Challenging Viacom and Microsoft, Google CEO feels happy

In 2000, when one of his friends advised him to get a job at Google, Eric Schmidt thought: “Where? This is just a search resource. ” And Everest is just a mountain. Since then, Google has become the most influential corporation of its time, and Schmidt - its executive director and multi-billionaire. Today, Google is at a crossroads. With more than ten thousand staff, the tension between corporate control and creative chaos has never been greater. Wired caught Schmidt at Googleplex , where he announced plans to experiment with video ads on YouTube, rejected the Viacom lawsuit, recognizing it as another move in the business game and indirectly confirmed that Google Apps threatened the monopoly of Microsoft.

Wired: Microsoft CEO Steve Ballmer recently called Google "a company with income from just one business." Your thoughts on this?
Eric Schmidt: I see no point in commenting on the words and actions of Steve Ballmer.
Wired: Well, to paraphrase the question: by and large, Google gets income only from one source - online advertising. It can be decided that the company's business is not sufficiently diversified.
Schmidt: Criticism is justified. We get most of our advertising revenue, which today is quite a popular business everywhere. But on the horizon, new revenue patterns are visible. The most interesting product, perhaps GoogleApps, in this area, we have already begun to receive income from large transactions with companies.
Wired: Google Apps allows users to work in a text and spreadsheet editor, email client directly in a web browser. All user data you store somewhere in a huge server array. Do companies want to work the same way?
Schmidt: Corporations are tired of struggling with the difficulties of the old models; our products today are strong enough to reliably serve the work of companies.
Wired: Does the success of Google Apps mean that Microsoft Office is losing market share?
Schmidt: Maybe. Or, it may mean that consumers will provoke us to solve completely new problems.
Wired: In March, Viacom’s media agent filed a lawsuit against Google, accusing YouTube of stealing video information. What made Viacom go to court?
Schmidt: Business games. We are negotiating with them, and I am sure that we will continue these negotiations even more actively.
Wired: Viacom argues: you are not diligently deleting copyright-infringing videos from YouTube.
Schmidt: If they turn to the laws, they will understand that the Digital Millennium Copyright Act ( DMCA ) implies shared responsibility. The law says that first the rights holders are tracking - and after that we immediately delete the problem clips. So we do. In fact, YouTube traffic has grown since we started doing this. So Viacom’s argument that YouTube is in any way built on stolen information is certainly wrong.
Wired: How can legislation on copyright be improved in the digital age?
Schmidt: The balance, which was the result of the DMCA, is maintained quite well. I think it will be better for all of us to work in these conditions today when we introduce innovations. But with the growth of new technologies, any legislative act sooner or later has consequences that were not taken into account when it was created, which creates difficulties in its use.
Wired: You thought that when you bought YouTube, there was a danger of litigation. The deal did not account for 200 million dollars, which were supposed to go to legal costs. Why did you make a deal when faced with so many problems?
Schmidt: Because we are sure that YouTube is a fantastic service. We really think that the YouTube phenomenon will work for many, many more years. The argument is simple: people use video clips all over the place, collectively, creating communities around. YouTube traffic continues to grow. Video is something that will eventually be embedded everywhere. From the point of view of Google’s development prospects, it makes sense to be the company owning the largest video web service.

Thanks to YouTube, now anyone can witness at any time how in 1986 a group of Sun Microsystems employees made a joke on young manager Eric Schmidt

Schmidt: Obviously, we will be happy to work with licensed, protected by copyright laws, information - legally - and then make money from it. But YouTube can pay for itself - and this is what critics do not take into account - with the help of earnings on a search service. Because, remember, when you go to YouTube, you do a search. After integrating all the Google search services that we are actively working on, traffic will increase in all directions. This technique will be an occasion to create new information, and thus increase the use of Google.
Wired: This encourages us to increasingly use the Internet, which in turn generates more and more advertising revenue.
Schmidt: They got it right.
Wired: Does this mean that we will see ads on YouTube soon?
Schmidt: Sure. Advertising producers and their agencies often make videos that they don’t use. For them, the Internet represents a new creative environment. Now they can create five to ten second short videos to attract Internet video lovers to continue to watch ads on TVs or show cut-off moments, as well as short versions of ads. This is only a small part of what creative people can do. We will see the emergence of new types of advertising and new ways of money production.
Wired: Meanwhile, News Corp. and NBC Universal recently announced joining forces to create their own online broadcast channel. Do they constitute a serious competition for you?
Schmidt: No. They created an exclusive agent for licensing content to anyone. In fact, the chief operating officer of News Corp. Peter Chernin and I talked about this for a long time. Before announcing the opening of the service, Peter explained in detail to me why their union would not compete with YouTube. I think this is the realization of another effort to free the information.
Wired: You recently joined Google’s board of directors and started talking about potential collaboration between Apple and Google. What will it look like?
Schmidt: Google’s model of building broadband Internet and services is very well suited to the powerful devices and services produced by Apple. We can provide the ideal place to store information for the tasks that they solve.
Wired: Let's talk about these data centers. They change our attitude to computers and everything connected with them. Explain.
Schmidt: It has already become obvious to everyone that an architectural shift is taking place today. Such changes occur every 10-20 years. The previous architecture was a proprietary network with a personal computer attached to it. With the new architecture, you are always online, every device can work with each application, applications are stored in a certain cloud. This is similar to the banking system in which your money is located, and you yourself do not manage this money.
Wired: How many data centers have you built?
Schmidt: A few dozen. Created several large, some of which are already known in the media. But within a year or two, these very large data centers will become smaller. This is the direction where most of the capital spent by the company goes.
Wired: Google manages its own fiber optic network. Why?
Schmidt: Because we can manage it. One of the positive effects of the burst Internet bubble of the 90s is the formation of a large number of fiber optic networks open for use today. People always assume that we have a master plan, including telecommunications systems, whereas in reality, if you consider this as a solution to the problem of supercomputers, we just want to speed things up.
Wired: How should we take Google today?
Schmidt: First of all, take Google as an advertising system. Further - as a system serving the end user - Google Apps. Third, you can treat Google as a giant supercomputer. And the fourth way to relate to Google - as a social phenomenon, including the company, the people of the company, the brand, the mission, the values ​​- everything that applies to it.
Wired: The company helps San Francisco and other cities set up cheap public Wi-Fi. Why?
Schmidt: Remember, one of the crucial things for Google is the number of users who have low-cost or completely free access to broadband Internet. If someone else is going to subsidize it, we think it is excellent. If you have 10% coverage of broadband in San Francisco and we increase this percentage to 50%, it makes people happier. We know that those who used to go to Google just to search for something, tomorrow will use our other services. They will quickly become users of Google Calendar, Gmail, Google News or other services, because they like performance.
Wired: Revenue and the number of people working with Google have tripled in the last two years. How do you keep Google from slipping into bureaucracy or chaos?
Schmidt: This is a problem that we will always solve. We analyze it every day and come to the conclusion that the best work model for Google-level companies is small groups that act as quickly and cohesively as possible. Attempts to ensure a rigid order freeze our creative abilities. Keeping a balance between creativity and the system is what is needed in a perfectly functioning corporation. But we control certain things. For example, now we do not close our eyes to the behavior of “Hey, I want to have our own database and at the same time have a nice time”, which was effective for us in the old days.
Wired: Do you, Larry Page and Sergey Brin still share your responsibilities in the same way as before?
Schmidt: Approximately the same. Today, Larry and Sergey spend all day in the boardroom, making product reviews. I talk with some managers, hold talks with a couple of partners about potential deals, and the three of us appear on the scene for a few minutes to answer some questions from the workers. This is a typical daily routine.
Our skills are also great complement each other, as it was five years ago. Larry and Sergey have an excellent technical understanding of the issues, while solving some problems, they are faster than me. They are very clear-minded people. My task here is to know how to achieve corporate growth. I think this combination works fine, and here, at least, nothing will change. We plan to work this way for a long time.

This text is a translation of the article “As Google Challenges Viacom and Microsoft, Its CEO Feels Lucky” by Fred Vogelstein, from Wired magazine # 15.05, May 2007.
Selected illustrations and videos are taken from the following sources:
Google logo, Earth Day - April 22, 2004: www.google.com/holidaylogos04.html
Eric Schmidt www.cable360.net/cableworld/technology/strategy/21493.html
Wired www.wired.com
Google office in China www.habrahabr.ru/blog/office/5252.html
You Tube by Eric Schmidt-1986 www.youtube.com/watch?v=Po3gW7xVvoE
Eric Schmidt home page ericschmidt.com
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