Dr. SCHMIDT: In Google's case, I think it's internal. It's the ability to manage the creative process, deal with the complexity in what is a relatively large company, in terms of people, who's doing what. We have 50 development centers all around the world, people in different time zones, `Are you doing that? Are you doing that? Do I work with you? How do check in my code?' Those sorts of things.

BARTIROMO: And for a long time, people were saying, `Look, you know, Google has this incredible campus, and, you know, spending money, and really showering employees, making sure that people are happy there.' Are you beginning a new process of managing employee growth right now and managing expenses more aggressively than you have in the past?

Dr. SCHMIDT: Well, certainly not our benefits, per se. Every day I turn around, there's some new benefit that we've come up with for our employees. It's part of our culture; we're happy to do that. And, of course, we have gross margins to afford it. So higher gross margins is one of the explanations. We have slowed our head count growth for a couple of reasons, but the biggest reason is it began to feel like we really didn't have a good sense of what people were doing. The systems in the company, literally who's doing what, what are they doing, seemed to lag our ability to hire these great people. So we slowed it a little bit. But we're still going to hire some number of thousand people this year.

BARTIROMO: Let me--let me go back to something on the DoubleClick acquisition. Are you seeing any pushback from some of the advertisers who say, `Look'--the ad agencies who say, `We're already spending a ton of money on Google. Why do we need to spend more on all this other stuff away from search?' How are you going to get them to devote more money to display, to audio, to print and TV ventures, which are--and everything else you're--and the display ads, obviously.

Dr. SCHMIDT: Because we earn it. Because you can measure it. We never want people to give us--give us money that we don't earn and that we can't prove that they--that they--that it really provides value. That's not a good business for us. So as we enter these markets, we hope to say, `We have the tools that can show you that if you put this display ad out there, you really will get the sale.' And we have ideas, we have new research in how to do that in a closed loop way that is phenomenal. So our innovation model is in very category of ads, not just text ads, to show real return, real sales, and we think we can do that. And if we do that, we'll get the business. And if we can't do it, we shouldn't get the business.

BARTIROMO: Right, because it's so measurable. That's why you don't really see a real dry up in the advertising during a recession.

Dr. SCHMIDT: Which is...

BARTIROMO: Would you agree with that?

Dr. SCHMIDT: That's our hope. Our hope is that, again, in a recession, people would say, `Look, I'm going to put my money where I know my money's being well spent.' Now, we don't know that we're in a recession, but if we were, we hope that's what will happen.

BARTIROMO: Now, earlier you said, `Look, growth levels have to slow, obviously.' What's appropriate then? I mean, when you say--I mean, investors are saying, `Look, is this company insulated? Is it not insulated?' So you say of course growth levels have to slow. To what?

Dr. SCHMIDT: Well, we don't know, but obviously, we don't plan to a growth level, we plan to an innovation level. Our idea is you just keep inventing new stuff, and it grows as quickly as it can. And there's some capacity with which we can deliver these to customers and that they can adopt them. And, of course, they have to do work. They have to learn how to use new tools, we have to talk to them, there's a lot of selling and marketing involved. It just doesn't happen automatically. Here's a new idea. People have to be comfortable with it. But once they are, we've found that growth rate is quite...(unintelligible).

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