Eric Schmidt released a bunch of written responses to different US Senate subcommittees late Friday as a follow-up to his recent appearance at which he claimed Google (GOOG) was not monopolistic.
Among the responses, one that got the most attention from the press was CFO Patrick Pichette was asked about the importance of Chrome on the company’s earnings conference call and his answer bonks you over the head.
There are really two stories on Chrome. There is a tactical question and there is a strategic question. Chrome is really pushing the Web, and it has a fantastic opportunity that, when people have adopted Chrome, they basically instead of looking for Google and looking for search, the omnibox gives them immediate access to Google search. So from a strategic perspective, it has that in Chrome OS. On a tactical basis, everybody that uses Chrome is a guaranteed locked-in user for us in terms of having access to Google.
Nikesh Arora, chief business officer at Google, also chimed in on the marketing ROI for pushing Chrome (image credit: Tinto via Flickr).
We have over 120 million daily users and 40% of them were added in the past year as a result of our marketing efforts. So you’ve seen the 30% growth quarter-over-quarter in our Chrome usage. So I think, from all perspectives, the Chrome strategy is working. The way we distribute Chrome is people get it organically or they get it based on our marketing efforts, or they see our marketing and they choose to download it, or we work with partners who help us promote Chrome to our users and to other users. So in that context, we found that marketing very often ends up with an equivalent or better ROI than us having to go to partnership deals. Sometimes you’ll see that our TAC and our marketing around Chrome is fungible. Where we spend money and marketing, we take away from TAC as it relates to Chrome. So you can expect us to continue to drive Chrome strategically because it has not just a Chrome specific benefit for us but it also impacts many of our other products that work as part of Chrome. So the lifetime value of a Chrome user is phenomenal.
Boil those comments down and the Chrome returns look something like this:
By the way, Chrome also gives Google a hand in browser standards, but that ROI seems decidedly naive when you consider the lifetime value of Chrome user.
It sure doesn't sound like Pichette and Arora were incorrect to me when they said the browser encourages lock-in.
Eric Schmidt's job #1 these days is to sweet talk politicians and regulators. He is to take any truth that slips out of Googlers mouths and spin them into gold that seems innocuous to the government.
Danny Sullivan said it best in a tweet over the weekend that "google actually loves anything that makes it seem like it has challengers, as gets biggest threat, that of govt intervention, off its back."
I doubt that Schmidt or any Google executive takes Siri as a threat to their search business. Andy Rubin - head of their Android efforts - downplayed the importance of Siri last month, saying people don't want to talk to a computer on their mobile phones.
In some ways, they are right: Siri won't stop people from searching in the future. People will still search in 5 years from now. So, in that sense, it won't "kill" Google outright.
However, Siri offers a clear pathway forward, combined with heightened consumer interest and motivation, for a new way of retrieving information that bypasses traditional Google search. In that way, Siri is a clear Google killer of its AdWords business. And AdWords - despite all the various new revenue efforts such as display, mobile search, and buying companies like ITA -- is Google's Mother's Milk. Siri will sharply decelerate that cash cow.
Deceleration doesn't go well with healthy stock prices. Ask Research In Motion (RIMM).
[At the time of publication, Jackson was long AAPL]