>>RUSBRIDGER: How’s your relationship with
the Murdochs at the moment.>>SCHMIDT: Very–it’s very good, actually.
We’re all very good friends.>>RUSBRIDGER: They haven’t–
>>SCHMIDT: And I’m very good friends with Steve Jobs, I should say, as well. I know
it’s a shock.>>RUSBRIDGER: Um, but Murdoch called you
a thief and a parasite. That’s quite rude. Has he apologized for that?
>>SCHMIDT: I did not ask for an apology, nor would I expect one.
>>RUSBRIDGER: Do you–do you think you’re a thief and a parasite?
>>SCHMIDT: Well, now, that’s a direct question, and the answer to that question is no.
>>RUSBRIDGER: Um…>>SCHMIDT: There was another question.
>>RUSBRIDGER: There was a piece–we were just discussing the piece in The Atlantic
by James Fallows which, um, which seemed to suggest there was real serious effort inside
Google to engage with this issue of the future of newspapers.
>>SCHMIDT: Yes.>>RUSBRIDGER: Is that genuine, or is that
just ’cause you feel it’s bad publicity and you want to put out an olive branch?
>>SCHMIDT: Well–well, hopefully, Google does not do things like that because of publicity
at all. That would be sort of a violation. We view ourselves as innovators, and we try
new things, and we’re not perfect, and we make mistakes. But hopefully, the things that
you hear about are sincere efforts to do something new. In the case of news, here’s the argument
I would make. Again, we’ll use the iPhone, iPad, Android phones and future tablets from
other manufacturers and so forth as a metaphor. Think internet first. What does the news reading
experience look like some number of years from now? Well, it’s clearly gonna be on one
of these digital devices, ’cause you carry it everywhere. It will have color, it will
have lots of information, it will have text, of course, it’ll have video. It’ll have the
ability to go very deeply. It’ll know what you read, and so it’ll show you what’s changed,
as opposed to repeating things over and over again. The newspaper often tells me things
I already know, because I already read it and they forgot I knew it, but it’s static,
not dynamic. It’ll have very, very sophisticated advertising products that are much more multimedia-centric.
Think of–the current print ads on newspapers can be replaced by multimedia display ads
that are likely to be quite lucrative. But the most important thing is it’ll be highly
personal and that the newspaper will be much more of a personal construction. When I was
trying to comment earlier that there’s some danger that that, um, personal construction
will narrow the field of view–and the serendipity principle of newspapers is very important–
so we’ll find some balance in that. So if you follow that line of reasoning, then Google
wants to be the company that offers the pieces that I just described to content publications
like yourself to do with as you see fit. So the article that you’re referring to, Jim’s
article basically talked about not only the development of the kind of user interface
that I’m talking about but also monetization both in terms of advertising formats and subscription
formats. The Murdoch comment was really about what are known in the industry as pay walls,
and there’s a dispute within the industries whether, ultimately, news will be charged
for through a subscription mechanism or through advertising. My view is we wanna enable both,
and we’ll let the consumers and the businesses that properly own the content make that decision.
It’s interesting that there are many publicly available free websites that, when offered
the opportunity to move to a pay wall subscription service, choose not to move. ‘Cause they figured
out a way to make enough money from advertising. So that is a model. Others, which are more
traditional print publications, want a subscription mechanism, ’cause, frankly, that’s what they’re
used to. They’re in the subscription business. I think we should try that too.
>>RUSBRIDGER: And how optimistic are you that you can come up with something that will
monetize business?>>SCHMIDT: We will eventually. There’s–the–the
sort of the snappy saying is that we’re replacing analog dollars by digital cents. So I guess
that would be pounds, pounds and pennies, in your case. And the current problem in the
industry, in media in general is that the analog rents, if you will, are being replaced
by smaller digital rents for the same technology. And the numbers really are smaller, the gross
margins are different, and that’s leading to a loss of jobs. It’s very real. I’m not
trying to suggest it’s an easy problem at all. And believe it or not, it’s quite–it’s
much better here in Britain because of the history of newspapers and I think the British
pride, and those sorts of things. But in America, for example, there are quite a few very, very
unhappy people, especially the regional newspapers and so forth, who fundamentally have been
losing their audience at a faster and faster rate. So it’s a very severe issue. I believe
that ultimately not only will the revenue be replaced, but I think it will be higher.
And the reason I believe that is that ultimately the medium is more personal. You know, fundamentally
today, you have something where you’re targeting a generic price for an ad on television that–typical
example is the television has an ad, at least on some of your television channels, that
are– that’s a, you know, baby diaper ad, but there’s no baby in the house. That’s a
wasted time slot. They should show something which is more relevant to people who are in
the home, right? So you should be able over time to build products that are more targeted
and therefore are more lucrative, not less lucrative. So we’re in one of those transition
periods, and it’s very painful to go through them.
>>RUSBRIDGER: China. What’s going on? Have you heard–have you heard from the government?
>>SCHMIDT: Um, yes! Yes, we– we talk to them a great deal.
>>RUSBRIDGER: Today?>>SCHMIDT: I have not talked to them today,
um, using the excuse that I was out of the country and in a different country. Um, the
history was that we decided that we did not–you know the laws require active censorship. We
decided to move to Hong Kong, former British protectorate, thank you very much. And, um,
the pitch in China is, um, one country, two systems. We like the other system better.
So we moved ourselves to Hong Kong, and the way the censorship works is the Chinese government
has what is known as the Great Firewall of China which sits there and–you’re not allowed
to talk about it very much–but basically, content goes through it and some then content
doesn’t make it to the other side, and that’s how the censorship is done. So we made this
decision pretty much unilaterally, based on the things that happened to us, uh, to great
fanfare, and that’s been in place now for a few months. As part of our operations in
mainland China, we needed a license called the ICP license in order to run our businesses
there. And the Chinese government said, look, you have to make a few more changes. You have
to get rid of what is called the redirect, and we didn’t exactly have a lot of choice.
So we made that change, and that change was done earlier this week. I want to be clear–
the Chinese government has the arbitrary ability to shut Google down in China, mainland China,
if they should choose to. So far, they have not done so, and we would hope that they would
not.>>RUSBRIDGER: Some people think the redirect
is gonna be an end to Google in China, and some people believe it’s an expedient–commercially
expedient move on your behalf.>>SCHMIDT: Oh, I can assure you it’s not–no
coherent commercial business would have made the decisions we made about China– trust
me. This was–this was not a business decision. This was a principle decision. Because it
puts revenue at risk and those kinds of things. But Google is a different kind of company.
We made a decision based on our values and our principles. I’m sure it’s–the decisions
are surely negative for the standpoint, compared to the alternative amount of revenue, but
we don’t run the company that way. So–so the answer is I don’t know. But I do want
to make sure–I think that people who speculate what’s going to happen in China don’t understand
how China works.>>RUSBRIDGER: How bruised were your engineers’
egos when they realized how badly they’d been hacked?
>>SCHMIDT: Uh, engineers have egos. That’s about all I’ll… I’ll say.
>>RUSBRIDGER: Business head of The Guardian with his hand up, so it would be rude not
to–to ignore him, so, Dan, you’ve got the last question.
>>ROBERTS: Sorry, I was just dying to ask, really. The life cycle of technology companies
seem to get shorter and shorter. If something one day will kill Google or replace it or–or–or
overtake you, uh, what will that be? Or to put it another way, what–what’s your biggest
fear? What keeps you awake at night as your threat?
>>SCHMIDT: Well, having studied this for a long time, almost all of the deaths in IT
are self-inflicted. Large, successful companies, they make mistakes ’cause they don’t continue
to innovate. They get sloppy, they get slow. They start to believe their own press, you
know, what have you. Um, so an example would be I started my talk by saying what’s new?
And I said nowness, okay? Well, that’s a new concept for Google because, you know, five
years ago, you didn’t need to worry about now. We were just busy doing search engines.
So we now added real-time information and that kind of stuff. So my fundamental fear
about Google is that we have the same faith as other companies, which is that we lose
that edge. There are successful models of companies that have been able to maintain
that, but they’re relatively rare. And so in that scenario, if we lost that edge, we
would eventually be a highly profitable but not very relevant company and eventually be
bought, which would be sort of a bad–bad thing. Although a long, long time from now.
So the external threats are likely to occur from truly innovative companies, really small
ones, that manage to see something that we don’t see, you know, and then build a big
enough business that we can’t catch up. And that’s the nature of our competition. I don’t
think that’s any different from any other industry. The difference in IT is it happens
so fast. The birth/death cycles are so quickly because of the scale of the internet. And
I think that’s permanent. In other words, it’s–it’s, you know, the next great success
will be an even faster success than Google. The one after that will be even faster than
Google just because of the scale of the internet and the reach and the things that I talked