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Googling Eric Schmidt

Google CEO Eric Schmidt appeared on Cramer’s live midday show, Mad Money at the Half, on Wednesday, giving viewers an insider’s take on everything from the future of advertising and the global economy to YouTube and mobile computing.

The internet search giant, which makes its money selling ads, is on track to capture a decent percentage of the world’s $1 trillion in advertising spending, Schmidt said. Google’s in the sweet spot as businesses increasingly move toward targeted and measurable ads because “online is where the measurements are.”

Even in a struggling economy, domestic or otherwise, businesses are getting smarter about how to unload their inventories. Automobile makers are using Google’s metrics to find more likely customers. But slowdown or not, the massive switch to online from off is a secular trend mostly unaffected by the world markets, Schmidt said, and his firm is capitalizing on that.

The CEO admitted that Google has yet to find a viable ad revenue model for YouTube, which the company acquired for $1.65 billion in 2006. But this isn’t a concern for Schmidt right now. The popular video-sharing site has so many visitors that they inevitably end up using Google’s search site and clicking on its paid advertisements.

“So don’t be too worried about all that traffic going to YouTube,” Schmidt said. “I’d be worried if people weren’t using to YouTube. Since it’s an enormous success globally, we know we will eventually benefit from it.”

No doubt Google’s growth has been exponential. Schmidt doesn’t see that slowing. While former market dominators IBM and Microsoft eventually flattened out, he said Google’s constantly adding new businesses. Mobile computing alone will bring in more money than the company’s desktop business at some point in the future. And overseas revenues, at 52% of the company’s total now, could climb as high as 65%. So it looks like Google has a lot further to go before the growth stops.

That means this $500 might make it to Cramer’s $750 price target. And no, there’s no split planned to give investors a lower entry point. What worked for Berkshire Hathaway might work at Google, too.

“People think that the value of a stock is really the dollars,” Schmidt said, “so we’ll keep it high.”

Nor will Google be changing its policy on offering earnings guidance to Wall Street.

“We don’t want it to get in the way of running the business,” Schmidt said. “If we started giving quarterly guidance, all of a sudden the whole company would start focusing on the quarter rather than trying to change the world.”

And what about Google’s homepage, will we ever see advertisements on that mostly blank, but branded, page? Schmidt said no, even though it could probably fetch “some number of billions of dollars.”

“People wouldn’t like it,” he said. “We prioritize the end user over the advertiser.”




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