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Google's Schmidt: 'No Recession in Innovation'

A few emotional pleas punctuated an otherwise uneventful meeting of Google shareholders, who gathered at the search giant's main Mountain View, Calif. campus Thursday for the annual meeting. The event was also Webcast.

Two shareholder proposals were voted down in a process one complained smacked of censorship. Ironically, the first one involved Internet censorship, while the second urged Google (NASDAQ: GOOG) to support legislation in favor of universal health care.

As for Google's business outlook, CEO and Chairman Eric Schmidt said that while we're in the throes of a global recession, such tough times are historically very good for companies that innovate and invest versus those more focused on cost-cutting.

"Going forward, I think our share price will, ultimately in my view, be determined by our rate of innovation," said Schmidt. He mentioned a few areas like YouTube and the enterprise as ones Google will "invest in big time. There's no recession in innovation."

He also took pains to emphasize search is still the killer app and is the company's main focus. "We still don't know how to give you the right answer without you looking for it, but we're working on that," he said. "Doing it right and creating the perfect search engine is very difficult, you have to understand all the world's information."

Schmidt noted Google made over 350 improvements to its search engine last year and continues to add more. He mentioned a few recent advances like a conversion optimizer designed to help Google's text advertisers bid more accurately and reduce costs while raising performance.

"Display advertising has the same properties, they're earlier in the cycle," said Schmidt. He said Google was working to simplify and further automate the process of creating and placing display ads, which typically involve many elements from pictures and graphics to HTML coding. "We want to bring the science of search to the art of display," said Schmidt. "We're doing similar things with YouTube."

Another hot area he touched on was mobile. "The number of mobile searches has gone up five times in the past two years," he said.

Schmidt predicts future mobile services will use GPS and other technologies to tell consumers about different things going on around them as they walk. "That's now possible," he said.

Shareholders speak out

The censorship proposal came from Tony Cruz, representing New York City Pension Funds (which he said owns over $300 million in Google stock) and Amnesty International. The proposal notes Google is already involved in efforts, along with other companies, to develop principles which would guide how they respond to censorship demands in all countries including China, which has had its share of Internet censorship controversies.

But the shareholder proposal asks that Google be more proactive, including that it demonstrate "a commitment to exhaust all possible remedies and appeals before complying with state directives that would violate internationally recognized human rights, including the rights to freedom of expression, access to information, and privacy."

The proposal also suggests Google commit to independent monitoring and assessment of the companies’ fulfillment of the principles that are agreed to and offer transparency about filtering processes used to limit or restrict search results, including informing users.

Under the rules of the meeting, the proposals were put to a vote followed by a reading of the results and a period for comments and Q&A with Google's board of directors.

But one shareholder asked why comments weren't allowed before the vote so shareholders could be more informed on the issue. "It's like you have censorship at your own meeting," Cruz said.

Schmidt said "We don't want to censor anyone" in response, but didn't elaborate other than to note the rules of the meeting were released well ahead of time.

The other proposal, in support of universal health, was made by Brandon Rees, representing the AFL-CIO labor union and was also voted down.

While noting Google and other big U.S. companies, such as IBM, McDonald's, Staples and G.E., all have excellent health plans, the cost of providing it is a huge burden to American businesses. "Starbucks pays more for healthcare than it does the cost of coffee," said Rees.

He said backing from companies like Google, would help President Obama efforts to broaden access to health care.