Going forward in these uncertain economic times, Google will “be more careful with potential large expense streams, which are of uncertain return,” CEO Eric Schmidt told the New York Times in a weekend interview.
You’ve just witnessed business innovation at work, people.
Eric didn’t say so, but we think he and Google learned this lesson from YouTube, which the company acquired for $1.65 billion in 2006 but still earns less than 1% of Google’s overall revenues.
The CEO began to publicly call for the division to turn a profit late last spring and echoed the sentiment through several interviews over the summer. But as recently as mid-October, YouTube cofounder Chad Hurley confessed that when it comes to revenues: “I don’t think there’s going to be a silver bullet that answers all those questions.”
Now YouTube seems to be considering launching a live-streaming service, which by all accounts is even harder to make money off of than the short, user-generated clips for which the site is currently known.
In a smarter move, YouTube also plans to start showing full length films and TV shows owned by MGM — the kind of stuff Hulu’s proven advertisers will pay to put their products next to.
Here’s the relevant bit from Schmidt’s New York Times Q&A:
Q. Google is known for investing liberally in projects that don’t produce immediate returns. Does the new measure of austerity, such as it is, change that?
A. It is interesting you use the word austerity. It doesn’t feel very austere. I think it is better to use the word focus. We are clearly going to be more careful with potential large expense streams, which are of uncertain return. But we are also going to continue to invest certainly in small teams to do wacky things.
Q. Are there examples of projects you have undertaken in the past — things like Chrome, Google’s Internet browser, or Android, its mobile operating system — that you wouldn’t do today?
A. The question is, with today’s market, would we still have done the things you named? Absolutely. Going forward, maybe we would do fewer ultimately. The problem here is that if you tighten up too much, you eliminate future innovation and then you set yourself up for a really bad outcome five or 10 years from now.
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