>>GUNDOTRA: …patient can make ads even
more relevant. Okay with that, lets move to question and answer and I’ll invite Patrick
and Mario up on stage with me.>>PICHETTE: Mario.
>>QUEIROZ: Patrick.>>PITCHETTE: So, Maria will be reading us
the questions that she is getting on the, what I call, the doily page, and so why don’t
we take the first question, Maria.>>MARIA: The first question is, how confident
are you that Google will be able to drive material revenue for mobile search within
two to three years? How much may be incremental to desktops search? What are CPC levels and
trends for mobile versus desktop? And what are your learnings from Japan?
>>GUNDOTRA: So, we are very excited to kind of report that, and we said this publicly
previously, that mobile searches appear to be additive and incremental to our business.
In other words, they’re inversely correlated to desktop. Just when we see desktop search
usage patterns decline, for example, when people go out to lunch, that’s exactly when
we see mobile spike. And so, we think these are brand new searches, searches people do
when they’re out and about and on the go that we never would have seen previously but now
are seeing. And in terms CPC levels, it’s important to note that prior to the arrival
and the mainstreaming of smartphones, when you’re talking about the feature phone era,
CPCs were, in fact, dramatically lower than that of desktop. With the arrival of smartphones,
we’ve seen CPCs rise dramatically. And, as I mentioned earlier, with the increase–-with
the improved technology like location and other attributes that a mobile device provides,
we hope and believe that there’s even a chance that we could exceed desktop in the future.
>>MARIA: Great. So, next question is how do you see wireless phones and mobile device
distribution evolving? What have you learned from the Nexus One launch?
>>QUEIROZ: I’ll go ahead and take that one. So, we think that the existing models of distribution,
which in most of the world, are operator-centric are very effective at delivering great mobile
phones to consumers. We also see an emerging trend in consumers wanting to pick a great
device and then choose his or her operator of choice. And that’s a need that’s being
fulfilled by some innovative companies in different parts of the world, Carphone Warehouse,
for example, in the UK, and different independent retailers in the US. And that’s also the need
which we chose to address with the launch of the Nexus One through our Google-hosted
webstore in January. Now, you questioned about what we’ve learned from the Nexus One launch?
We chose to launch the Nexus One through an online channel because that’s the fastest
and most effective way for us to learn from consumers, so that we can iterate and make
improvements. We’ve made significant improvements to our purchasing flows as well as to our
customer support processes, and we’re pretty pleased with the results so far. So, pleased
that, as we mentioned in January, our intent is to expand the program in terms of more
devices, more operators, and more countries.>>MARIA: Great. The next question is about
China. What is the outlook for Android and Chrome OS in China given recent Google search
dynamics?>>PICHETTE: So, why don’t I take this one.
I think that there’s, in its simplest form, this about Android platform. Android platform
is available to everybody and all of the carriers, all the handset providers can actually use
the Android platform, it’s an open source platform. And so, China is, obviously, you
know, another great market in which Android should flourish. So, we look forward to that.
Maria, next question?>>MARIA: Great. The next question is looking
at five years, the mobile device market will likely be bigger than the mobile phone market.
In general, talk about Google’s OS market share objectives in each of these categories,
Android versus Chrome OS.>>GUNDOTRA: So, why don’t talk broadly then
you can talk about Android. It is–-we agree with the sentiment expressed in the question,
that looking forward in a half a decade or so, there will be many mobile devices that
are bigger than what we consider the mobile phone market to be. And those mobile devices
will vary in size, from small phones up to larger form factors. But what we think is
critical is that regardless of manufacturer, in fact, regardless of even platform, what
will be the common element across these new emerging web endpoints will be powerful browsers.
And so, we’re working very hard, not only to move HTML 5 forward on the desktop, but
to make sure that we see even faster innovation across these endpoints with the web browser.
>>QUEIROZ: Okay, so I’ll add to that, in mentioning that. Specifically to Android,
one of the strengths of Android is that it can–-it’s open and it’s flexible and it
can be adapted very quickly by hardware partners to a broad range of form factors, display
sizes, display resolutions, chip sets, keyboard types, input methods and so forth. And so,
we believe that Android, specifically, will play a big role across a very broad range
of device formats. And as far as Android and Chrome OS, our two-pronged operating system
strategy really allows us to take advantage and contribute to what Vic just described,
which is to enabling a better web and enabling great applications to run on the web and run
in the browser. And through Android, we’re also offering a powerful application framework
which for consumer electronic types of devices like mobile phones, also allows developers
to build some great apps which run natively on those platforms.
>>MARIA: Okay. Next question is how big is Google’s mobile monetization opportunity in
the corporate world? What are your views of the enterprise concerns regarding security
in the cloud? Will Google’s mobile success be based on open platform and web apps or
closed and native app-based offerings?>>GUNDOTRA: So, you know, when you talk about
the enterprise, it’s important to understand the sea change that’s occurring. And that
sea change is that enterprises are increasingly building software for their own employees
and for their customers that are based on the web, that are cloud-based apps. And as
they shift away from proprietary operating systems and applications that reside on those
proprietary applications, then that’s a great thing. And Google’s mobile strategy as well
as its Chrome strategy is really designed to push that web forward which will enable
enterprises to build even more powerful apps and really continue the path that is so exciting.
The second part of that question asked, open platform versus native app-based offerings.
And we believe that there’s room for both. As excited as we are about the web platform,
we’re also very pragmatic. We recognized that the web platform today, even with the emerging
centers like HTML 5, often don’t give developers the full access for certain classes of apps,
like games. And in those cases, we think writing to the native platform is the only option.
In fact, Google’s pragmatic nature can be seen by looking at our own apps, whether it
be Youtube, which we offer as a web-based mobile version and a native app, or Google
maps, which we offer as a web-based app and a native app. And so, we believe for the next
several years, as the web evolve, developers will do both depending on what their apps
need.>>MARIA: Great. Next question is about AdMob.
How does AdMob fit in your mobile strategy and how critical is it to your monetization
plans?>>GUNDOTRA: So, because we’re currently in
regulatory review on AdMob, I’m going to limit my comments to just to two comments. One is,
obviously, the space is highly competitive, as Apples’ recent acquisition of Quattro demonstrates.
And then secondly, concerning AdMob itself, we were work incredibly and continue to be
very impressed by the quality of people at AdMob, including the engineering team, and
we look forward to having a chance to work with them in the space.
>>MARIA: Great. What percentage of search queries are coming from mobile? How is that
trended over the past four quarters, and can you compare and contrast click through rates
on mobile versus desktops search?>>GUNDOTRA: So, we don’t breakout the number
of queries versus–-or mobile versus desktop. But we will tell you that our search query
volume has gone up five times in two years at an accelerated pace. That, obviously, is
a growth rate that’s pretty dramatically higher than desktop. And so over time, it’s only
natural to assume that that will continue and will represent a bigger and bigger portion
of our business. As to CPC and CTR, as I mentioned, you know, three or four years ago, they were
dramatically lower. The emergence of smart phones has change the dynamics totally, and
while we don’t give out specifics, we’re very encouraged about what we think we can do in
making these apps more relevant, which will drive both of these metrics.
>>MARIA: What percentage of mobile search come through Google.com versus an app or the
search boxes that Google pays to have on deck?>>GUNDOTRA: So, I think that depends upon
the phone. And even in phones like the iPhone, I suspect the number of queries coming–-by
people going to the browser and typing in www.google.com is a surprisingly high number.
So, we’re excited about the choice that users have of opening their browser on their mobile
device and typing in www.google.com to come to Google.
>>MARIA: Okay. And what percentage of Google advertisers are bidding on mobile today?
>>GUNDOTRA: We don’t have–-we don’t publish the percent of advertisers. But it is in increasingly
large number and there’s a dramatic amount of interest in mobile. And we see that reflected
in the movement of advertisers actually running mobile-optimized campaigns.
>>MARIA: Next question is on Android. Do you have any comments on the handset manufacturer
relationships and different dynamics by geography? What are your views about concerns regarding
version control issues for Android overstated owing to the ability to automatically update
the operating system?>>QUEIROZ: So, our handset manufacture relationships
are very strong around the globe. These are global companies and we are–-we’ve been
working very closely with all of them who are members of the Open Handset Alliance.
And they or have brought a lot of products to market which have been successful and we
see roadmaps which are very, very rich. So, generally speaking, we’re very happy. We won’t
comment, specifically, on device numbers by region. But I will say that in North America
and in Europe, for example, our relationships with the handset makers as well as the operators
are such that all major operators have announced Android phones in those two geographies. I’ll
give an example, from Asia where the launch of Android phone in Korea has led to results
which we’re very, very pleased with, and this was just last month. And as far as version
control issues, we––there are two aspects of this. First of all, when we launched a
version–a new version of the operating system, we spend a lot of effort making sure that
there is backwards compatibility to the right devices as well as using our–-what we think
is a very important capability which is over-the-air updates so that these existing devices are
getting the latest software very quickly without the need to plug any cables or anything, and
that we’re making these devices as evergreen as possible. And our engineers are also then
focusing on the latest and greatest hardware so that the future versions of the operating
system are taking full advantage of what’s available in these devices.
>>MARIA: Great. How do you ensure that Android in open source system is free of any patent
infringement risks from competitors, namely Apple? Why wouldn’t the patent infringement
lawsuit against HCC slowdown the evolution and adoption of Android?
>>QUEIROZ: Well, we’re not a party to this lawsuit. But I will say that we stand behind
the Android operating system and the partners who have worked very closely with us to develop
it.>>MARIA: Your product search on Mobile now
includes Blue Dots that show if the item is available from nearby stores. How are you
monetizing this feature? Would the retailer pay you per click or per call?
>>GUNDOTRA: So, we are very excited about bringing that kind of innovation to users.
We could find products right by where they are. Today, we monetize that just like we
do our other search pages, with ads that may serve at the top or bottom of that page. Going
forward, however, we are experimenting and contemplating different methods of monetization.
But our primary focus right now is building a product that users just love and use.
>>MARIA: Do you consider the iPad a mobile device? What about eReaders? Are Netbooks
mobile devices? What are the basic standards for a mobile device?
>>GUNDOTRA: Well, this is an interesting question because I don’t believe there’s a
crisp answer. I think you have to look at the device itself. Does it have a connection
to a network? Is it something that can be used outside of just where Wi-Fi is served?
Does it have a mobile Web browser? Does it support desktop capabilities like Flash? And
I think there’s many, many variables that go into this, and we’re going to have to look
at each device on a case-by-case basis. But in any case, whether it’s mobile or not, Google’s
goal is the same, the best search results we can deliver as quickly as possible.
>>MARIA: This is an Android Nexus One question. Will Google be taking inventory risk with
the Nexus One? Who sets pricing on the device in the different channels it sells in? Will
Google recognize revenue on sell-in to the carrier or when the carrier sells that item
to the consumer?>>QUEIROZ: Okay. You want that one?
>>PICHETTE: Yes. I’ll just start with the backend of it which is we–-as we had mentioned
before on other public statements, right, we recognize the full revenue, that’s the
market revenue sort of 529, I think was the last price for the device. And that’s what
we’ve looked at the revenue line for us. And in terms of inventory, we have very, very
little inventory risk. I mean, it’s very, very small, so we don’t have that either.
Was there another part of that question?>>QUEIROZ: Yes, the pricing. And in terms
of setting prices on the device–-we set prices based on market conditions and, of
course, operators who offer service for the Nexus One set their prices for their service
with consumers.>>PICHETTE: There you go. Next question,
Maria?>>MARIA: What are you doing to help the developers
of apps on the iPhone make their apps work on the Android?
>>GUNDOTRA: So, we are very interested in making sure that developers of all kinds can
build applications for Android. The reality is we’re actually humbled and amazed at the
adoption that Android has had from developers in the past year; after all, we’ve only have
the product out for about a year and a half and to have what is arguably the second most
popular app store in the world delights us. We think we’re doing the right things, whether
that be through technical education at events like Google IO, which this year is sold out
ten weeks early, whether it would be through Google days––developer days we do throughout
the world or whether it would be through our advocate team who reaches out to developers
and engages with them in a very deep way, we continue to invest in that area.
>>QUEIROZ: Can I add to that? So, what I will add to that is it really is not whether
an app is going to be developed for one platform and brought over into Android. Right now,
with more than 24,000 applications in the Android market, you can pretty much get all
of the high-end, all the quality apps that you’re looking for for your Android device.
And we actually see some developers, a number of developers, starting to develop for Android
first for a number of reasons. First of all, the device volumes, and Eric Schmidt quoted
some device volumes when we where in Barcelona, device volumes have really reached critical
mass. The technical advantages of the Android platform in terms of supporting multitasking
apps calling each other, the support for Flash which was also announced in Barcelona, is
really bringing developers into the platform; and just as importantly, the fact that Android
marketing, which is our–-Android market which is our publishing platform is really–has
no friction in terms of the publishing of an app. You can create your app, you can publish
is very easily. If you wake up in the morning, you think of a feature you want to add to
your app, you code it and by the afternoon, your app is live. There’s no cumbersome bureaucratic
approval process whether it is for adding a feature or for fixing a bug. And so, meaning
these are very, very attractive for developers; and it’s not a matter of developers supporting
from one platform to Android. More and more developers are thinking about Android first.
>>MARIA: Great.>>PICHETTE: The benefit of open.
>>QUEIROZ: Always.>>GUNDOTRA: Yes.
>>PICHETTE: Next question, Maria.>>MARIA: What portion of your mobile queries
are from iPhone users versus Android users? Is your ability to monetize an Android user
the same as an iPhone user today?>>GUNDOTRA: So our monetization across both
platforms looks very, very similar. This is the same class of consumer who uses a powerful
WebKit-based browser so it’s not surprising that these numbers look comparable. In terms
of queries from iPhones versus Android, you know, that’s a dynamic and fluid changing
number as both platforms are selling. What we think is more interesting is that the searches
that come from the iPhone and Android are up to 30 to 50 times greater in volume; more
searches than we saw from feature phones. And so as the market shifts from feature phones
to these, what we used to call smart phones now that are now becoming mainstream, we think
that is the material impact on the business.>>MARIA: Okay. So the next two questions
are about Japan. How does the number of total Google searches, desktop plus mobile per user
in Japan compare to the US, and what percentage of Google searches in Japan are from mobile
devices?>>GUNDOTRA: So, Japan is an interesting case
study in that a different Internet developed in Japan, a WAP-based internet called IMO.
The rest of the world really has moved to having the real Web on these mobile phones.
And so, now we’re seeing growth, search dynamics, usage, in other regions of the world that
notch or exceed Japan. And North America is one example where we have seen usage just
skyrocket over the past several years that has even surprised–the volume and rate of
growth has even surprised us.>>MARIA: Okay. How had the number of apps
in the Android marketplace trended, accelerating post the Motorola DROID launch and the Nexus
One launch?>>QUEIROZ: Well, I think we’ve been communicating
the number of apps in Android market so you can probably take those numbers and figure
out percentage growth. It’s not just about–-the Motorola DROID is, of course, a fabulous device,
but it’s not just about one device. It really is about all of the devices across the ecosystem
and the volumes that we were talking about before. So, the combination of the volume
of devices and the technical capabilities of these phones, the Nexus One, for example,
with its hardware capabilities enables incredibly rich multi-user games to run on it. And so,
it really is the combination of the things that I was talking about before, the volumes,
the technical capabilities of the platform and the openness, which are causing the number
of apps and the number of developers to grow very fast.
>>MARIA: How do you…>>PITCHETTE: Maria, I just suggest we take
another one or two questions.>>MARIA: Okay. How do you encourage carriers
and OEMs that develop Android devices to highlight Google search and other services?
>>QUEIROZ: Well, we–-Android is an open platform and so OEMs and carriers are free
to build a product in the way they see fit. We offer a lot of flexibility. We do spend
a lot of time making sure that devices are compatible, compatible through–-we publish
a compatibility definition document, we have a compatibility test suite. We want to make
that for the consumer as well as for developers, Android is–-Android devices are compatible
so that apps and the product will function predictably. But in terms of–-and so we–-that’s
what we do. It’s an open platform and we are–-we strive to make sure that whatever device is
being built is supported by an operating system that’s going to deliver a great customer experience
regardless of what applications are going to be on there.
>>MARIA: Okay. And our last question will be, when will Google be educating its advertisers
about Mobile, given you have already automatically extended the default campaign serving settings
for their AdWords and Adsense campaigns to Mobile?
>>GUNDOTRA: So, we are, of course, incredibly excited about the feedback we’ve been getting
from advertisers. We explain on our blog where we talk to advertisers about these capabilities
before we enable them, and we continue to engage with advertisers. And so you should
expect on the traditional blogs that we use to talk to advertisers, you should expect
more and more of our global features being released and discussed there.
>>PITCHETTE: Great. Let me have the closing comments. Vic, it’s always an incredible surprise.
You always come in with these surprises that never stop to amaze me in terms of innovation.
Thank you very much for taking the time with us this afternoon. Mario, again, Nexus One
and all the great promise of Nexus is terrific. I hope you found this webcast interesting.
Thank you very much for taking the time to join us today. And I think we’ll have another
one of these. You can give your comments. So please circle back with the IR folks and
thanks again for taking the time today. We’ll talk to you soon. Cheers.