Schmidt: YouTube Trumps Yahoo in Google’s Focus


Google’s (NASDAQ: GOOG) top priority this year is to make money off its YouTube video-sharing site, chairman and CEO Eric Schmidt said in a TV interview that sent Google’s shares up 4.7 percent.

“I don’t think we’ve quite figured out the perfect solution of how to make money, and we’re working on that. That’s our highest priority this year,” Schmidt said in the transcript of an interview airing today on CNBC.

Schmidt said YouTube planned to introduce a series of new products aimed at generating advertising revenue. Asked by interviewer Maria Bartiromo what the time frame for making money was, Google’s chief executive answered, “We believe the best products are coming out this year. And they’re new products. They’re not announced,” Schmidt said, adding that such ads would be “much more participative, much more creative … much more interesting in and of themselves.”

Shares of Google rose $26.39 to as high as $584.86 after CNBC broadcast portions of the interview on Wednesday. The stock is off 15 percent in the year to date, but has recovered 40 percent off lows hit six weeks ago.

The new ad services will go beyond basic in-line advertising that YouTube already runs, Schmidt said. In-line ads are text ads that run along the bottom of YouTube videos.

Schmidt left open the prospect of further business ties to Yahoo (NASDAQ: YHOO) even as he criticized what he said were anticompetitive aspects of Microsof’s (NASDAQ: MSFT) possible acquisition of Yahoo.

Long term, Google is focused on automating “the trillion-dollar industry that is advertising,” and he said its push into the business software market would help it forge relationships with big corporate customers that last “20 or 30 or 40 years” and “will ultimately be very, very lucrative.”

Schmidt said Google was still in the running for a business deal in which Yahoo would replace some portion of the ads running alongside its search results with Google-delivered ads, a move that lets Yahoo focus on other advertising fields.

[cob:Special_Report]”We did this as part of a commercial conversation, which I obviously cannot go into, but it’s one of the strategic options that we believe Yahoo is considering at this time,” he said.

Schmidt said Google’s primary concern if Microsoft succeeds in buying Yahoo is that the combined company would limit user choice in technology categories such as e-mail and instant-message communications.

“It would be possible for Microsoft to integrate some of the properties and essentially eliminate consumer choice, particularly in electronic mail, instant messaging, the things where they have 80 or 90 percent market share, and that’s a sweet spot for Microsoft in its ability to eliminate choice.”

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