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ã¯â»â¿>>pruitt: now we'll move on to our finalsession. before i introduce our esteemed guest, i wantto thank the university of missouri's donald w. reynold's journalism institute for sponsoringthis session. i'd like to welcome our members joining usvia webcast and coveritlive. our keynote speaker this morning leads a companythat not only changed how information is acquired and delivered, it blew the old paradigms tobits. it would organize the great global brain ofthe internet and put the information at the fingertip of the masses.when your company goes from a noun to a verb, you know that you've had an impact.his remarkable journey began with an electrical

engineering degree from princeton, followedby master's degree from the university of california at berkeley,where prophetically, he developed a campus computer network.he also earned his phd in computer science from berkeley and went on to a number of itpositions before landing at sun microsystems, becoming chief technology officerand then, later, ceo of novell. in 2001, he was recruited to an oddly namedbut promising internet search company founded by two stanford students.you could say he was a good hire. that internet startup today is the world'slargest search engine and an information powerhouse. it's one of the defining cultural phenomenaof our times.

you might think that such an internet visionarywould see newspapers in his rear view mirror, but not so.he's a passionate believer in newspapers and their role in democracy.please join me in welcoming the chairman and chief executive officer of google, eric schmidt. [applause] >>schmidt: thank you very much. that was verykind of you. i'm here because i want to talk about newspapers,information, and the american dream. why is america so wonderful? why am i here?because of freedom of speech. without freedom of speech, there can be noeffective democracy.

without freedom of speech, there can be no,if you will, policing of the elites that dominate so many countries.america is a great idea, precisely because it can change.without freedom of speech and without the newspapers that make us understand what'sreally going on, none of the great things that have happenedin the last 200 years in america would have occurred.that's fundamentally why i'm here. when you think about the political environmentthat we've just been through. six months. eight months.a huge set of political changes, leadership changes, business changes all brought aboutthe fact that people got tired of one set

of assumptionsand were now pursuing a different set of assumptions. although we know that things are changing,we don't know how long it will take. we don't know the scope and depth of the recessionthat we're now in. but we do know that change comes in hard times,that it comes in recessions. it doesn't come in times of overall abundance.we know that this is when the issues that everybody faces come front and center.but the principles that i talked about-- freedom of speech, the role of newspapers,the role of a reporter going and discovering the good and the bad and bringing sunshineto everything-- is one that will be with us for many hundredsof years--thousands of years--and is fundamental

to the way i think human systems will workfor the rest of eternity. this current economic situation allows usan opportunity to relearn what creates real value.there was a saying, a year or two ago, that in our system, financial innovation precedesfinancial regulation. i think that one's gone for a while.i think all of a sudden now, we've gotten back to "how do you create wealth in a country?"how do you create jobs? how do you create happiness?how do you make things better? the answer is through business investmentand, in particular, innovation. innovation in all sorts of new ways.innovation in businesses. innovation in serving

customers.literally, new inventions that change the world in ways that are very profound.from my perspective, the recovery that we will have, and that we are very much all lookingforward to, will be very much technology-driven. that the investment that is being made nowin science, technology, environmental services and so forth and so on--all the things thatyou all know about-- will then create the high-paying, export-orientedjobs that will then help define how we go from here.my basic thesis here is that innovation occurs and business success occurs and societal wealthis created, but only in the backdrop of the principles of free speech.think about something we all share, which

is a focus on transparency.don't you think that if there had been better transparency in what was going on,a lot of the excesses that we've seen and that we're all upset about would have beenaddressed much earlier? ask someone who is a victim of a huge bankingbubble or a huge housing scandal if they had known more earlier or, more importantly,if the thoughtful and knowledgeable people had informed them, they would have taken actionearlier. it's the lack of transparency in our governmentand other governments that was one of the great problems that got us into this.again, another example of the importance of free speech.here we are, and we've got a situation where

markets have reprised to historical norms.what's going to happen? if you take my bias and you take my bias aboutinnovation, you can imagine, for example, that audiences--and i want to talk a lot about innovation-- that audiences organize themselves into segments.there's the globe, a couple of billion people, you're going to reach them with advertising.if you're building a business with a couple of million readers, maybe you should use theto-be-invented micropayment systems. it's obvious that you'll need those sortsof things. if you're building a business which has arelatively smaller business, thousands of specialized readers, you use subscriptionservices that are complex and powerful

and people will get great value for that.my point here is not that these models are wrong, but rather that the globalize and thatthis is the time when investment in those models creates the next opportunity for allof us. what happens with the newspaper industry fromour perspective is, first and foremost, a redefinition of what the newspaper of recordmeans. i think everybody here understands the notionof a newspaper of record. it's the one that records what's happeningin your life. it's the local newspaper that records what'shappening in your city or your town. it's the service, the place that you go, forinformation that matters.

it's a national stage and a global stage anda business stage. we have to reinvent, relearn, what the paperof record means in a world where so many different formats and so many different ways that thingsare being consumed. fundamentally, the question is, what do weneed to do to become the newspaper of record in this new form?the answer, of course, is ultimately all about reporting, which is what newspapers reallyare about. it's the relationship that the reporter haswith the local police chief and the courts and so forthand knowing all the things that happen in the local environment or the national environmentor the global environment that we've been

talking about.so you end up with a situation where you have two models of information, both of which areimportant. the paper of record, in its appropriate context,available everywhere and then user-generated content, of whichwikipedia is a phenomenal example. wikipedia which has this enormous depth ofinformation but changes, and then you have the record of what happened.the two coexist. the two merge together. and that's a new model, a new platform ifyou will, for how newspapers will evolve. in that model, newspapers become platformsfor technology to use their services to build businesses on top of themand to interlink and hyperlink all of the

different information sources that end-userswill take. the innovation message is fundamental fromour perspective and from my personal perspective, because i think it's real change occurs, andit's where real, unmet needs are met in our society.innovation is bizarre, because it's very difficult to centrally plan.that innovation fundamentally occurs fromã¢â‚¬â¦ in google's case, we have a notion of 20%time. in universities, it's two graduate studentsand young assistant professor who then spin out and create a new company that changesthis or changes that or so forth and so on. it's small companies that are founded thatprovide the economic innovation engine for

all of us.you can't plan it, but you can architect a structure where innovation is welcome andwhere it's taken advantage of. we're seeing this right now with somethingcalled cloud computing. all of us have grown up with the personalcomputer revolution. we're all familiar with personal computersand macintoshes and so forth and centralized computers in these sort of networks.but there's a new form of computing coming along, generally known as computing, wherevirtually all of the hard work is being done in the servers,and you take the device--the computer, the people here in the room, and on our webcasthave computers in front of them--

and you just plug them in, and you don't worryabout them too much. they don't have a lot of memory, in termsof they don't retain things. if you drop them, you don't have to worryabout it, because that information is always stored in what we call "the cloud."google and other companies provide these services. why is this important? it's an inversion ofarchitecture. historically, the networks were unreliable,and personal computers were reliable. in this new model, the network is always there,always reliable, and so the hardware can become less reliable and more disposable.you don't have to worry about it. it means, all of a sudden, you can pick upa phone, a netbook as they're called, a pc,

or what have you, and everything works, andyou can get your work done in the right context. how fast will these networks get?the fastest network that i know about is one in japan, about 160 megabits per second.how fast is that? that's enough to handle all of the televisionneeds, all the reading needs, all the communications needs, obviously all the telephone needs--that's one-millionth of that amount of bandwidth--for an inexpensive price at the homes that theyserve. in america, there's a new standard calleddoxis 3 that's coming out, which is 50 megabits roughly.all of a sudden the technology is enabling not only the development of reliable networks,but really a change in the way information

is transmitted,and not just here at a newspaper convention but also movies, television, and so forthonto this new substrate. in fact, that's not the end.it's just the beginning of even more. how fast do these things get better?for those of you who don't know, technology is driven by something called mors law,which is roughly a doubling of capacity over 18 months or a reduction in cost by a factorof 2 every 18 months. to help you with the math, that means thatin 5 years, it's an improvement of basically, if you work it all out, think of it as roughly10. in 15 years, it's roughly a thousand. allof a sudden, off you go.

take all the numbers that i just told youand multiply them by a thousand. a thousand times more than what i just toldyou. a thousand times faster than what i just toldyou. because we're not done yet.the evidence in mors law and other technologies is that this is going to continue for at leastanother 10-15 years because of the great work that's going onin the physics labs and so forth and so on. in that world, there is some nonobvious stuff.for example, it systems, the ones that all of us built over the last 20 years, are endingup being slow and relatively difficult to configure because they're so complicated.this new web system that everybody is excited

about in building is really the new platformfor a lot of things that are happening. it also means that these powerful computerscan do data mining. for example, we build something called flutrends, which looks at the way people use information and tries to predict the outbreakof a flu. there's a lot of concern about a repeat ofa very severe 1918 flu virus that would kill many tens of millions of people.the analysis says that if we were able to get this out a few months earlier, and wethink we can do that, that we can save many tens of thousands of lives because of earlierreporting. there are many examples where that kind ofearly, instantaneous analysis can get us ahead

of everybody else.when you do this, of course, it brings out all sorts of trust issues.what information do you trust? how do you do this?when i think about newspapers, i think about newspapers as fundamentally for standing forsomething about trust, that their brands represent an ethic and acommitment to accuracy and so forth that has served them for many years, which all of youshould be very proud of. what can you do, if you follow my reasoningthat we're going to have these enormous networks that are being built now, and we see the effectsof them already, with everybody interconnected, what can youdo with it?

the most obvious one, since we have all theinformation organized, is we can be sitting here, a politician can be giving you a speech,and we can have the politician bs detector. true? not true? what probability is what heor she said true? then you and your staff can go and do theresearch and try to figure out what the real truth is.we can just listen and figure it out. no problem. for every experience you have, there's a searchquery that you can do. when i wander around, somebody says something,"did you know this?" i check. and you can usually figure out pretty quickly,within a matter of a few seconds, whether what they said is correct or not.again, these are today. imagine 5-10 years

from now.we have an application on our android mobile operating system and phones that are availablenow, and there are others as well, where you go into the store, you take theupc bar code, you take a picture of it, and it tells you if it's cheaper online.from a consumer perspective, that's a tremendous benefit.i'm not sure the stores are very happy with it, but the fact of the matter is this iswhat you can do. if you take a look at another applicationwe have on android is you can hold up your phone. look around.it knows where it is, because it has a gps. it takes a picture of all the buildings, andit tells you what's going on inside of them.

pretty interesting, to the degree that peoplewill tell us that we know what we want. this notion of user empowerment is a nonobviousbut fundamental change brought on by the technological revolutions that i'm talking about.what can you do with the combination of these powerful, new mobile devices, the gpsã¢â‚¬â¦oh, and by the way, a phone as well. i forgot there are more cameras now in phonesthan there are cameras that are not in phones. there are soon to be more movie cameras inmobile phones than there are movie cameras in movie cameras.one of the most obvious ones for me isã¢â‚¬â¦ here you are in san diego, and you walk downthe street, and since i like history, the phone tells me the history of every buildingin every scene i'm in as i'm walking along.

why can't it do that now?well, indeed it can, because we know where you are, we know what happened.we got all that world of information. we've never had these kinds of tools beforein our world to use and, perhaps, to misuse--hopefully not, but it's all there now with a lot ofimplications for all of us. if you tell me about the world right nowã¢â‚¬â¦tell me what's going on right here, right now?i live in a local context. then, later this afternoon, tell me what'sgoing on right now where i am next, and so forth.the goal, if you will, is to get a billion people to have this kind of power in theirhands.

you say, "is this madness? is this achievable?"it's easy! there's that many mobile phones being built in the next couple of years withthis capability! this is not some random technology raving.the underlying platform has been built. indeed, the big news, this year, is essentiallyall of the mobile phone operators are now building devices with the kind of capabilitythat i'm describing with the implication for a lot of us in allthe things that we do. what does this mean?it means a lot to how information will be structured and how all of us will have todeal with it. in thinking about newspapers and how theyevolve, the first and most interesting idea

is to rethink the notion of a story.we think of newspapers. let's think about the story within the newspaper.the story, of course, has a life. today, the newspapers tend to print them today,and there's a revision tomorrow, and so forth and so on.but stories have a start, a middle, and an end.people are fascinated by the beginning and the end.it's possible now, for example, to algorithmically look and see when the first report was doneabout something and the last report was done on something.but it makes sense to us that stories, eventually, will evolve.that there will be a story about secretary

clinton in korea, for example.and it has a start, and it has a life, and it has an end, and then a resolution.that notion of resolution is important. a lot of evidence with newspapers is thatpeople feel that when they read the newspaper, when they finish reading the newspaper, they'redone. they've achieved their objective. they'velearned what they needed to know. we need to come up with the same experienceonline, and we don't do that very well right now.nevertheless, the notion of a living story, if you will--a story that has annotation andso fort--that you can get into at any depth is probably one of the new ideas that willaffect all of us.

one of the other issues that we have withthe web is it's still relatively unpleasant, in my view anyway, to read.think about the joy of reading a magazine. "pretty interesting picture.""oh, okay, i like that article," and so forth and so on.it's the most wonderful experience, because it's the right form factor.you just turn it. it's got pretty pictures and so forth and so on.why can't we recreate the same thing in the web?today, for example, most of the websites use flash and other technologies which are prettybut slow. we need to reinvent the way the web deliversthis content so that the underlying technology

can actually have the kind of experience,when people are wandering around with their phones and so forth, that you can see witha printed magazine. of course, i'm going to come to the monetization,which needs to go along with the same thing. but from my perspective, the online experiencecan be thought of as terrible compared to, what i view, is this wonderful experiencewith magazines and newspapers-- the sense of newspapers, turning it and beingdone, knowing which pages you care about, going to the second or third page if you likethat category versus the fifth page versus the editorial page--is a fundamental thing that we don't do very well in my side of the world that we needto get done, obviously doing it together.

on the format, you have the same problem.the format was one size fits all for good technological reasons.now we have an opportunity to break through that.in particular, this format can be very different. people consume information in many differentways. what we've learned in the web is that thereis not a one-size-fits-all, that people do things very different.we need a new format for journalism that will work on all of these new platforms and allof these new formats that i'm talking about. if you think about all of this, we have anopportunity to redo the way information is processed in our society.in high-tech, there's a lot of venture capital,

and i'll give you an example.i was trying to think about how will the web change in education?i, of course, like, i suspect, most of you, sat and learned in textbooks and so forth.imagine, rather than handing out textbooks in a class, you gave people the equivalentof search queries and wikipedia pages, and you told them to read them and study themand see what interested them. would that produce a better educational experience?i don't know. it would certainly produce a different one.maybe we'll do both. maybe learning how to use this enormous resourcethat exists and that is being built over the next 10-20 years,the paper of record information, the wikipedia-type

information, and the real-time information,which i'll get to in a second, maybe learning how to navigate all of thatwill be just as important as the traditional textbook learning that all of us went through.my friend, bill joy, is a venture capitalist and a very smart person.i asked him what it was like to become a venture capitalist as a computer scientist, and hesaid, "i don't do it the way other people do it."i said, "how do you do it?" "what i do is i search around a topic, andi learn about it, and i read the papers. i try to figure out who are the people who writethe most interesting papers who write the most of them. i eventually makea list, and i call them. since no one ever

calls them, they call me back."interesting. very interesting way to become a venture capitalist.normally, they sit, and they wait for people to make proposals.he calls the people and he says, "would this idea work?" and so forth and so on.what it triggered in my mind is that there's a very different relationship to informationif you take an aggressive position-- if you will, a reportorial position--as opposedto a consuming position. if you engage in it and you learn about itand so forth, it's a different outcome. that opportunity is before all of us withour readers, your readers, and so forth as we make this thing happen.the reality--and we measure this pretty carefully--the

reality is that the vast majority of informationis not being produced by any of the traditional mechanisms for making information.it's being produced user-to-user. sometimes, free speech gets a little pushedwhen you start looking at what they produced. you wonder about taste and judgment and soforth. but the fact of the matter is this is thenew world. a truly fundamental change in the way informationis being processed is that we have given the tools of publication to people who--maybe, they need a better education. let's put it that way.but the important thing is that information is not going to go away.if anything, the growth rates on an aggregate

and percentage basis are much higher.all of us now live in this world of a mixture of professionally produced content and, ifyou will, user-generated content. how could you use that to advantage?the most obvious example to me would beã¢â‚¬â¦ let's build up a product. let's call it wikimed.doctors spend all their time with all this specialized information that they have.why is there not the equivalent of wikipedia for medicine, where all of the canonical andjudgment things that doctors know in their heads,along with shared summaries of outcomes and tests and so forth,why is there not a single repository for that? there are many reasons for that, but it'sobvious that there will be one.

the same thing for every other trade, forevery other specialization maybe even for reporters as to how to be agreat reporters. my point is that the notion of this sort ofcommunity-generated information is already in aggregate more than professionally producedinformation and is likely to become more important.when we build products, when you think about how your users consume things, you'll discoverthat it's really in both places. search, then, becomes fundamentally more personal.it's all about what "i" want, because i'm the one asking the search query.in this model that i'm talking about, why doesn't the newspaper know what i read yesterday?it makes sense to me, but when i turn on the

television, it shows me the same show it showedme yesterday. clearly, a bug in the television.why does it not already know that i watched that show?this is easy. it's easy to remember this kind of stuff.the new model of consuming news, since it's personal--whether it's search or other based--willbe knowing that you've already read this. it'll show you the delta.it'll understand a little bit more about what you care about."i don't like sports, and i do like international." or, "i don't like international, and i onlyread sports, and i only care about these teams or these sports, and occasionally, i wantthis other thing."

if you remember what i looked for yesterday,you can tell me what has changed. you can also tell me, again, with permission,what my friends are focused on. the new model of social networks means thatpeople can take their networks of friends all the way in which that they interact,and they can actually operate as a community around information.this phenomenon, pioneered by facebook and a number of others, looks to us as anotherfundamental change in the way people will consume information,because care a lot about what their friends are doing.combining all of those, too, allows us to build a product which i'm just going to call"entertain me."

what i want--and we've not yet built, buti hope we can do someday--is i want a constant stream of entertainment that's consistentwith the principles that i'm describing. and "entertainment" here, i mean very broadly.i mean news and information and gossip and television and radio and so forth,because the computer can know what i care about.when you do all of this, it's very important to know the first and most important law ofall of this technology, which is you need to know where the off buttonis, because you can get overloaded. in that sense, the most obvious question andthe question on everybody's mind here is "how do we make money doing this?"this is what users want.

one of the fundamental problems with the internetis it doesn't respect traditional scarcity structures.all of us are struggling with that in various ways.the fact of the matter is it's very difficult to hold information back.we think the answer is advertising. since 98% of our revenue comes from advertising,i guess we have a bias. but we think it comes from advertising, becauseadvertising still is the best way to reach a very large audience.i think if you think of it in a hierarchy, not only do you have local audiences, butyou now have national and global audiences for advertisers.the kinds of products that can be built here

in advertising and that we're beginning tobuild are equivalently exciting. what's advertising about?it's about engagement. it's about telling a story.what do marketers care about? they care about telling a story.they tell it in a picture or a word or a phrase. in this new world, they can tell it with timeand engagement. you click on an ad, and all of a sudden, it'sa narrative. why don't we have ads that have narrativesand pictures and so forth? why don't we have ads that are the equivalentof multiuser games, where the other people who are also participating in the ads arealso interacting with each other in real time?

you want to talk about time that a customerspends inside of an ad? that's a way to do it.take the ideas of networks and gaming and so forth and apply them.all of that technology becomes possible over the next few years.those ads, in our view, replace the traditional advertising models that all of us grew upwith, because they're just so much more compelling. they don't replace them all at once, and ittakes a very long time. but the fact of the matter is that advertisingworks when it adds value to a customer, when it tells them something they don't know, whenit gets them educated or excited or passionate. the advertising industry is very good at doingthis.

we've recently brought out our set of productscalled instrument-based advertising that allow us to tailor to people's interests and soforth. importantly, people can opt out if they don'tlike the way we've constructed their tastes and so forth or just turn the whole thingoff precisely. the important thing here is that advertisingthat's useful is going to work. we know it works, because we can measure it.an example would be if you have an ad for an espresso machine, a typical example,today, we would show you a text ad, which is fine, but wouldn't it be better if it hadpictures, prices, how to buy it, and all that kind of stuff?if we take the premise that we have an advertising

model that's going to work,and we have this explosion in mobile content with all of the people working and so forththat i've been talking about, and all of that changes, what does it meanfor how people will use it? to me, the most interesting example is thekindle, which is, i think, very successful. what i like about the kindle is it's anotherexample of cloud computing for specialists, for people who care a lot about newspapersand books and so forth. it's a model that works.it works economically, because it's a subscription-based model.it works technology. imagine, as that platform evolves, how muchmore powerfulã¢â‚¬â¦

it's the first of, i think, many that aregoing to come in this new model. what happens to this, if you take the worldof radio and television broadcast, internet cable broadcast, newspaper--everything beingonline, these huge pipes that come out of the internetand all of this content and everybody seeking everybody's attention.a lot of new things happen. you can imagine live concerts, where the liveconcerts take the videos that are coming out of people's cell phones and stream them onstage, right there in the local context. you want to talk about something exciting,get the fans involved directly in the performance. when you think about movie theaters, herewe are.

we're all in the same movie theater.we're all watching the same movie. we're all tweeting or twittering to each other,"oh, i think she's wrong," or "oh, i don't think that's the right thing," or "oh, hedidn't kill her," or what have you. this is going to happen because of this notionof being in a shared community drives information so powerfully.here we are, and we're all sitting here listening to me.why don't we have mood-mapping? everybody tweets, "i don't like it," or "ido like it," or so forth. we can do it real time.this is the year when real time gets added to the equation that we are all dealing withnow that i've been talking about so far.

all of a sudden, in addition to professionalcontent, the building of the web, all of the user-generated content, it's now all becomingreal time. it is that sum that defines both the problemand the opportunity that all of us see. i've been thinking about how does this playout globally? one of the great things that's happened inthe last few years is the ability to do simultaneous translation of everything.a hundred languages translated into a hundred other languages.it will be possible, relatively soon, for you to instant message somebody who does notspeak your language, because we'll be able to translate it enoughcontextually to have you be able to have a

conversation.i think that's pretty neat. the same thing for these social communities.language has often been a barrier, not to just misunderstanding, but eventually, toconflict and war and really horrific things. from my perspective, the opportunity, forexample, to use these very large number of mobile phones that are out--not the high-speed ones that are all coming out now, but the ones that came out last yearand the year before, especially those that are in the third world--for things like sms, where you can do search queries, find out about the weather, findout about the news, find out about your local contextis another platform and another opportunity

for news, newspapers to get information.it's one where real-time, life-critical information can be transmitted for people who will neverhave, or likely to have, access to a television or some computer orthe kinds of networks that i'm talking about. my point here is that when you add all ofthis up--and i'll finish upã¢â‚¬â¦ to put it into context, you have the fundamentalprinciple--freedom of speech, freedom of expression, the enormous impact that newspapers have hadin governance, in creating a civil society, in creating agreat country. the sum of all of that has delivered us tothis point economically, politically, and so forth,where it's now an opportunity for us to understand

how innovation really occurs and what willreally get us going again. from our perspective, the innovation opportunitiesare around the cloud-computing platform, all of the technologies that i talked about,and the fact that end users, your readers, our consumers, our searchers, and so forthhave these infinitely larger choices around both professionally produced content and user-generatedcontent and real-time content. they will decide how successful we are basedon the quality of the information that we produce, the number of voices, and so forth.from our perspective, we need those voices. google is not a content company.we're not reporters. we don't understand the stuff particularly well.what we do is build platforms that can enable

the broad use and distribution of many differentforms of content and information and understand and, using clever computertricks, basically assemble all of this information into one place.why has this been so hard? why is everybody so worried?it's a very hard transition. these are models that are changing, becauseconsumers are changing even more quickly than i had ever thought.it will be in all of these industries. five or ten years of very difficult businessrestructuring, business questions, as everybody tries to understand how to move to this newmodel. the fundamental issue, and i'll say it again,is that the internet distribution model doesn't

work on scarcity.it works on ubiquity. what we have to do is find models that involvevery broad distribution and that you make money all along the way.we, of course, are in the advertising business, and we think that money will be there.we think that there's a way to do it with even more targeting and even more immersivekinds of advertising models. we think that that is the ultimate outcomefor all of this will play out. in 1831, de tocqueville toured america--andi'm paraphrasing--and said that america will do well because of its sunny optimism itsabundance of land, and its absence of a king. when i think today, i think the same thingis still true.

the political dynamic, the enormous resourcesthat we have, the ingenuity of our people-- the sum of all of that, i think, creates anext set of opportunities for us to seize, for us to take, for us to build businesseson top of. from my perspective, we have to embrace whatusers want together, and by doing that, i think we can win big.with that, thank you very much. gary, i think you indicated we had time forquestions. we have some microphones, or people can shoutout, and i can repeat it. i'm happy to answer any questions on any subject.and i guess we should say, "it's on the record," since we're in newspaper land.

>>male #1: you had mentioned the importanceof advertising in the future, but in your opening remarks, you also indicated a bitabout micropayments and subscriptions. would you elaborate on each of those othertwo potentials? >>schmidt: i think you're going to end upwith all three. an analogy i would offer is television.there is free television, over-the-air television. there is cable television, and there's paytelevision. they have smaller markets as you go from freeto more highly paid. that structure looks to us like roughly thestructure of all of these businesses. today, there are very effective, subscription-basedmodels, but they're not very good micropayment

systems, "micropayment" meaning 1-cent, 3-centskinds of systems. they clearly need to be developed by the industry.i think from your perspective, you should assume that if there's a category of informationyou'll produce that you want to distribute freely,there's a category that you'll want to have a per click basis,and then, there's some that you want subscription for.the reality is that, in this new model, the vast majority of people will only deal witha free model, and so you'll be forced, whether we like itor not, to have a significant advertising component as well as a micropayment and atraditional payment system.

the technology around micropayments is gettingto be possible now. the transaction cost was so high before thatyou couldn't do the 1-cent, 3-cent kind of a model,but it looks the new technologies around aggregation will allow that at the payment level. >>male #2: if i could follow up, you madea comment regarding trust. this is somewhat of a practical question.you've been quoted as saying a number of times that there's going to be a flight to quality,that there's just an awful lot of garbage out on the internet. >>schmidt: let me just say precisely, it'sa sewer out there.

[laughter] >>male #2: fair. very fair.question, though, is, recognizing that the brands in this room, for the most part, arecredible brands, and following up on your-- >>schmidt: i would say 100% are credible. >>male #2: trust? yes.on your trust comment, is there a way to look at search and, when you search on a particulartopic, that news organizations with credible brands,somehow the algorithm is tweaked or adjusted to reflect that, not only for the benefitof the publishers but for the benefit of the

users? >>schmidt: we actually do that in the caseof google news. google news uses a relatively fixed set ofsources, which are selected based on exactly the kind of trust that you're describing.the answer to your question is "yes" on the google news.for general search, we've been careful not to bias it using our own judgment of trust,because we're never sure if we get it right. so we use complicated ranking signals, asthey're called, to determine ranking relevance. and we change them periodically, which driveseverybody crazy, as our algorithms get better. there's no question, in my experience, thatthe top brands represented here in this room

would, in fact, float to the top in our searchranking. the usual problem is you've got somebody whoreally is very trustworthy, but they're not as well known.they compete against people who are better known, and they don't, in their view, geta high enough ranking. we've not come up with a way to algorithmicallyhandle that in a coherent way, but we're very sensitive to not on the search--literally, the generic answers-- we don't want to go in and do the kind ofthing you're describing, unless we can do it across the board and for all categoriesof trusted institutions, not just newspapers. and that's where we get in trouble.more questions, yes? go ahead.

>>male #3: two-part question. first of all,thank you for coming to speak to us today. >>schmidt: sure. >>male #3: part one. speak frankly, if youwould, about how you feel newspapers have performed digitally over the past 10-15 years.in part two, let's assume that one of your greatest fantasies in life came true and youbecame the ceo of an american newspaper company, what would be the top two or three or fourthings that you would do as the ceo of a newspaper company in the digital space?what would you make sure that this newspaper company did immediately in the digital space? >>schmidt: sorry, and the first question was?

>>male #3: speak frankly about our performance.how do you feel american newspapers have done? >>schmidt: i can answer both questions atthe same time. i was very impressed by how quickly all thenewspapers that i talk with in the mid- to late-90s embraced the web.essentially, all of them quickly understood first, the repurposing of existing print storiesonto the web, and then, the creation of reporter's blog.the criticism, if i can offer one, is that there wasn't an act after that.there wasn't a thing afterã¢â‚¬â¦ in other words, that's great. you guys dida superb job. and the act after that is a much harder question,which is how do you keep the engagement?

how do you avoid being disintermediated intojust a set of stories that are aggregated with your brand on them?--which is what has happened to some newspapers. in the case that you were describing, if iwere involved with the digital part of a newspaper and trying to understand what to do,i would, first and foremost, try to understand what my reader wants.it's obvious to me that the majority of the circulation on a newspaper should be onlinerather than printed. there should be 5 times, 10 times, more circulation,because there's no distribution cost. it doesn't cost anything to read it online,from the end-user perspective. so i would start with my diagnosis is, howdo we get to 10 times more readers online?

what do they want to see? what is their style?my own bias, by the way, is a technology one. i think the sites are slow.they literally are not fast. when i read the paper, they're actually slowerthan reading the paper, and that's something that can be worked on in a technical basis.i should also mention that at google, we're working hard to try to try to address thetechnological question that you're asking. but we don't have easy answers here.this is something where better development tools, better hosting tools, and so forthfrom the industry as a whole will make a big difference for newspaper publishers.more questions. yes? >>male #4: mr schmidt, the associated pressresolved, over the last few days, to take

a more aggressive approach to enforcementof intellectual property rights. speaking from your perspective at google,what impact, if any, do you think that would have on the relationship between google andthe associated press and the members it represents? secondly, looking ahead on intellectual propertygenerally, how effective do you think that more aggressive approach might prove to be? >>schmidt: with respect to the associatedpress, we at google have a multimillion-dollar deal with the associated press, not only todistribute their content but also to host it at our servers.i was a little confused by all of the excitement in the news in the last 24 hours.i'm not quite sure what they were referring

to.but we have a very successful deal with ap, and hopefully, that will continue for manyyears. your second question? >>male #4: if you would look ahead a littlebit on the outlook of the future of intellectual property rights as affected by the growthof digital publishing? >>schmidt: the ultimate resolution of allof these--and we have lawyers in the room--is ultimately determined by how you interpretfair use. in my position, i've come to learn that lawyersgo to different schools. if you went to school a, you learned it oneway, and if you went to school b, you learned

it another way.and if you're google, all your lawyers went to school b, and if you're the other side,all your lawyers went to school a. i am not a lawyer, so i will simply reportwhat the school-b lawyers say. then, if you're a lawyer, and you went toschool a or b, you can just tell me so i can figure out how to talk to you.from our perspective, we've looked at this pretty thoroughly, and there is always attentionaround fair use, but ultimately, fair use is a balance of interestin favor of the consumer. i would encourage everybody, when they thinkabout all the rhetoric and all the concern about this or that,think in terms of what your reader wants.

try to figure out how to solve their problem.these are ultimately consumer businesses, and if you piss off enough of them, you willnot have anymore. or, if you make them happy, you will growthem quickly. we try really hard to think that way.these are often uncomfortable at google, as well as at other companies.you'd have to ask a more specific question, and i could respond more specifically. >>male #4: do you think that the intellectualproperty rights will continue to erode, given the digital future as you see it? >>schmidt: there are laws that cover thesethings.

it's important that all of us respect thelaw. it is a balance of interest between the copyrightholder--and we try very much to respect the copyright holderã¢â‚¬â¦there are all sorts of examples where google is the company in the middle of one of thesedisputes that people never resolved. we came to what looks like a very good settlementwith respect to, for example, books. i disagree with your premise that they willcontinue to erode. what i do believe is that all of these partiallythought-through legal systems are being challenged by the ubiquity of the internet,just as free speech is being affected by the fact that people are now to speak whateverthey think, even if we really don't want to

hear them.it's the same problem. i would tell you, by the way, that we've facedthese issues for many years in our society, generations before us,and we've resolved them in a way that caused the right thing to occur.businesses were built, entrepreneurs were able to create new businesses, and consumerswere ultimately being met. so i disagree with you that it's obvious thatthere's an erosion of future intellectual property rights.if, by that, you mean people stealing, there is a problem where countries outside of americado not have the same kind of laws, and it's really an issue.if that's what you're referring to, then yes,

it is an issue. [pause] >>male #5: thank you again for coming today. >>male #5: to take that same discussion and take thefair-use defense and take that out of the equation and just look at it from a very practicalstandpoint, google has been at the forefront of conditioningour audiences that a headline and extract is enough.they've gotten to the point now where we do a google search, and we come up with a listof topics or from google news,

and we look at the headline and the extract,and that becomes enough news in the twitter world so that what happens isis that now google becomes the point in the middle between that audience, that consumersupporting the creation of that professional content you were talking about.the real question becomes, how can the media industry in general partner with google tohelp support that professional content, when the consumer isã¢â‚¬â¦the headline and the extract is good enough? >>schmidt: again, i want to be careful notto criticize consumers for doing things that are idiotic.you can have your opinion, but my position here is that we love our consumers, even ifi don't like what they're doing.

in google news' case, for example, when wefirst built google news, i remember being absolutely terrified at the first meetingof this category i was in. then, one of the editors came up and said,"this is a great product." and i said, "why?"he said, "because it provides me a summary every day from which i can then do qualitywork." that's a good answer.everybody here understands that everyone here has an opportunity to opt out of this by usingrobots.txt and others. these are one-line changes that can take allof the information out of google. again, it's entirely your content. we respectthat and so forth.

given that it's a problem that we all share,that consumers want to do this thing, i would first observe that google news isnot very much different from the news that i get on the radio.basically, when i listen to the radio, i hear roughly the same headlines that i see on googlenews. so i'm not sure that it's a new form.i think it's a transmitted form. my general answer to this question has todo with getting people to take the next step. if you see a headline, what i want you todo is i want you to think, "oh, that's interesting. i want to know more."then, based on that, i want you to click to the newspaper website or to wikipedia or towhere ever.

if we can build products, and we have teamsat google working on this, which roughly work like that, where there's a one-liner that'sinteresting, and you click there, and you go into layer after layer of information--andby the way, not just text, but also video, entertainment, and so forth--that's personalized, we think that we can build a business, again, with you guys withsignificant advertising resources where the advertising is targeted to the content.to me, that's the only solution we've come up with to this problem.i don't think we're fundamentally going to decrease the fascination that the world haswith britney spears. i think it's just fundamentally going to continue.

gary says i have time for one more question. >>male #6: one of the issues that still isa problem for us is 14-15 years into the net, for us, there are no defined standards ofwhat exactly an eyeball is. there are four or five different providers.if you look at your internal data versus an external source, you will go absolutely crazy.how do you all look at what is truth to you when it comes to either external or internalsources of audience counting that make the most sense to develop into astandard over time? >>schmidt: we look at clicks, and we alsolook at how long people stay on a page. we can then infer interest.your question is so good, because it shows

you how early we are in the industry.we don't have combined, accurate, audited ways of measuring audiences, counting advertisersand so forth, all of which has to be developed as the technologybehind the businesses that all of us are going to build.it took many years for the same business structures, for example, to be designed for the auditcirculation bureaus for magazines. the same thing is going to occur, and it willoccur because it needs to be. from our perspective, we use our internalinformation, which is accurate, but, as i agree, there's not a uniform standard forit, and that will be developed. with that, gary says i'm done, so thank youvery much.

i hope you guys enjoyed this.