Google Still Dreaming Of $50 Billion Mobile Ad Market

Google’s Schmidt talks stocks, huge mobile opportunity, scandals, advertising and YouTube with Jim Cramer

Google chief executive Eric Schmidt was on the popular CNBC show “Mad Money with Jim Cramer” today. Most of the talk was about Google’s dominant positions in the search, online advertising and online video businesses.

Cramer is very bullish about Google and thinks the company’s stock could soon return to the $750-a-share level it was very close to back in November of last year. After sinking all the way back down to near $400-a-share in March, the stock currently sits around $500-a-share.

Some of the highlights of the conversation included:

• Google will not be splitting its stock price anytime soon. Schmidt believes people see value in knowing its true dollar amount.
• Google is not going to start giving financial guidance (how it thinks it will do financially in upcoming quarters). “If we started giving quarterly guidance, the company would focus on the quarter rather than trying to change the world,” Schmidt said.
• Schmidt doesn’t think it was out of the realm of possibility that Google could one day be responsible for 10 percent of the all advertising and a high percentage United States’ gross domestic product (GDP). Right now the company accounts for .07 percent of the GDP.
• “We will make more money from mobile advertising,” Schmidt said when asked about the possibility of mobile computing taking off. The thought is that advertising on mobile platforms will be much more highly targeted than it currently is on the desktop.
• On the topic of Google as a content producer, Schmidt said basically that Google has great relationships with many content producers and that they work together to all make money.
• On the Georgia maps scandal (Google has been accused of removing data for the country of Georgia following Russia’s attack), Schmidt said, “we had the same amount of Georgia before the war as after. We’re adding more Georgia going forward cause it is such an interesting topic.”
• On the recent Gmail outage: “That was a screw up. We fixed that. We’re not perfect,” Schmidt said.
• Cramer asked if Google would ever put advertisements on its homepage. Schmidt noted this could bring the company “some number of billions of dollars,” but said it would not happen because people don’t want ads there.
• Schmidt doesn’t think Google will see the same huge growth followed by a flatline in its stock that IBM and Microsoft did because “that is a different generation.” Schmidt thinks Google can avoid the lack of growth other big companies see by constantly expanding to new businesses.
• In terms of Google’s dominant market share in areas like search and online advertising, Schmidt doesn’t worry about it too much because it’s happening simply because Google offers the best product and is careful not to lock in its customers. “How do we behave? Not the way Microsoft did. I would never do that,” he said.
• Along the same lines, Schmidt feels Google’s Yahoo search advertising deal isn’t anti-competitive because Yahoo is free to use other partners as well.
• In terms of YouTube, Schmidt is extremely pleased with how big the site is and how fast it is still growing. He’s not overly concerned with the monetization angle because he thinks Google just hasn’t figured it out yet and the site “doesn’t hurt our bottom line.” He conceded that someone else might figure out the monetization of online video first, but says Google is working on a number of new ideas in that field.
• Finally, Schmidt wouldn’t pinpoint exactly when the first mobile phones running Google’s Android software will be out but did promise it would be “between now and the end of the year.” There had been talk of delays, but both Google and one of the phone makers, HTC, have committed to shipping a phone this year.
• “I never worry about Microsoft,” Schmidt said in wrapping up his thoughts.

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Google Still Dreaming Of $50 Billion Mobile Ad Market

Eric Schmidt has been very vocal about the promise of mobile ads. Never mind that mobile ads have been overhyped for more than a decade: This year's the year, says Eric. In fact, Eric says, mobile ads will one day be a bigger opportunity for Google than the desktop.

Come again?

Really--that's what Eric told Cramer this afternoon:

CRAMER: RIGHT NOW [YOUR REVENUE IS] PREDOMINATELY DESKTOP, BUT COUNTRIES LIKE JAPAN, [THERE'S] MOBILE COMPUTING. IS THAT GOING TO BE UP TO SNUFF AND CAN YOU MAKE AS MUCH MONEY IN MOBILE COMPUTING BECAUSE OF THE CELL PHONE COMPANIES?

SCHMIDT: WE CAN MAKE MORE IN MOBILE THAN DESKTOP EVENTUALLY. THE REASON
BECAUSE THE MOBILE COMPUTER IS MORE TARGETED. THINK ABOUT IT YOU CARRY
YOUR PHONE EVERYWHERE IT KNOWS ALL ABOUT YOU. WE CAN DO A VERY, VERY
TARGETED AD.OVER TIME, WE WILL MAKE MORE MONEY FOR MOBILE ADVERTISING.

"We can make more in mobile than desktop eventually." Google currently makes about $20 billion a year in desktop. For Google to make "more in mobile than desktop," the targeted mobile advertising market will have to grow from less than $1 billion today to, say, $50 billion (assuming Google pulls down a mind-boggling half of it).

Is that possible? Anything's possible. Is it something investors should count on?

Well, before we investors count on it, we want Eric (or anyone) to give us one single example of a "targeted mobile ad" that won't annoy the hell out of the user. We gave up on the breathless "mobile's gonna be huge" promise about five years ago. We're also just not buying that crap about Starbucks zapping us with coupons as we walk by. All that would make us do is want to throw our phones through the window. And we're not yet persuaded that the market for folks searching for "pizza" from their geo-located mobile phones is, in fact, ginormous.

So we're all ears, Eric. Until we get some specific examples, however, we're going to view these "mobile will be bigger than desktop" pronouncements as hot air. And you're not a hot-air kind of guy. So get specific!

(By the way, we think Cramer was actually asking a more sophisticated question, which is "Can you really make money given that the greedy carriers want to shove their hands into every content cookie jar?" And in the US, at least, that's a fair question. Is Android going to fix that? Details, please!)

See Also: WOW! Microsoft Unveils An AMAZING New Example of Mobile Advertising (ed: sponsored, custom games.)