of the voting,
which, as we know, whether, in part, based on proxies we received before the meeting.
I've been advised by the inspector of elections that the nominees for the election to the
board of directors has been duly elected. I've further been advised by the inspector
that a majority of shares entitled to vote and present at the meeting or by proxy have
voted in favor of the ratification of Ernst & Young to act as our independent public accounting
firm for the 2011 fiscal year, the approval of the amendment of our 2004 stock plan, and
the approval of the 2010 compensation that was awarded to our named executive officers.
I've also been advised by the inspector that the frequency of once every three years for
future stakeholder advisory votes on executive compensation received the highest number of
the votes cast. So, therefore, the next time that stockholders will be able to vote on
this recommended frequency will be at our 2017 annual stockholders meeting.
I've also been advised by the inspector that a majority of the shares entitled to vote
and present at the meeting in person or by proxy have voted against the stakeholder proposal
regarding the formation of a board committee on sustainability, against the stockholder
proposal regarding the adoption of a single majority voting standard, and against the
proposal regarding a conflict of interest and code of conduct compliance report. So,
therefore, each of the stockholder proposals have not been approved by the stockholders.
As soon as possible after the meeting, we will complete the final vote tabulations and
provide those results on our investor relations Web site, and in a filing with the Securities
Exchange Commission. So that ends the official business. And I
hereby declare the formal portion of the meeting adjourned.
And Eric and Larry will make some presentations about Google's business, starting with Eric.
Eric. >>Eric Schmidt: Well, thank you so much, David.
As we have before, we're going to talk a little bit about the past year, and we'll be joined
by Larry in his new role, which I'm excited to see him in this role. And then we'll have
your questions for the senior leadership of the company.
So let's go to my first slide. Google really did rock in 2010. We had a fantastic
year by every measure. Our core search and ads business grew by more than 20%, which
at our scale, is quite an accomplishment. Of course, we benefited from a number of things,
including the global recovery. But compared to other companies, we had a very, very good
year. What I was particularly excited about was
the core business did well, but our emerging businesses grew many times that rate. Display,
Android, Chrome, and YouTube all growing significantly faster than that growth rate. So you have
your core business growing at a very healthy rate and you have the new businesses growing
even stronger. That produces great long-term value for all of the players involved.
Next slide. But I think we should put this into a context
of the Internet. And we're really at the beginning of a new age of the Internet. What the Internet
can do, how people will use it, and all of the assumptions that we've been making about
what the Internet can do, I think, are being turned over by new technologies, new approaches,
new entrants, and new competitors. There's a whole bunch of trends that are explaining
this. But if you put it -- the Internet is becoming richer, grander, more personal, more
individual, more intelligent than anything that any of us could have ever imagined.
The mobile devices revolution, which, of course, Google is now in the lead in, is one of the
great drivers of this. Mobile data traffic was three times the size last year of the
entire Internet in the year 2000. Pretty amazing. Give you a sense. So you wonder what all of
those people are doing on their phones? They're using the Internet. We love this. We make
money. Right? What's not to like? Smart phone sales, not phone sales, but smartphone
sales, are set to pass PC sales in the next 12 months. So, again, the right thing to do
if you're an engineer, if you're a product manager, if you're in a business, is to focus
mobile first. That's where all the action's going to be. That's where the new applications
are going to be. That's where we're going to make some significant money, whether it's
as a business or in a nonprofit, or in just trying to get your message out or making the
world a better place. The Web is also getting much larger. One of
Google's sort of core strengths is our ability to deal with humongously large amounts of
data, data that is so incomprehensibly large, it gives you a headache to start writing down
all the numbers. The Internet has grown from 360 million users
in 2000 to around 2 billion today. So you can say, well, that's pretty good. You can
also say, you've got another 4 or 5 billion to come. So pretty big growth market in front
of us. What's interesting is that estimates indicate
that in the next ten years, we'll add somewhere between 2 and 3 billion additional Web users.
I believe the vast majority of those people will come through phones, and I certainly
hope that that will be through Android phones. It gives you a sense of the scale of the opportunity
before us. And what's interesting is, even more and richer
information is moving online. The Internet has moved from sort of text documents, which
is what got Google into the space, to advanced multimedia applications and so forth. I was
astounded to read that Netflix is now the number one source of downstream video. Netflix,
of course, doing all this great video that people are watching. All right. That's a huge
transformation of how the Internet is. And it presupposes many to come in the future.
And the industry, of course, is getting itself organized around this. In addition to making
fiberoptic networks and all these things so much faster and delightfully powerful, we
get used to it. Go to a place where we don't have fiber and you'll see what I mean. But
there are new technologies in wireless, something called LTE, which stands for long-term evolution,
which promises 50 megabits in its first version, really, 20, 30 megabits as you use it. And
systems in the United States, and in certain other countries in Europe and China are beginning
to deploy. And I've measured it at that speed, so I know this is a real claim.
There are significant challenges, because as the Internet has sort of walked through
and changed society in all the ways that we have all seen, there are challenges to the
Internet's sort of role; right? People are worried about what's happening on the Internet,
and people, in particular, are worried about some of the businesses that are being affected
negatively by disintermediation, other businesses that are more consumer focused than the historic
businesses, and distribution businesses and so forth and so on. And I'm very concerned
about the Balkanization that is being discussed now by regulators, by governments, and so
forth. And you can imagine that instead of having one interconnected Internet, we'll
have an Internet per country or an Internet per state. And then we lose all of the scale
and all of the reach and all of the amazing things that you get when the world is talking
to each other. So this has to be dealt with very, very carefully.
There's information, for example, there are walled gardens coming on where people have
information they say is on the Internet, but you can't get to it. In particular, Google
can't index it. Information is coming online that you literally can't search. So how would
you know if you can't find it? In any case, the promise of the Internet, we are only a
third of the way through. We didn't write down that the Internet was available only
for the top third of humans. We want the Internet to serve everybody, in every country, to make
their lives so much better. Next slide.
So this fundamentally, then, drives the search strategy of Google.
We are making improvements to search at a rate that is the fastest we've ever. I would
argue that search is still the most important thing people do online. We crawl eight times
more documents than we did two years ago. And two years ago, that number was so large,
I couldn't write the number down. That gives you a sense of how quickly this data explosion
is occurring. And users, of course, are also coming back
to us with even tougher expectations. Interesting statistic is that query length, that is, the
length of your queries, has grown about 6% in the last five years. People are asking
deeper or more complex questions, if you will. And every day, 15, one five, percent of all
the queries that we get, are queries we've never seen before. Very interesting. Shows
you the breadth and multiplicity of interests and the complexity of the world around us.
And, basically, people want information available on all of their devices. They don't want it
just on one or another. They want it to work everywhere.
So what we want Google to be like is an expert that knows you. Now, this has to be, by the
way, with your permission. I'm going to say that about 500 times. You have to want this.
We'll still keep anonymous search and all of that.
But Google is in the process of offering even more personalized and specialized search results.
It's important that we be able to understand your past history and your preferences so
that we can give you an even better result, again, with your permission.
So, for example, if you're planning a trip to Hawaii, right, your friend -- photos that
your friend took about Hawaii should sort of show up. It will allow you to make a better
informed decision about whether you want to go to Hawaii or not.
If you're looking at Geo, it's the same thing. You want to see a virtual mirror on the world.
You want to see the world would you see wherever you are. You need that kind of information,
if you're willing to give it to us. If you go to YouTube, there should be a personalized
channel. What we want you to be able to do is turn on YouTube and there it is, and somehow,
the selections that YouTube makes are better than the one that you would make wandering
around the space, because we can algorithmically determine, using all sorts of interesting
signals, what you're really going to like and surprise and you delight you for whatever
goal you have using YouTube. Next slide.
This is why we fundamentally have to be a leader in cloud technology and in the rising
cloud, as it's known. And we're busy working on these in many ways. The seamless high-definition
video chat between any two devices; right? You can join a video conference. Right from
there, you can do it on your phone or on your desktop or somewhere else.
Better translation technology. It's interesting that we now are the absolute leaders in automatic
translation of languages from one to another. And the Chrome browser automatically translates
pages from one language to another. So I find myself all of a sudden able to see all of
this content in languages that I didn't even know existed. This is a pretty amazing accomplishment.
And the cloud, of course, provides better entertainment in and of itself. We just launched
something called Google music beta where you can take all of your music and essentially
make a copy of it in the backup and have it sent to you at the right time and on the right
device. We want books and music and movies available on a digital content store. And
the YouTube movie store already has 3,000 movies, including things like The King's Speech,
which is a great movie if you haven't seen it.
These cloud services and the fundamental focus, it's not just a fun project for computer scientists.
It really does matter. Because when your information is in the cloud and when computers can help
you select things, we can do things you can't do for yourself that make your world more
efficient, more entertaining, and more meaningful. We put this together with Chrome and Android.
I'm going to have, I think, Larry talk a little bit more about Chrome and Android in a second
to give you a sense of the perspective of what we're doing.
So let's do next slide. So I will have Larry talk about Android. Next
slide. This is our slogan. Companies now around the
world are going Google. They're literally ripping up their I.T. infrastructure, the
way they do things, to move to this cloud computing architecture, all of services Google
Offers. From our perspective, it's fundamentally about serving users and how we do it.
What we can do is, because of this -- these links, we can engage advertisers and ultimately
deliver great revenue growth and advertiser satisfaction along the way.
It is a delight to work at Google. I am very, very proud of what I have been able to do
at Google. Part of the reason that this opportunity came to me is because Google was founded by
two people who are among my best friends and also some of the most brilliant people that
I have met. One of them is Larry Page. And the delight of working with someone so insightful,
so capable of anticipating the world that I'm now describing over the last ten years,
has been the highlight of my professional life.
So I don't know how else to introduce you, Larry, except my friend, partner, and our
new CEO, Larry Page. [ Applause ]
>>Eric Schmidt: Thank you. [ Applause ]
>>Larry Page: Eric, you still have much time left in your professional career.
>>Eric Schmidt: I know. >>Larry Page: Thank you for that wonderful
introduction. And thanks to all of you for your spending all the time with us today,
and everyone who's also on the webcast. Now, I do want to thank Eric, too, very much
for all of the things he's done on behalf of Google over the years. And, in fact, you
know, I think in the last week, he's, like, been in more countries probably than I was
in the first 20 years of my life. And so just a tremendous amount of travel, and the communications,
and other things he's been doing for the company. Exactly as we announced, as we announced the
transition, it's been working great. And I really thank him for that.
Now, I'm really excited to be here. It's really a great privilege and honor to be here in
front of you as Google's CEO. And I'm very excited about our future.
And as we announced the transition, you know, I said one of the big things I was going to
focus on is just the velocity and execution, speed and pace.
And I think the -- you know it's only been actually eight weeks -- I was kind of amazed
when I calculated that -- since we announced that. But I feel like we've already made a
lot of changes and accomplished a lot. Now, this priority around speed and velocity
has really been since day one. And the reason is, I think there's a natural tendency as
companies get bigger just for things to slow down. It's harder to get things going. It's
a good time for us to make a transition and to think about how we're organized and how
we're going to improve those things. So, you know, we've already done a number of things
there. Now, I would also say the technology industry
is really on fire. You know, I grew up, I had my first computer when I was 6, 1978,
actually. I was really lucky to get a computer. And, you know, things moved, you know, like,
you know, a few years later, you'd get disk drives or something like that. But it moved
from tapes to disk drives. But it took a couple years. Now I feel like, you know, a few months
goes by, and you get a whole new telephone, you know, with all sorts of amazing things
on it, a new smartphone, with a bigger display or high resolution or whatever. And not only
that, but, you know, hundreds of millions of people get these things. And they buy them,
and they use them and they change their lives. So I think we're at a very, very exciting
point in the history of the technology industry. And I think that Google, we're very well positioned
to take advantage of that and to increase our pace along with the pace of the industry
increasing. Now, you know, our main priority is to build
amazing products for all of you, for everyone. You know, we want to be like a toothbrush,
right, something you use every day and that's really important to you. Certainly if you
don't use a toothbrush, that would be bad. And I think we're doing a good job of that.
And one of the things I just wanted to mention is that I think, you know, not only has the
pace of the whole industry picked up, but the pace of our products has as well. And
I'll just single out Android for a second. Android is, you know, a mobile operating system.
I'll talk more about it in a second. But we've been releasing a new version every quarter.
It used to be not too long ago, we had operating system that is got released every few years.
And that's a huge change. And it's really part of the success of Android, and it's also
part of the success of all the different devices that you see that people are buying.
Now, I think -- just to finish up on the speed and velocity point, I think that you know,
my goal has really been to have Google feel like it was a smaller company. And we certainly
have very many efforts within the company. I think if we're organized in the right way
that those efforts can execute as if they're smaller and have the soul and kind of pace
of a smaller company within them. And, you know, we all came from a smaller company at
some point, and so we all know what that feels like. And that's something I'm really pushing
hard on. I know we can really do that. And I think
it's an important thing. Now, let me just talk about Chrome for a minute.
So Chrome, you know, is our mobile browser. Actually, raise your hand if you use Chrome.
Raise your hand if you use something besides Chrome. Wow. Okay. We need to work on that.
We've got a few people out there. We've had huge growth in browser share in
Chrome. We grew about 300% in 2010 in share. And we've got over 160 million users using
Chrome, which is a tremendous achievement. You know, that team is doing really well.
And I think it's really reinvigorated the whole browser segment. Much like I mentioned
with operating systems, you know, years would go by before you saw major, major changes
in browsers. And we've introduced a whole bunch of new things in that segment, much-improved
security, much-improved speed. And I'm really, really excited about that. And I think, obviously,
the tool that you use to access the Internet is a very important thing for the Internet
and for our products as a whole. And we're excited about making the Internet work better
and also making it easier and better to provide applications to you through Chrome.
Now, I also want to mention Chromebooks are going to reach the market this month. So those
are PCs, little laptops, that are based on Chrome, and it's the whole operating system.
And I've really enjoyed using mine. You basically open it up and in a few seconds, you're running.
There's no software updates or anything like that. It's just a utility. You never have
to worry about it; it's always updated and secure and working well. I think that's a
really big deal and I'm really excited about that.
Now, I wanted to mention also just a little bit about our Wallet efforts you see here
on that slide. And I think that the Wallet has the possibility to really transform your
shopping experience. And, you know, you imagine right now you're carrying a real wallet, and
your phone, and your keys, and a whole bunch of other things. Imagine you're just carrying
your phone and when you want to buy something, all you do is take out your phone, you know,
and you tap it on the cash register, and you get your coupons and you get your payment
done, and you get a record of it and so on. You might get the manual, say, buy a toaster,
you'll get the manual for it also in your account, without having to go routing around
and looking for it. So I think the whole notion of how you pay
for things and your shopping experience really is ripe for improvement. And, actually, yesterday,
we announced Portland was the first city to get Google Offers of these kind of, you know,
good deals that you can get and so on through that. And we're very excited about that.
Now, let me just talk a little bit about our core businesses, which are really search and
advertising. You know -- and if you noticed the press about
Google, you'll see very many different issues that come up, you know, things that are relatively
peripheral to our business. At Google, we've had a philosophy that we don't want to choke
innovation. So we want to make sure that we've got a lot of things going on at the company
that are maybe speculative. Maybe there's a few people working on them and they really
hope that they're going to build a billion dollar business, but it's a relatively risky
thing. And, in fact, both Chrome and Android that I've talked about, both of those things
when they started were considered to be pretty risky things. When we started working on phones,
people thought, oh, phones worked pretty well, why do you need an operating system, that
sounds kind of crazy. But, in fact, the team was amazing. They executed
well. Now it's a very important part of our business.
And so I just want to reiterate that sort of -- there are many things like that that
we do that are speculative, but we spend the vast majority of our resources on our core
businesses, which are search and advertising. Search being how we receive, you know, all
the searches that we get, and advertising, how we are making the mass majority of our
money. So, obviously, that's our core focus.
And we work really hard on it. Last year, we saw over 500 improvements in
search. And we actually tried very many more things than that in various kinds of experiments.
And I expect this year, we'll work even harder on that. And it's amazing the kind of things
we've been able to do. Instant search, you know, where you type and even before you finish
typing, it's already given you the answer. If you'd asked me a few years ago, was that
possible, I would have said, "No, I don't think that's possible."
But the ability to predict what you're interested in and to sort of -- the networks being fast
enough, the computers being fast enough, or your phone even being fast enough to give
you what you want even before you're finished typing it is an amazing thing. And I'm really
proud of that achievement we did. That required us to do a lot of work in our core infrastructure
and in providing those services. But it really provides great benefit for end users.
And also for English speakers, you might not realize, but for other languages, can be even
harder to type. So you can get even more benefit if you have more difficulty typing.
Now, I want to talk also a little bit about ads.
You know, I think that it's easy -- people think, you know, our ads business is pretty
mature on search, that we have lots of advertisements and advertiser relationships and it's a very
big, successful business, which is all true. But I would tell you, you know, just try doing
a few searches for things that are commercial and see whether you get the right ads or not.
You know, and I think, you know, maybe half the time, you get the right ads. But you can
easily imagine those ads were much better than they are now. Very, very substantially
better. So I think there's tremendous opportunity for us in just increasing the relevance of
the ads that we provide to users and also increasing the experience for our advertisers.
Many of you are probably not advertisers, but if you are an advertiser, you know, you
have to go through a lot of detail in our systems in how you buy the advertisements,
how you pick the right customers to target, and so on. And those systems are improving
a lot and can improve even more. So I'm very, very excited about that.
I should mention also display platform. Display has just been a tremendous area for us in
terms of growth. And we expect that to continue. We're applying the same technology and insight
that we did on search to the display market. You know, we're focused on producing ads for
people that are measurable and that are relevant to people and useful for people. And that's
working really well in the display space. And we expect that to be a big deal, even
berg deal going forward. Now, I think that, you know, we spend -- you
know, as I said, we spend most of our time in search and advertising. That tends not
to be as interesting to people outside the company. It's much more interesting, you know,
what is the latest crazy thing that Google did? And for us, you know, those things are
interesting, too. But it tends to be three people somewhere in the company that are having
a good time doing that. So just, again, keep that in mind. You know, we're not betting
the farm on a lot of those things. That's not what we're doing.
Now -- and I wanted to mention sort of the future of Google. And we'll show one of the
crazy things we're doing; right? Which is -- actually, we have a picture of Eric and
Sergey and I in a car with no driver. And this -- again, this is a small effort. But
we do really like doing these kind of things to not cut off the future responsibilities.
And -- but I do want to reiterate to you also, we're very careful stewards of shareholder
money. We're very committed to spending money and resources carefully. You know, we started,
remember, as a startup in a garage. And we're very, very careful about our spending. In
fact, I remember I was scared to hire an office manager because I thought it was too expensive.
So we have that history and culture, and we're very committed to that.
Now, Google has really great people. We have tremendous ambition, as you can see from the
picture here. And we also, thanks to all of you, we have a tremendous amount of resource.
We have absolutely, you know, amazing resources. And, you know, my commitment to you is that
we're really going to aim high to really achieve important things and to continue to grow this
really great company that we've all inherited. So with that, I think we will open it up to
questions. Thank you.
[ Applause ] >>Eric Schmidt: So --
>>Larry Page: Thank you. >>Eric Schmidt: Thank you, Larry.
We're going to be joined by Patrick, who is our chief financial officer. He keeps all
of the money in the company in that orange bag.
[ Laughter ] >>Eric Schmidt: And I checked, and it's not
actually cash. David Drummond we've previously introduced,
who I think everybody here knows. And, of course, Susan Wojcicki.
Susan has many, many roles in the company. She was the person who owned the house in
which the company was formed. Over the years, she's been a product manager and built many
of our businesses. We promoted her to run much of our product businesses a few years
ago. And now she runs all of our advertising businesses, is that right, as a senior vice
president. So, anyway, shall we begin with our first
question. Yes, sir. >>Tony Mezzapelle: Tony Mezzapelle (phonetic),
shareholder. Eric, thank you for the service over the years.
>>Eric Schmidt: Thank you. >>Tony Mezzapelle: I've been very impressed.
I have a question about Android. Even though we've gained huge market share
over the last year against our powerful competitor, we've failed to financially benefit because
we give away Android for free and our side businesses don't earn a lot.
This bothers me, because our key competitor has created massive wealth. If we created
wealth the same way, our shares might be two or three times what they are now, perhaps.
Also, this bothers me because we've missed other big opportunities, I think, maybe even
social network kind of opportunities. So I have a multi-sided question.
Why do we give away Android for free rather than a modest fee or royalty?
Number two, why did we not -- why did we decide not to go after smartphones in a direct way?
For example, was there some kind of conflict with our key search business?
And, number three, for the products -- products and projects in our development pipeline right
now, do we have a system to better identify and shepherd these projects to strong revenue
situations? >>Eric Schmidt: Larry and Susan.
>>Larry Page: I would encourage you to take a long-term view of these things.
So I think if you'd asked the question, you know, a year or two ago, you would have been
asking about Android Market share, not just revenue. Now you're just asking about revenue.
So that's a positive step. We have a lot of market share there.
I think that we've seen -- and I think that we believe the openness of Android is driving
that tremendous growth, not just in the U.S., but in many, many places in the world. And
I would say also that it is benefiting also our core businesses, which we do make substantial
money from. We're receiving a lot of searches now from Android, which is a big benefit to
us. And otherwise, we would be paying for those arrangements, potentially, or we would
not get a good-quality user experience that drove a lot of usage there. But it's definitely
an area -- I'd say that we are very focused on the long-term ability for us to make money
from those products. And I would also say that if you looked back, Susan probably could
comment on this, but if you look back ought our search monetization business, we had similar
kind of questions coming from that. Ultimately, we did very well in those businesses. So I
would just encourage that we have a very long-term view of that, and I would encourage that from
our shareholders as well. >>Susan Wojcicki: I'll just add a few comments
on that, which is that it's been a philosophy of the company and been really important for
us -- and I say this as a important who works on the ads and the revenue part -- that we
make sure that we have the users and the adoption first, and that we make sure that we have
experiences that we know work for our users. Because we find that once we actually have
a really useful service, that over time, there are ways that we can monetize that and that
monetization can take many different forms that will work for our users and our advertisers.
But getting the actual usage first is the most important thing. And I think that's -- Android
has done a really good job of that. But as Larry mentioned, because Android has
such broad distribution, we get a lot of searches on Android phones. And that enables us to
serve ads on them. So we do generate revenue via that way.
We also get a lot of revenue from the -- serving display ads as part of Android Marketplace.
And being able to do that with our AdMob acquisition has also been important for us.
>>> Can you comment on the scale of revenues and benefits from those -- phone right now?
>>Eric Schmidt: We've actually made a decision not to go into the details there.
A simple calculation will tell you since we get 100% of the gross margin of all of the
ads on Android, it's a really good business. Let's go to the question behind. Yes, sir.
>>Hal Leslie: My name is Hal Leslie (phonetic). I'm a small stockholder. And I'd like you
to give me names and e-mail addresses of people who would be interested in three projects
I'm in. One is called Zenti, Z-e-n-t-i. We measure
sentiment as a way to monetize Twitter. We're measuring sentiment right now for the State
Department and also the intelligence community. And it would be a way you get to measure sentiment
for advertising. Number two company is call Special Deals,
and we think we have a superior business model to Groupon.
The third company is called Allie Controls (phonetic), and we're doing control system
software. And we're going to make wide use of the Internet.
So if you can give me somebody's e-mail address, --
>>Eric Schmidt: David, you sort of own this area.
>>David Drummond: Sure. So one of the things I work on is Google Ventures. And so he's
probably going to be upset with me, but wmaris@google.com. William Maris, Bill Maris, he runs Google
Ventures, wmaris@google.com. >>Hal Leslie: He's the guy from Canada?
>>David Drummond: He's the guy from Canada. But Bill's from --
>>Eric Schmidt: He is a wonderful gentleman. >>David Drummond: A great guy.
>>Eric Schmidt: He is the answer to your question. Let's go to you, sir. You come every year.
>>> Yes, I do. >>Eric Schmidt: Welcome back.
>>> It's a pleasure. >>Eric Schmidt: You're welcome again.
>>Shelton Ehrlich: My name is Shelton Ehrlich. I'm a smaller shareholder than I was a few
years back. You mentioned the wonderful translation service.
I was in a hotel in Kiev last week. And this hotel had a very nice Ethernet, so I had really
high speed. And I opened up Google Chrome, and there it was in Ukrainian. I looked all
over. Where do I find how to get to English? It was not easy.
Now, my parents had been born in the Ukraine, and they only taught me one phrase -- Sergey
would know it -- "niet gengi" (phonetic), which means no money.
I'm serious. Is somebody going to teach me how to not get Ukrainian on my laptop?
>>Eric Schmidt: There's normally an English version on the page. The good news from your
perspective is that we're building bilateral voice translation phone to phone, so you will
be able to call your friends in Ukrainian, speak in English, and it will come out Ukrainian
on the other side. [ Laughter ]
>>Larry Page: Yeah, that's probably a bug we should fix, though.
>>> The real issue I wanted to discuss was the proposal by Mr. Harrington.
Mr. Harrington praised Google for the money it spent on his priorities, which are global
warming, sustainability. To me, being praised by John Harrington is not worth the paper
it's not printed on. I tend -- I tend to agree with the National
Center for Public Policy Research in its proposal or suggestion that there is a conflict of
interest. But it's not a financial conflict of interest. The people he was talking about
don't need any more money. What it is is a religious conflict of interest.
To many of the executives here, the environment and its protection is a religion. I think
it's a false religion. And I hope you would consider that spending money on things that
aren't in the interest of the shareholders is a waste.
I told Tony a little story before the meeting started. Almost 60 years ago, I spent a few
weeks working for a big oil company. The first assignment I had was turning oil into food.
Today, that would be a ludicrous idea. Now we're turning food into oil.
>>Eric Schmidt: Thank you very much. Larry, did you want to answer the prioritization
question? >>Larry Page: Yeah. No, I think it's good
-- you know, I tried to highlight this in my remarks. But it's also good to keep in
mind the actual effort and resource that goes into these things is very small. So that's
the first thing to keep in mind. The other thing I would tell you is that Google
does have substantial energy use, which we believe should be sustainable. And I think
that that's good business sense for us, given the sentiment there is around this, no matter
what you think about the environment. But I think that it's important for us to have
a sustainable business. And I think that's very -- a very achievable thing for us to
do. [ Applause ]
>>Eric Schmidt: Let's have you go ahead and ask a question.
>>Matthew Mendizabal: Hi. My name's Matthew Mendizabal. I'm a shareholder. I'm not an
accomplished public speaker, so I made a few notes.
Larry, we met a few years ago at the W Hotel in San Francisco. And -- well, quite a few
years ago. And I'd like to say, a lot of things have changed since then. And a lot of things
have stayed the same. Google went public. The market share grew. And Google continues
to enhance and improve all of its algorithms. I admire the Google code of conduct and believe
in following the law, acting honorably, and treating others with respect.
The Google model, don't be evil, and if you see something that you don't like, speak up,
I'm not saying that Google's responsible for national security or the security of one nation
over the other, whether that's China, the U.S., or Israel. However, I find it's incumbent
on executives to uphold their duties, fiduciary duties to corporations. And it's been mentioned
many times today already that the money that they spend is Google's money; it's not their
money. And, ultimately, it's the shareholders' money.
So the two areas of concern that I have are, number one, China; and number two, investments
in windmills and solar energy race. On the latter, I say kudos for supporting
renewable energy. It's making a statement. However, you know, such a sizable investment,
whether it's prudent for a business decision is yet to be realized.
On China, you know, it's now the world's second largest economy. And the decision to quit
and walk away from search and advertising opportunities will remain a bone of contention
for years to come. Sources estimate that China, within 14 years, will surpass the U.S. economy.
So there are quite a bit of long-term growth opportunities there.
But with Google out of the China market, the dominant players there can grow and prosper,
while its citizens are left with few options without the benefit of Google Search functions.
Even if that search function was based upon an older algorithm, the opportunity for people
to have access to information using Google Search has been effectively eliminated. It
reminds me of the boy in grade school who came to class and had a brand-new ball and
he was very popular but didn't like the local rules at the school, so he took his ball and
went home, much to the detriment of the children and everybody else. No one is going to prosper
when that happened. Another Silicon Valley big company, eBay,
refused to close down operations in foreign European countries who banned or outlawed
the sale of items that were deemed offensive under local laws and customs. And some of
those items were, like, World War II German military vehicles and action figures with
World War II German uniforms. Now, I'm not saying that, you know, the world
is perfect. I'm not saying it's going to be perfect in our lifetime. But restricting access
to Google search and advertising abilities doesn't appear to be in the best interests
of progress or the stakeholders. So my ultimate two questions are, one, what
are we going to do to stay viable in China? And, two, how are we going to ensure that
investments in energy are in the best financial interest of the shareholders?
>>Eric Schmidt: Patrick, can you talk about the investments we've made? Because the last
time I looked, they were really smart financial investments, too, weren't they?
>>Patrick Pichette: Yes. I think it's worth noting that not only, as Larry commented,
we have an objective of being carbon-neutral, but all the investments that we do in green
energy actually have a high cost of capital, meaning to have a high hurdle rate. And in
order for us to invest in them, they do actually very well from a returns perspective.
We actually benefit from -- we have a number of assets at Google that we can benefit from,
which is smarter engineers that understand the technology. Also, we have a capital structure
and tax structure that enables us often to actually get a lot of benefits out of them.
So I can assure shareholders that these investments are actually really good return in addition
to fulfilling Larry's requirements for being carbon-neutral.
>>Larry Page: I should correct one thing. We do two classes of things. Patrick is referring
to kind of things like existing wind farms, where, you know, the capital return is very
known. You know, there's a long-term purchase from a power utility or something like that,
and it's strict financial investment. We also do other kinds of more speculative
startup investing where -- and we're doing that in areas where we think that we can make
a real difference. They are obviously speculative, but they're small in scale, and they're in
areas where we think that by us participating, we can really change the world significantly,
and we believe in what the company is doing. So just wanted to separate those two things.
>>Patrick Pichette: But in both cases, we have high hurdle rates.
>>Eric Schmidt: And David and Larry, you want to talk a little bit about China?
>>David Drummond: Well, yeah. To the part of your China question, I think a couple of
things to remember to keep clear -- to make clear: We didn't leave China. We're in China.
We have hundreds of employees in China. And we continue -- we expect to be there for a
long time. What we did was to shift -- to move -- to
not operate a search engine within China that would have to -- that would require us to
do all the censorship that they required. So the second thing to remember is the reason
why Chinese users, to the extent they're restricted, it's because their government doesn't want
them to see -- to use the unrestricted version of Google, which is available to anybody in
China if the government would let them do it. So I think the -- you know, our plan is
to be there in the market and to serve the market with advertising, with all kinds of
other services, but to do it in a way that's consistent with our principles, because our
global reputation at the end of the day is worth even more to us and to you than, you
know, any one country. But it's important to remember, we're there, and we haven't left
the market. >>Eric Schmidt: Go ahead, yes, sir. I'm sorry.
>>Susan Wojcicki: Just one thing I wanted to add to that from the advertising perspective
that I think is important to point out, is Google does sell display advertising in the
market and we are one of the largest display advertising providers in China.
The second way we selling advertising in China is, given the importance of export in China,
there are many advertisers that want to be able to reach global markets. So we are selling
advertisements to global -- to Chinese advertisers who want those products to be found.
So there are significant investments from the advertising business in those two areas.
>>Eric Schmidt: Yes, sir. >>John Simpson: Good afternoon, Dr. Schmidt,
Mr. Page, fellow shareholders. I'm John Simpson. I'm a shareholder. In the
spirit of full disclosure, I'm also director of Consumer Watchdog's privacy project. And
I wanted to ask you about "do not track." Since February -- excuse me, since December,
when the FTC suggested that users be able to have a do not track function, there's been
a great movement growing. There's legislation that's been introduced, both at the state
and national level. Three of the four browser companies have added a way to send a do not
track message. But you folks with Chrome have not done so.
Do you intend to add a do not track function? How will your Web sites honor the do not track
message that is currently being sent? And if there is legislation and do not track
becomes a fairly effective thing that people opt into, will it have an impact on your revenues?
Thank you. >>Eric Schmidt: David.
>>David Drummond: Do you want to start? >>Susan Wojcicki: I can start and other people
can jump in. It's definitely -- do not track is something
that we have definitely been looking at and something that we have been wanting to participate
in terms of understanding better what that header actually means.
And so although some of the different browser companies have implemented it, it has not
been clear exactly what the response is when you get that header. So we've been working
with the different groups to try to understand that and the different advertising groups
to try to understand what would be something that would actually benefit the users and
that would make sense as something we could implement.
So we definitely have been looking at it. And it -- our focus has been on trying to
define what exactly that would mean. I will say, from the privacy standpoint, we
have been very, very focused on enabling transparency. If you look at our ads, we are always telling
our advertisers who have served them and where they have come, as well as control. Control
has been super important so that all of our advertisers can always opt out of that. And
if you look at the work that we've actually done in display, we've raised the bar in terms
of offering more notification, transparency, and control than the other networks who participated
in that space beforehand. So we do take the privacy very seriously of our users.
>>Eric Schmidt: Anything on the legislation question?
>>David Drummond: Yeah, on the legislation, there are a lot of different flavors of it.
We're involved in a lot of those discussions. And I think as Susan said, we come at this
as sort of the industry leader when it comes to informing people of what's going on with
their ads and giving them control over, which really should be the hallmarks of any kind
of legislation. So I think the key here is to make sure there's the appropriate balance
between making sure people know what's going on, protecting their privacy, but not squelching
innovation. And I think we're involved in those discussions to make sure that we don't
have that situation, because that's not going to be good for anybody.
But, obviously, whatever comes out of this, we will follow. But we are in the middle of
it to make sure it goes in the direction of protecting privacy, but also protecting innovation.
>>> We'd look forward to an opportunity to having some of those conversations at the
same time that you're at and have repeatedly made that suggestion, and would look forward
to trying to do that. >>David Drummond: I'd be happy to talk to
you. >>Eric Schmidt: Thank you very much.
Question towards the back. >>Jim Sutton: My name is Jim Sutton, and I'm
a stockholder, also a publisher, also buy AdWords and use Google Apps and kind of the
whole kit and caboodle. >>Eric Schmidt: Good. Thank you.
>>Jim Sutton: And I guess the particular -- I don't know if it's a question or a comment
or maybe a mix of both that I would like to raise is, as related to -- it starts off in
my role as a publisher and then ends up in my role as a stockholder in the company, which
is -- there's been a lot of press recently about the recent algorithm change in search.
And I have a number of Web sites that I'm involved with, either full owner or partial
owner of. And some of those sites were negatively impacted by that. That's okay. I understand
there's a goal to improve the quality of search. I guess what's concerning to me is that in
an effort to go back and understand what it is that search is looking for in these ads
or in these sites, I've taken a look at a number of sites that made big jumps up to
number one search position on the first page, or number two or three in the markets we're
in, and a number of those appear to be just absolutely pure spam. And before, they were
lower. Now they're higher. So they seem to have been promoted in the relative scheme
of things by the recent algorithm change. And, of course, that comes to the detriment
of publishers like myself, although I'm sure it helps the publishers who are doing the
key word stuffing and the other kinds of things that have resulted in them becoming number
one. The -- Also what I found is, in a couple of
cases, I have Web sites where the traffic has gone up significantly, but the monetization
of those sites has gone down significantly since the algorithm change, which seems to
indicate that we're being delivered less relevant ads and/or ads that are more poorly monetized
so to speak, or worth less to us. So from a publisher's point of view, I guess
my concern is pretty obvious here, which is that it seems like the algorithm change has
had what I would consider to be, at least in many cases that I have examined, directly
the opposite effect of what the world, if you will, would want, or the people doing
the search would want. From a Google stockholder point of view, that
worries me because it says that the whole Google experience and being a publisher using
Google's facilities and so on is becoming less valuable to me. Okay?
So -- And that all leads back into, I guess, kind of what the real question of the matter
is. Is there some way to communicate with Google about any of this? There doesn't seem
to be, frankly. I mean, the -- you know, the blogs, the help forums just seem to go into
black holes and never get any response. And I'm concerned as -- I'm concerned as a shareholder
that the value of my shares go down as the value of my experience as a publisher goes
down, and that others might be sharing that. >>Eric Schmidt: So given we have sort of run
over time, I want to sort of have a little quicker questions and answers going forwarded.
Larry, do you want to talk about the ranking changes? Susan --
>>Larry Page: (off mike). Hello.
Sorry. The mike was broken. I think the -- I think it's possible, obviously,
that there will be some instances, as you have mentioned, where not the right thing
happened. And when we make those kind of changes at this scale, there's always some -- some
possibility of that. We're pretty sure that we caused a very significant
positive impact. You know, we're very sure of that. So -- but it wouldn't surprise me
if there are -- it would surprise me if there are no such instances of also a negative change
also when you change results for hundreds of millions of people.
That being said, I think we should in general -- the gist of your question that we should
be providing better services to publishers is absolutely true. We should be -- have better
communication channels and all those things. And those are areas we're actively working
on. And maybe Susan can comment on the monetization
question. But there's no -- there's no reason that that -- the monetization of those sites
should be linked to the algorithmic change we made in search. That should not be the
case. >>Susan Wojcicki: So I'll just second what
Larry said from the monetization standpoint, that none of our monetization algorithms changed
with the search change. So search runs a different set -- one set of algorithms in terms of how
they rank sites, and then in a completely different part of Google, we do the monetization.
And so the monetization's independent of the search algorithm. So there shouldn't have
been any monetization change that occurred, or at least it wasn't correlated to the algorithm
change. The other thing I wanted to say is, we are
making -- we are working very hard to enable all of our advertisers and publishers to contact
us and to be able to get phone support. And we've been in the process of rolling that
out. We've been e-mailing groups of advertisers and our publishers. And we plan to put that
in the front ends over time as we scale that out. So within the next quarter, pretty much
everybody will be able to contact us via phone number. So we definitely recognize that and
are working on it. >>Eric Schmidt: Let's move to more -- tighter
questions, if I could ask. Yes, sir.
>>> Every year when I come here, there is an issue in the previous year with Google
and China and not in a positive way. And this is a country, just to remind you, that seems
to not know the word "human rights," is just learning about environmental awareness, and
doesn't seem to respect intellectual property law that we have in the west.
So in order to really do no evil, why not just flip them the bird and show that -- show
that value-based business is more important than making another dollar?
>>Eric Schmidt: We would argue very strongly that we have made the appropriate change based
on our rules and our culture by moving our previously censored and now uncensored results
into the other China. Remember, it's two -- one -- two systems, one China. We moved it to
the other system, because we prefer that. It's a pretty strong response. And it's had
a lot of repercussions throughout the world. Yes, sir.
>>Greg Coladonato: Hi. My name's Greg Coladonato. I'm a shareholder and a proud former employee.
I'll make my two questions very concise in deference to our chairman.
The first one is about management structure. Could you guys give us some insight into whether
Google grew beyond the scale at which a functional organization can work effectively and that
at this size and up, it's all business units going forward? Or is it the sort of thing
where some organizations are one style for ten years and then they switch to the other
one, hoping it will be better, and then they switch back because the gains weren't there?
Is Google -- do you expect that this is -- and I'm sure that everyone always expects that
it's a permanent change. But what do you guys think there?
And the second question is, -- I forgot the second question.
>>Eric Schmidt: Let's answer your first question. >>Greg Coladonato: I'll think of it.
>>Eric Schmidt: Every high-tech company goes through the phenomena that you just described,
the question of division into business units. Larry felt very strongly -- the decision you
drove on your first day as CEO. >>Larry Page: Hello, hello.
>>Eric Schmidt: I think we're failing to give you a microphone that works. What is that
message, Larry? >>Larry Page: I think we haven't moved to
a business-unit structure. That's not actually what we've done. We've moved to -- we've basically
-- have moved the product areas of the company up a level. And that's really what we have
done. So we're still functionally organized for important areas.
But, in general, we don't talk a lot about our internal structure.
>>Eric Schmidt: Your second question? >>Greg Coladonato: Second question, which
I remembered, is, a couple of years ago when the economy turned from bad to good, Hal Varian,
your chief economist, was very vocal in sharing data you had from your -- from search engine
use and so forth that we were out of the woods. If the economy were to turn south again, would
Google also share information showing that things were slowing down? Or should we only
expect that sort of information when the news is good? Thank you.
>>Eric Schmidt: It's probably better if we don't answer a hypothetical and we prefer
to believe that the United States will have nothing but a seamless and perfect recovery
for the next 20 years. [ Applause ]
>>Greg Coladonato: But the current data appears to suggest something different than that,
especially yesterday's data. So what do you guys currently think --
>>Eric Schmidt: Let's not answer a hypothetical question. As you know, we also don't give
guidance. >>John McWade: Yes, John McWade, a shareholder.
Short question. Google knows a lot about everybody. There's
been a recent breach of security with your e-mail. And with cloud computing also becoming
a big issue, what is your plan for security in the future?
>>Larry Page: We should say also the thing we announced yesterday with regards to e-mail
was people's passwords kind of being taken from them. It was not a breach in our security,
although we take it seriously as they are our users.
I think -- and I think that improved security in the cloud, we're able to detect those kind
of things because of the cloud, which I think will enable us to provide much better security
to people over time. >>Eric Schmidt: Okay. In the back, yes, sir.
>>> Hi. Thank you for running the company. Quick comment and a question.
The comment is, I wouldn't presume to tell the smartest people in the world how to invest
in energy business, but I'm really glad that you invested especially in solar and I hope
you continue to find that worthwhile. It's really important for the future of energy
in many different ways. [ Applause ]
>>Eric Schmidt: Thank you. >>> The question is, you recently announced
that you're going to be hiring a lot of people. I think it was thousands of people. And for
the new employees coming in, what would you say to them, Larry I guess in particular,
about making better products faster, what would you say to them if they're detecting
some bureaucracy or detecting things are not going as fast as they might like? What might
these people do in order to safely express that kind of concern?
>>Patrick Pichette: Allow me to take that one.
We run a process at Google -- Google is very open, as you all know. So every -- on a very
constant basis, people basically show up here at Charlie's and ask any questions they want.
Googlers vote on it. And whatever is the top question is the first one that's answered
every Friday. In the same way, we run a process called Bureaucracy
Busters. And it's the same process. It's all-encompassing through Google. Everybody actually throws
their ideas, and then we have kind of two sets of categories, anything that can be fixed
in 60 days that can benefit the vast majority of Googlers, and others that actually take
a little longer than 60 days but are really actionable short term. And these processes
run on an absolute regular basis. People vote in. We make a bit of a party on it. We kind
of show all the stuff that doesn't make any sense. It's like spring cleaning. You have
to go at it all the time. So they're very participative, both the Nooglers, our new
Googlers, and everybody else loves to chip in. We get them all the time.
And because they know that we're -- a couple of us run these processes, you can imagine,
I get, like, once -- one a week at least on top of that, just showing up out of nowhere.
And we act on them. We think bureaucracy is kind of -- that's part of what's slowing us
down. So we really kind of have these shark-repellent processes to make sure it's not a one-time
item, it's part of everyday life at Google. >>> Thanks. Thank you for the model.
>>Eric Schmidt: Let's have these be the three final questions.
Yes, ma'am, can you ask your question quick. >>Susan DaSilva: I'm Susan DaSilva. And I
have a comment about how Google Docs and chat have changed something that I work with.
I'm involved with an organization called Free Speech Radio News. And the people put it together,
and the reporters are all over the world. Nobody ever sees each other. A lot of the
work is done through chat. And then, you know, it's not unusual to have eight people in a
meeting using Google Docs all working on the same document, and how fast we can get something
together that really -- that's really wonderful when we're all typing on the same document
at the same time. It's really amazing. And if you had to do it by e-mail, where you
had to send the thing, it would be impossible. So it makes it possible for things to get
done really quickly. And thank you. >>Eric Schmidt: Well, thank you very much.
And this is, in fact -- [ Applause ]
>>Eric Schmidt: This story is why Google Docs and Google Apps are doing so well, more than
3 million businesses doing particularly well. They're built around collaboration. And, by
the way, we use them as collaboration tools ourselves. So your story is exactly how we
run the company. So you get -- Yes, sir.
>>Chin Chao: Good afternoon. Chin Chao (phonetic). Even owning one share of Google stock is like
a sprinkle on the icing on a cake at Google. And being in front of all of the brilliant
people here today, I'd like to make a case to be able to have that brilliance shine on
me and may possibly be able to melt on the cake and add value to it. I can contribute
to Google in many ways, including marketing, advertising, public relations, accounting,
and administrative support. And I have many ideas to contribute.
One of my ideas I'd like to present right now would be something that I'd like to call
Google Self. We, as -- we as people are -- we -- doing searches, it's hard to find out sometimes,
for instance, what exactly your symptoms are and then who can treat them. Doing early -- they
say that early prognosis is actually the best medicine of all. For all of us out there,
we have methods to search for symptoms, and then we find diseases for symptoms. But adding
on to that, value to that of adding possibly searches for a doctor in your area who would
be able to treat those symptoms more easily, or preferences for doctors. And since males
may prefer to have male doctors see them or that females prefer to have female doctors
see them, as opposed to just having random searches where they would show all the doctors
in the area and having to go and call each one individually, where you would waste a
lot of time and people might lose track of what they're actually focused on.
That hit me hard recently, that I had a strange mark on my side, and I looked up symptoms
for it. And then I had to do another search and other search to find out exactly what
doctors in my area would be able to best help me.
As our generation is also, you know, growing older, there will be more illnesses out there
-- >>Eric Schmidt: Could you make your question
-- >>Chin Chao: My question is very brief and
straightforward. I would like the opportunity to be able to
work at Google and to -- >>Eric Schmidt: I think this -- I want to
congratulate you for having a lot of courage. We'll look forward to talking to you later.
And thank you for your product suggestion. We love product suggestions.
Yes, sir. >>> Thank you.
>>> My name (indiscernible) is Joseph (saying name), according to your sign-in sheet, what
have you. I'm an advocate for persons with disability
and government transparency. And I'd like to point out that on your announcement regarding
the live webcast, it made no mention of it being archived. And my kids and other people
who I'm giving the stock to would probably like to have the advantage of this particular
meeting. May I suggest, A, that you archive it. And,
B, from the standpoint of your nice presentation regarding Chrome and the translation service,
could major points or major statements you make be annotated so there can be some references
down at the bottom with page so that my kids and I can understand how to follow up on the
translation service. As well as from the standpoint of a publication standpoint, to be realtime,
I would suggest that maybe this particular presentation be annotated maybe every three
months so we can go back to the Web site and see possibly what you want to share, not annually,
but some type of periodic basis. >>Eric Schmidt: I think that's a very good
suggestion. David, you'll take that under advisement?
>>David Drummond: Yes. By the way, the meeting is being archived. You can find it on our
investor relations site. And previous meetings. >>Eric Schmidt: We have two people who snuck
in after the bell. And using chairman's discretion, we're going to have them ask their questions.
Yes, ma'am. >>> Thank you very much. And thank you for
running a great country -- a great company here.
[ Laughter ] >>Eric Schmidt: Google is not a country; it's
just a company. [ Laughter ]
>>Eric Schmidt: It's important to establish this.
>>> I love what you do, and I love how you do it.
I'm a share owner, and I'm an organic farmer/rancher, Wagyu, which is American Kobe beef, and blueberries.
I have one constructive suggestion here, I hope, which is, when share owners call in,
we never get a call back. And it would be nice to have that facility so that when we
call in, we get a call back. Other than that, thank you so much for what
you do and how you do it. >>Eric Schmidt: Thank you. And thank you for
your suggestion. [ Applause ]
>>Eric Schmidt: Yes, sir. >>> Well, my --
>>Eric Schmidt: The final question. >>> My question is a simple one.
On -- I was wondering why Google doesn't consider a stock split.
Now, I understand the value of a stock, whether it's at -- you've got ten shares at $1,000
or you've got 100 shares at $100. Just recently, Cramer gave you guys a big thumbs up after
being negative on you for quite a long time. But if you listen to him, he says Google's
price is too high. And the only way you should invest in Google is deepening the money calls.
I was wondering, with this new philosophy -- and there are more and more people that
listen to him, and his books are out all over the place -- wouldn't it be better or advantageous
to Google to make a stock split and therefore cut down the velocity or fluctuation in the
prices? >>Eric Schmidt: So Mr. Cramer is a phenomenal
television show and stock picker. I can -- and we know him well. And I personally
like him a lot. I can tell you that the board has discussed
this matter quite a bit. [ Laughter ]
>>> Thanks. >>Eric Schmidt: Would anyone like to add anything
else? >>Patrick Pichette: There's -- most of the
research actually points that the stock splits don't create any value. They're a good -- they're
good for marketing in the same way that Mr. Cramer does it. But, actually, there's no
empirical evidence from any deep research that actually points to any value creation.
So just -- >>Eric Schmidt: We have one more person jumping
the line. Yes, sir. >>> I've said this every time I've come here.
My name is jack easterling. And I appreciate what you're saying. But don't split the stock.
All you do is allow those people who play with the market to play with Google. And I
think that's wrong. >>Eric Schmidt: I think that's a great thought
to end on. Thank you so much. We'll see you next year.
Thank you to our panelists. [ Applause ]