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Google Reassures Investors of 'Deep Pipeline'

Internet giant Google met financial analysts Thursday, providing insight and assuring the group of a "very deep pipeline of monetized new products," according to its chief financial officer.

What's in store for the future? Storing everyone's information all the time, CEO Eric Schmidt told the gathering.

One purpose for the second annual Google Analyst day may have been to calm concerns sparked by comments on Feb. 28 by George Reyes, Google's CFO.

Reyes reportedly told analysts at a Merrill Lynch conference that the company's growth was slowing and new revenue paths were needed. The remarks caused Google's stock to drop 7.1 percent Tuesday.

The company later issued a clarification. "We still see significant opportunities to improve monetization and intend to continue to focus our efforts in this area."

During Thursday's analyst meeting, Schmidt built on the statement. "We're going to continue running the company under the founding principles," he said. "Google's ambition is to become a $100 billion firm. I'll leave it to you to judge whether that is $100 billion in market capitalization or revenue." In 2005, Google's revenue reached $6.1 billion.

"Everything is running flat out because of the demand," Schmidt added. He noted Google's $5 billion investment in Time Warner's America Online as a high point of 2005. The purchase gives Google a 5 percent stake in AOL, along with a larger advertising market.

Schmidt said the company is completing 1 to 2 acquisitions each week. "Better quality, bigger indices, more personalization" are Google's goals for 2006, he added.

Other Google plans include expanding its advertising base from mid-size to larger customers, and branching from online inventory to print, radio, mobile and direct mail.

"We define the market we are in as the entire world," Schmidt said.

And Google's site index is "significantly larger than 8 billion" pages, said Jonathan Rosenberg, the search site's senior vice president of product management. The index is three times larger than competitors, he said during a Web cast of the presentations.

Has Google seen any impact from Microsoft's search or advertising challenges? Not yet, officials claimed. Microsoft reportedly will launch a new search engine in six months.

Since Reyes' earlier comment about the need to find new revenue, some analysts have questioned whether Google's advertising has tapped out. Rosenberg said there's room aplenty. One goal is to increase the number of ads per search query. "Ads are pretty primitive compared to what can be done with them."

Speaking of ads, Google is all over the Clickfraud problem, said Jeff Huber, Google's vice president of engineering. "Our goal is to recognize invalid clicks before they are charged to advertisers."

Kai-Fu Lee, who leads Google's research lab in China, talked up the company's expanding work in that country. Although he claimed Google is something of a celebrity in China, Lee himself became a headline staple in 2005 after Google hired him away from Microsoft, where he helped form Microsoft's expansion into China. Microsoft sued.

In December, Microsoft and Google reached a settlement of the lawsuit in which Microsoft claimed Lee violated a non-competition agreement Lee had signed while at Microsoft.

Lee told analysts that when he gives speeches in China, audiences reach 3,000 per lecture. Interest in Google is so great, he continued, that Chinese universities have had to issue tickets for the events.

Who wouldn't be interested in China? The company counts 110 million Internet users there with four times more graduating computer scientists than the U.S. Also making China attractive is the growth of online advertising alongside traditional advertising. In the U.S., online advertising is just now starting to keep pace with other ads.

Lee said Google has hired 70 engineers in China and believes the nation will become the company's largest research and development site. While the China search site has tripled its reach, the user experience in China is stiller lower, according to Lee.

While Google is expanding internationally, "it is not an out-sourcing method," reassured Alan Eustace, an engineering vice president.

During the meeting with analysts, Google's stock gained 2.7 percent to $374.57.