BARTIROMO: Do you have any sense of how these things go? I mean, can they go in the open market, buy the stock, and then just create a proxy battle?

Dr. SCHMIDT: All I know is what I've read in the press, which is that essentially you replace the board and you force--you force the deal.

BARTIROMO: Let me ask you about YouTube and MySpace. YouTube has these phenomenal growth rates. What do you think is behind that?

Dr. SCHMIDT: Video is powerful. And it's amazing. You know, we started off with Mentos and the other sort of fun videos, and now people, because they have so many digital cameras, are essentially uploading everything. Furthermore, we're beginning to see glimpses of significant professional content on YouTube. People are using it--because there's such a large reach, they're learning how to reach that audience. We're working but have not yet in my view gotten a breakthrough around monetization. So while we have lots and lots of traffic and we have lots and lots of interesting and creative people and all sorts of controversies--we're blocked in countries, so on and so on--I don't think we've quite figured out the perfect solution of how to make money, and we're working on that. That's our highest priority this year.

BARTIROMO: Which is a huge priority, clearly. A lot of people feel like this is an amazing opportunity for you. So, as far as monetizing that business on YouTube, do you think that takes a year? Does it take the next five years? What's your time frame on that?

Dr. SCHMIDT: We believe the best products are coming out this year. And they're new products. They're not announced. They're not just putting in-line ads in the things that people are trying. But we have a number--and, of course, Google is an innovative place. The Yahoo! team are trying various new forms of advertising, ones which are much more participative, much more creative, much more--much more interesting in and of themselves. Google believes that advertising itself has value. The ads literally are valuable to consumers. Not just to the advertisers, but the consumers.

BARTIROMO: They want to look at them.

Dr. SCHMIDT: When they're targeted. When they're the right ad for what you're doing or what you care about.

BARTIROMO: Mm-hmm. But, you know, it gets me to MySpace. Some people feel like, when you look at the MySpace part of the business, that's really where people are looking at, or feeling a bit of an economic downturn. Let me ask you about that. The deal involving revenue promises, is that going to impact margins in the coming two years?

Dr. SCHMIDT: Not materially in that sense. We have pointed out, and I'll repeat again, that the whole social networking space has been harder for us to monetize--that is, develop advertising businesses again--than some of the other--than some of the other spaces that we're in. It has to do what people are doing. When you think about it, you're in a social network, you're looking at people's photos, you're figuring out where your friends are. You're not as likely to be purchasing a new car at the same time or purchasing clothes or purchasing a book or what have--whatever business that you're in. So the development of the advertising tools and techniques, literally the platform, has been more difficult than we have thought. But we're working on it, and we're hopeful.

BARTIROMO: You've got $12 billion in cash right now?

Dr. SCHMIDT: A little more than that.

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