Thank you. Now, I want some feedback. Did everybody have a chance to have lunch?
Yes.
My favorite part of Google, the lunches here are fantastic. By the way, the breakfasts and dinners are pretty good, too. What I wanted to do is to welcome everybody, and in particular, welcome you to our 2011 shareholders meeting. I think you know who I am. I'll be presiding on the meeting. Each of you is supposed to have registered at the arrival. If you haven't, if you could register just so we have a formal record of your attendance, that would be helpful. We have given everybody an agenda, which we'll be following, as we have in previous years. You've got a set of rules of conduct and all that kind of thing. I'm going to call the meeting to order at this time.
I wanted to introduce a couple of people in the audience. I see, for example, Ram Shriram, one of our long-serving directors here in the room. I know, I know. I was going to embarrass you, Ram. Instead, I'll talk about John Hennessy, who's also here on the right, also another long-serving director and our external independent director. Let's see. I see David Drummond. I'll be introducing. Patrick, of course, will be here. Larry is on his way. Also with us is, oh, in fact, there's Susan. Susan just came in as well. She's hiding behind the corner. She'll be with us as well. Also with us is Deborah Kelly, who's a representative from Computers hare, who will act as our inspector of elections. Please inspect correctly.
Matthew Taggart and Barbara Marcini are representatives of Ernst & Young, who are our independent accountants, which you also have had for many years. What I'd like to do is to introduce David. David Drummond, of course, has worked in the company for more than a decade. He's Google's Senior Vice President, Corporate Development, Chief Legal Officer, and Secretary. David, will you please conduct the formal business of the meeting?
Thank you.
Thanks Eric.
Thanks , Eric. Good afternoon, everyone. Glad to see you here once again for our annual meeting. A couple of quick notes before we get to the business. In terms of stockholder questions, the rules of conduct which you've seen, stockholders shouldn't address the meeting until you're recognized. We'll have a Q&A session at the end with a number of folks up here on the stage. You can ask questions after we finish the formal business and after Eric and Larry's presentations. If you'd like to ask a question during the Q&A period, just move to one of the microphones here, and we'll recognize you. When you're recognized, please identify yourself and identify yourself as a stockholder or a representative of a stockholder, and then go ahead and ask your question. Thank you very much for your cooperation here. Let's get started.
I've received the affidavit of mailing of Computershare, which states that the notice of meeting, the proxy materials, and the annual report were mailed to stockholders of record as of April 4th, 2011, which is the record date for the meeting. I've also been advised by the inspector of elections that holders of our outstanding Class A and Class B common stock, representing at least the majority of the voting power of our outstanding capital stock that's entitled to vote in person or by proxy today, is actually here. We've got a quorum present. The meeting's duly constituted, and the business may proceed. The first item of business: meeting and until their successors are duly elected and qualified. The board of directors has nominated the following persons: Larry Page, Sergey Brin, Eric Schmidt, John Doerr, John Hennessy, Ann Mather, Paul Otellini, Ram Shriram, and Shirley Tilghman.
Our bylaws require that stockholders provide advance notice of their intent to nominate anybody as a director. We received no such notices. Accordingly, I declare fiscal. Our board of directors has also recommended that stockholders vote to get of office these future advisory votes. I'll move on time, I'd like to recognize John Harrington.
It's back to any of the shareholders. I represent Harrington Investments from the Napa Valley. We do more than grow grapes and drink wine, though there's nothing wrong with doing either of those things. We have invested in Google. We believe in your financial, your environmental, and your social. We are looking not to look at your sustainability programs, but to actually attempt to insert into the DNA of this company a commitment, a policy commitment long term as a fiduciary duty to environmental sustainability. We were able to have Intel amend their company committee charter to include environmental sustainability. The way you insert into the DNA of the company a commitment to environmental sustainability very seriously, they did this. I'll read the language. Performance, including potential long and short.
Secure a legal opinion from outside counsel, which indicated that once this was in the charter, this was actually a fiduciary duty. In some discussions with another opinion indicating that that was also their fiduciary duty, which I think is extremely important in looking at this issue long term. I want to be clear.
Harrington, I don't want to interrupt, but I just wanted to.
Yes, I want to be clear that Google's strides are very important. We appreciate them. Thank you very much, Mr. Chairman.
Thanks very much, Mr. Harrington. I'd like to move on to the second stockholder proposal, which is being brought by Mr. John Shevdan now.
I'm sorry to bore you once again. I suggested a simple majority voting requirement. Houser, Alcoa, Waste Management, that our company is committed to good corporate governance and our long-term financial performance. Please encourage our board to respond positively to this proposal in support of improved company performance. Thank you.
Proposal, which is being brought by the National Center for.
All right. As was said, my name is Justin Danhoff. I'm General Counsel with the National Center for Public Policy Research. We're a free market think tank and a Google shareholder. As a conflict of interest and to report acts in the best interest of shareholders, we are specifically concerned that shareholder money is being used to personally benefit a member of the board in violation of Google's conflict of interest policy. Google board member John Doerr has a long history in alternative energy and is heavily invested. He allocated $80 billion for clean energy and the alternative energy marketplace, and some of the company's investments raise ethical questions. In recent years, Google has invested millions of shareholder dollars in wind and other alternative energy projects. These ventures are risky and not in line with Google's core business.
A 2009 GigaOm News report disclosed that AltaRock, which is a small geothermal company, received significant investments from both Doerr's firm and Google. This gives the impression that Google is using shareholder money. Google is bailing out one of its own. He specifically includes conflict of interest that his shareholder money to bail out Doerr's risky moves or follow his wide-eyed supposition. Mr. Doerr should be personally commended for his previous investments in Amazon and Google. However, your company and Amazon compete in the marketplace. Green energy companies do not. Without strong government subsidies and renewable energy standards, green energy companies would go under. Google should focus on its core technology and Internet business and not risk shareholder value in the volatile energy markets. In closing, nothing truly worthwhile hides in the dark.
I hope my fellow shareholders join me in voting for transparency and that Google's leadership sees the light and decides to be honest with the company's true owners, the shareholders. Thank you.
Thank you very much, Mr. Danhoff. The reasons for the board's recommendation that you vote against the proposal are stated in the proxy, along with our commitments to transparency and the police enforcing of our codes of conduct. Because there's no further business scheduled to come before the meeting, I now declare the polls to be open. If you've previously voted by proxy, you don't need to vote again today unless you wish to change your vote. You should also know, as we tell you, we've told you in previous meetings, that we've received sufficient proxies before the meeting to know that the proposals we've discussed today will pass or fail in accordance with the recommendations that were made by our board and that are set forth in the proxy statement. We do want to make sure that everyone gets a chance to vote.
If you haven't done so and would like to do so, please raise your hand. We can get you a ballot, and you can complete it, and we will collect those. Ok. Does everyone that wants a chance to vote get a chance? Perhaps we could have the ballots brought up to the inspector of elections, and we can keep going. Excellent. Why don't we proceed? It looks like everyone has had a chance to turn in their ballots. Let's proceed with the results of the voting, which, as we know, were in part based on proxies we received before the meeting. I've been advised by the inspector of elections that the nominees for the election to the board of directors have been duly elected.
I've further been advised by the inspector that a majority of shares entitled to vote and present at the meeting in person or by proxy have voted in favor of the ratification of Ernst & Young to act as our independent public accounting firm for the 2011 fiscal year, the approval of the amendment of our 2004 stock plan, and the approval of the 2010 compensation that was awarded to our named executive officers. I've also been advised by the inspector that the frequency of once every three years for future stockholder advisory votes on executive compensation receives the highest number of the votes cast. Therefore, the next time that stockholders will be able to vote on this recommended frequency will be at our 2017 annual stockholders meeting.
I have also been advised by the inspector that a majority of the shares entitled to vote and present at the meeting in person or by proxy have voted against the stockholder proposal regarding the formation of a board committee on sustainability, against the stockholder proposal regarding the adoption of a single majority voting standard, and against the proposal regarding a conflict of interest and code of conduct compliance report. Therefore, each of the stockholder proposals has not been approved by the stockholders. As soon as possible after the meeting, we will complete the final vote tabulations and provide those results on our investor relations website and in a filing with the Securities Exchange Commission. That ends the official business. I hereby declare the formal portion of the meeting adjourned. Eric and Larry will make some presentations about Google's business, starting with Eric.
Thank you so much, David. As we have before, we're going to talk a little bit about the past year. We'll be joined by Larry in his new role, which I'm excited to see him in this role. Then we'll have your questions for the senior leadership of the company. Let's go to my first slide. Google really did rock in 2010. We had a fantastic year by every measure. Our core search and ads business grew by more than 20%, which at our scale is quite an accomplishment. Of course, we benefited from a number of things, including the global recovery. Compared to other companies, we had a very, very good year. What I was particularly about your core business growth of the Internet, and we're really at the beginning of a new age of the Internet.
What the Internet can do, how if you put it, the Internet is becoming richer, grander, more personal, more individual, more intelligent than anything that any of us could have ever imagined. The mobile devices revolution gave you a sense. You wonder, what are all those people doing on their phones? They're using the Internet. We love this. We make money, right? What's not to like? Smartphone sales, not phone sales, but smartphone sales are set to pass PC sales in the next 12 months. The right thing to do if you're an engineer, if you're a product manager, if you're in a business, is to focus mobile first. That's where all the action is going to be. That's where the new applications are going to be.
That's where you're going to make some significant money, whether it's as a business or in a nonprofit or in just trying to get your message out or making the world a better place. The web is also getting much larger. One of Google's sort of core strengths is our ability to deal with humongously large amounts of data, data that is so incomprehensibly large, it sort of gives you a headache to start writing down all the numbers. The Internet has grown from 360 million users in 2000 to around 2 billion today. You can say, that's pretty good. You can also say you've got another 4 or 5 billion to come. A pretty big growth market right in front of us. What's interesting is that estimates indicate that in the next 10 years, we'll add somewhere between 2 and 3 billion additional web users.
I believe the vast majority of those people will come through phones. I certainly hope that they'll be through Android phones. It gives you a sense of the scale of the opportunity before us. What's interesting is even more and richer information is moving online. The Internet has moved from sort of text documents, which got Google into the space, to advanced multimedia applications and so forth. I was astounded to read that Netflix is now the number one source of downstream video. Netflix, of course, doing all this great video that people are watching. That's a huge transformation of how the Internet is. It presupposes many to come in the future. The industry, of course, is getting itself organized around this, in addition to making fiber optic networks and all these things so much faster and delightfully powerful. We get used to it.
Go to a place where you don't have fiber, and you'll see what I mean. There are new technologies in wireless, something called LTE, which stands for long-term evolution, which promises 50 Mb in its first version, really 20 Mb, 30 Mb as you use it. Systems in the United States and certain other countries in Europe and in China are beginning to deploy. I've measured it at that speed. I know this is a real claim. There are significant challenges because as the Internet has sort of walked through and changed society in all the ways that we have all seen, there are challenges to the Internet's sort of role. People are worried about what's happening on the Internet.
The people in particular who are worried about are some of the businesses that are being affected negatively by disintermediation, other businesses that are much more consumer-focused than the historic businesses and distribution businesses, and so forth and so on. I'm very, very concerned about the balkanization that is being discussed now by regulators, by governments, and so forth. You can imagine that instead of having one interconnected Internet, we'll have an Internet per country or an Internet per state. We lose all of the scale and all of the reach and all of the amazing things that you get when the world is talking to each other. This has to be dealt with very, very carefully. There's information, for example, this walled gardens coming on, where people have information that they say is on the Internet, but you really can't get to it. In particular, Google can't index it.
Information is coming online literally that you just can't search. How would you know if you can't find it? In any case, the promise of the Internet, we are only a third of the way through. We didn't write down that the Internet was available only for the top third of humans. We want the Internet to serve everybody in every country to make their lives so much better. Next slide. This fundamentally then drives the search strategy of Google. We are making improvements to search at a rate that is the fastest we've ever. I would argue that search is still the most important thing people do online. We crawl 8x more documents than we did two years ago. Two years ago, that number was so large, I couldn't write the number down. That gives you a sense of how quickly this data explosion is occurring.
Users, of course, are also coming back to us with even tougher expectations. An interesting statistic is that query length, that is the length of your queries, has grown about 6% in the last five years. People are asking deeper or more complex questions, if you will. Every day, 15% of all the queries that we get are queries we've never seen before. Very interesting. Shows you the breadth and multiplicity of interests and the complexity of the world around us. Basically, people want information available on all of their devices. They don't want it just on one or another. They want it to work everywhere. What we want Google to be like is an expert that knows you. This has to be, by the way, with your permission. I'm going to say that about 500x . You have to want this.
We'll still keep anonymous search and all of that. Google is in the process of offering even more personalized and specialized search results. It's important that we be able to understand your past history and your preferences so that we can give you an even better result, again, with your permission. For example, if you're planning a trip to Hawaii, photos that your friend took about Hawaii should sort of show up. It'll allow you to make a better informed decision about whether you want to go to Hawaii or not. If you're looking at geo, it's the same thing. You want to see a virtual mirror on the world. You want to see the world that you would see wherever you are. We need that kind of information if you're willing to give it to us. If you go to Y ouTube, there should be a personalized channel.
What we want you to be able to do is just turn on YouTube, and there it is. Somehow, the selections that YouTube makes are better than the one that you would make wandering around the space because we can algorithmically determine, using all sorts of interesting signals, what you're really going to like and surprise you and delight you for whatever goal you have using YouTube. Next slide. This is why we fundamentally have to be a leader in cloud technology and the rising cloud, as it's known. We're busy working on these in many different ways. The seamless high-definition video chat between any two devices. You can join a video conference. From there, you can do it on your phone or on your desktop or somewhere else. Better translation technology. It's interesting that we now are the absolute leaders in automatic translation of languages from one to another.
The Chrome browser automatically translates pages from one language to another. I find myself all of a sudden able to see all of this content in languages that I didn't even know existed. This is a pretty amazing accomplishment. The cloud, of course, provides better entertainment in and of itself. We just launched something called Google Music Beta, where you can take all of your music and essentially make a copy of it in a backup and then have it sent to you at the right time and on the right device. We want books and music and movies available on a cloud-based digital content store. The YouTube Movie Store already has 3,000 movies, including things like The King's Speech, which is a great movie if you haven't seen it. These cloud services and the fundamental focus is it's not just a fun project for computer scientists.
It really does matter because when your information is in the cloud and when computers can help you select things, we can do things that you can't do for yourself that make your world more efficient, more entertaining, and more meaningful. We put this together with Chrome and Android. I'm going to have, I think, Larry talk a little bit more about Chrome and Android in a sec to give you a sense of the perspective of what we're doing. Let's do the next slide. I think maybe I'll have Larry talk about Android. Next slide. This is our slogan. Companies now around the world are going Google. They're literally ripping up their IT infrastructures, the way they do things, to move to this cloud computing architecture, all the knowledge services that Google offers. From our perspective, it's fundamentally about serving users and how we do it.
What we can do is because of these links, we can engage advertisers and ultimately deliver great revenue growth and advertiser satisfaction along the way. It is a delight to work at Google. I'm very, very proud of what I've been able to do at Google. Part of the reason that this opportunity came to me is because Google was founded by two people who are among my best friends and also some of the most brilliant people that I have met. One of them is Larry Page. The delight of working with someone so insightful, so capable of anticipating the world that I'm now describing over the last 10 years has been the highlight of my professional life. I don't know how else to introduce you, Larry, except my friend, partner, and our new CEO, Larry Page. Thank you. Thank you.
Eric, you still have much time left in your professional career.
I know.
Thank you for the wonderful introduction. Thanks to all of you for spending all the time with us today and everyone who's also on the webcast. I do want to thank Eric, too, very much for all the things he's done on behalf of Google over the years. In fact, I think in the last week, he's been in more countries probably than I was in the first 20 years of my life. Just a tremendous amount of travel and communications and other things he's been doing for the company. Exactly as we announced such a transition, it's been working great. I really thank him for that. I'm really excited to be here. It's really a great privilege and honor to be here in front of you as Google's CEO. I'm very excited about our future.
As we announced the transition, I said one of the big things I was going to focus on is just the velocity and execution, speed, and pace. I think it's only been actually eight weeks. I was kind of amazed when I calculated that since we announced that. I feel like we've already made a lot of changes and accomplished a lot. This priority around speed and velocity has really been since day one. The reason is I think there's a natural tendency as companies get bigger just for things to slow down. It's harder to get things going. It's a good time for us to make a transition and to think about how we're organized and how we're going to improve those things. We've already done a number of things there. I'd also say the technology industry is really on fire. I grew up.
I had my first computer when I was six, 1978, actually. I was really lucky to get a computer. Things moved. Like a few years later, you get disk drives or something like that. You move from tapes to disk drives, but it took a couple of years. Now, I feel like a few months goes by and you get a whole new telephone with all sorts of amazing things in it, a new smartphone with a bigger display or high resolution or whatever. Not only that, but hundreds of millions of people get these things. They buy them. They use them. They change their lives. I think we're at a very, very exciting point in the history of the technology industry. I think that Google, we're very well positioned to take advantage of that and to increase our pace along with the pace of the industry increasing.
Our main priority is to build amazing products for all of you, for everyone. We want to be like a toothbrush, something you use every day. That's really important to you. Certainly, if you don't use a toothbrush, that would be bad. I think we're doing a good job of that. One of the things I just wanted to mention is that I think not only has the pace of the whole industry picked up, but the pace of our products has as well. I'll just single out Android for a second. Android is a mobile operating system. I'll talk more about it in a second. We've been releasing a new version every quarter. It used to be not too long ago, we had operating systems that got released every few years. That's a huge change. It's really part of the success of Android.
It's also part of the success of all the different devices that you see that people are buying. Now, I think just to finish up on the speed and velocity point, my goal has really been to have Google feel like it was a smaller company. We certainly have very many efforts within the company. I think if we're organized in the right way, those efforts can execute as if they're smaller and have the solemn kind of pace of a smaller company within them. We all came from a smaller company at some point, so we all know what that feels like. That's something I'm really pushing hard on. I know we can really do that. I think it's an important thing. Now, let me just talk about Chrome for a minute. Chrome is our mobile browser. Actually, raise your hand if you use Chrome.
Raise your hand if you use something besides Chrome. Wow. OK. We need to work on that. We got a few people out there. We've had huge growth in browser share in Chrome. We grew about 300% in 2010 in share. We've got over 160 million users using Chrome, which is a tremendous achievement. That team is doing really well. I think it's really reinvigorated the whole browser segment. Much like I mentioned with operating systems, years would go by before you saw major, major changes in browsers. We've introduced a whole bunch of new things in that segment, much improved security, much improved speed. I'm really, really excited about that. I think obviously the tool that you use to access the Internet is a very important thing for the Internet and for our products as a whole.
We're excited about making the Internet work better and also make it easier and better to provide applications to you through Chrome. Now, I also want to mention Chromebooks are going to reach the market this month. Those are PCs, little laptops that are based on Chrome, and it's the whole operating system. I've really enjoyed using mine. You basically open it up, and in a few seconds, you're running. There's no software updates or anything like that. It's just a utility. You never have to worry about it. It's always updated and secure and working well. I think that's a really big deal, and I'm really excited about that. I want to mention also just a little bit about our wallet efforts you see here on that slide. I think that the wallets really have the possibility to really transform your shopping experience.
You imagine right now, you're carrying a real wallet and your phone and your keys and a whole bunch of other things. Imagine you're just carrying your phone, and when you want to buy something, all you do is you take out your phone, and you tap it on the cash register, and you get your coupons, and you get your payment done, and you get a record of it and so on. You might get the manual. Let's say you buy a toaster, or you'll get the manual for it also in your account without having to go routing around and looking for it. I think the whole notion of how you pay for things in your shopping experience really is ripe for improvement.
Actually, yesterday, we announced Portland was the first city to get Google offers of these kind of good deals that you can get and so on through that, and we're very excited about that. Let me just talk a little bit about our core businesses, which are really search and advertising. If you notice the press about Google, you'll see very many different issues that come up, things that are relatively peripheral to our business. At Google, we've had a philosophy that we don't want to choke innovation. We want to make sure that we've got a lot of things going on at the company that are maybe speculative. Maybe there's a few people working on them, and they really hope that they're going to build a billion-dollar business, but it's a relatively risky thing.
In fact, both Chrome and Android that I've talked about, both of those things, when they started, were considered to be pretty risky things. When we started working on phones, people thought, oh, phones work pretty well. Why do you need an operating system? That sounds kind of crazy, but in fact, the team was amazing. They executed well. Now, it's a very important part of our business. I just want to reiterate that there are many things like that that we do that are speculative. We spend the vast majority of our resources on our core businesses, which are search and advertising, search being how we receive all the searches that we get and advertising how we're making the vast majority of our money. Obviously, that's our core focus. We work really hard on it. Last year, we saw over 500 improvements in search.
We actually tried very many more things than that in various kinds of experiments. I expect this year we'll work even harder on that. It's amazing the kind of things we've been able to do. Instant search, where you type, and even before you finish typing, it's already giving you the answer. If you'd asked me a few years ago, was that possible? I would have said, no, I don't think that's possible. The ability to predict what you're interested in and the networks being fast enough, the computers being fast enough, or your phone even being fast enough to give you what you want even before you're finished typing it is an amazing thing. I'm really proud of that achievement we did. That required us to do a lot of work in our core infrastructure and in providing those services. It really provides great benefit for end users.
Also, for English speakers, you might not realize, but for other languages, it can be even harder to type. You can get even more benefit if you have more difficulty typing. Now, I'll talk also a little bit about ads. I think that it's easy. People think our ads business is pretty mature on search, that we've got lots of advertisements and advertiser relationships. It's a very big successful business, which is all true. I would tell you, just try doing a few searches for things that are commercial and see whether you get the right ads or not. I think maybe half the time you get the right ads. You can easily imagine those ads were much better than they are now, very, very substantially better.
I think there's tremendous opportunity for us in just increasing the relevance of the ads that we provide to users and also increasing the experience for our advertisers. Many of you are probably not advertisers. If you are an advertiser, you have to go through a lot of detail in our systems and how you buy the advertisements, how you pick the right customers to target, and so on. Those systems are improving a lot and can improve even more. I'm very, very excited about that. I should mention also display platform. Display has just been a tremendous area for us in terms of growth, and we expect that to continue. We're applying the same technology and insight that we did on search to the display market. We're focused on producing ads for people that are measurable, relevant to people, and useful for people.
That's working really well in the display space, and we expect that to be a big deal, an even bigger deal going forward. I think that we spend, as I said, we spend most of our time in search and advertising. That tends not to be as interesting to people outside the company. It's much more interesting, what is the latest crazy thing that Google did? For us, those things are interesting, too, but it tends to be three people somewhere in the company that are having a good time doing that. Just again, keep that in mind. We're not betting the farm on a lot of those things. That's not what we're doing.
I wanted to mention sort of the future of Google, and we'll show one of the crazy things we're doing, which is actually we have a picture of Eric and I and Sergey in a car with no driver. This is a small effort, but we do really like doing these kind of things to not cut off the future possibilities. I do want to reiterate to you also, we're very careful stewards of shareholder money. We're very committed to spending money and resources carefully. We started, remember, as a startup in a garage, and we were very, very careful about our spending. In fact, I remember I was scared to hire an office manager because I thought it was too expensive. We have that history and culture, and we're very, very committed to that. Google has really great people.
We have tremendous ambition, as you can see from the picture here. Thanks to all of you, we have a tremendous amount of resource. We have absolutely amazing resources, and my commitment to you is that we're really going to aim high to really achieve important things and to continue to grow this really great company that we've all inherited. With that, I think we're open up to questions. Thank you very much.
Thank you. Thank you, Larry. We're going to be joined by Patrick, who is our Chief Financial Officer. He keeps all of the money in the company in that orange bag. I checked, and it's not actually cash. David Drummond, we've previously introduced, who I think everybody here knows, and of course, Susan Wojcicki. Susan has many, many roles in the company. She was the person who owned the house in which the company was formed. Over the years, she's been a product manager and built many of our businesses. We promoted her to run much of our product businesses a few years ago. Now she runs all of our advertising businesses, is that right, as a Senior Vice President? Shall we begin with our first question? Yes, sir.
Tony Mazzapelli, shareholder. Eric, thank you for the service over the years.
Oh, thank you.
I'm very impressed. I have a question about Android. Even though we've gained huge market share over the last year against our powerful competitor, we've failed to financially benefit because we give away Android for free. Our side businesses don't earn a lot. This bothers me because our key competitor has created massive wealth. If we created wealth the same way, our shares might be two or three times what they are now, perhaps. Also, this bothers me because we've missed other big opportunities, I think, maybe even social network kind of opportunities. I have a multi-sided question. Why do we give away Android for free rather than a modest fee or royalty? Number two, why did we decide not to go after smartphones in a direct way? For example, was there some kind of conflict with our key search business?
Number three, for the products and projects in our development pipeline right now, do we have a system to better identify and shepherd these projects to strong revenue situations?
Larry and Susan.
I'd encourage you to take a long-term view of these things. If you'd asked the question a year or two ago, you would have been asking about Android market share, not just revenue. Now you're just asking about revenue. That's a positive step. We have a lot of market share there. I think that we've seen, and I think that we believe the openness of Android is driving that tremendous growth, not just in the U.S., but in many, many places in the world. I would say also that it is benefiting also our core businesses, which we do make substantial money from. We're receiving a lot of searches now from Android, which is a big benefit to us. Otherwise, we would be paying for those arrangements potentially, or we would not get a good quality user experience that drove a lot of usage there.
It's definitely an area I'd say that we are very focused on the washing business. We had similar kind of questions coming from that. Ultimately, we did very well in those businesses. I would just encourage we have a very long-term.
We make sure that we have experiences that we know work for our users because we find that once we actually have a really useful service, over time there are ways that we can monetize that. That monetization can take many different forms that will work for us. It enables us to serve ads on them, so we do generate revenue via that way. We also.
From a phone right now w e've actually made a decision not to go into the details there. A simple calculation will tell you, since we get 100% of the gross margin of all the ads on Android, it's a really good business. Let's go to the question behind. Yes, sir.
How. Deals.
He's probably.
Let's go to you.
I looked all over. Where do I—I'm serious. Is somebody going to teach me how to?
Cranian.
I tend to agree with the National Center for Public Policy Research in its proposal or suggestion that there is a conflict of interest. To many of the executives here, the environment and its protection is a religion. I think it's a false religion. I hope you would consider that spending money on things that aren't in the interest of the shareholders is a waste. I told Tony a little story before the meeting started. Almost 60 years ago, I spent a few weeks working for a big oil company. The first assignment I had was turning oil into food. Today, that would be a ludicrous idea. Now we're turning food into oil.
Thank you very much. Larry, did you want to answer the prioritization question?
Yeah. No. I think it's good. I tried to highlight this in my remarks. It's also good to keep in mind the actual effort and resource that goes into these things is very small. That's the first thing to keep in mind. The other thing I would tell you is that Google does have substantial energy use, which we believe should be sustainable. I think that that's good business sense for us, given the sentiment there is around this, no matter what you think about the environment. I think that it's important for us to have a sustainable business. I think that's a very achievable thing for us to do.
Let's have you over here.
Thank you.
Let's have you go ahead and ask the question.
Hi. My name's Matthew Mendizabal. I'm a shareholder, not an accomplished public speaker. I made a few notes. Larry, we met a few years ago at the W Hotel in San Francisco, quite a few years ago. I like to say a lot of things have changed since then. A lot of things have stayed the same. Google went public. The market share grew. Google continues to enhance and improve all of its algorithms. I admire the Google code of conduct and believe in following the law, acting honorably, and treating others with respect. The Google model, don't be evil. If you see something that you don't like, speak up. I'm not saying that Google's responsible for national security or the security of one nation or the other, whether that's China, the U.S., or Israel. However, I find it's incumbent upon executives to uphold their duties, fiduciary duties to corporations.
It's been mentioned many times today already that the money that they spend is Google's money. It's not their money. Ultimately, it's the shareholders' money. The two areas of concern that I have are, number one, China, and number two, investments in windmills and solar energy arrays. On the latter, I say kudos for supporting renewable energy. It's making a statement. However, such a sizable investment, whether it's prudent for a business decision, is yet to be realized. On China, it's now the world's second largest economy. The decision to quit and walk away from search and advertising opportunities will remain a bone of contention for years to come. Sources estimate that China, within 14 years, will surpass the U.S. economy. There are quite a bit of long-term growth opportunities there.
With Google out of the China market, the dominant players there can grow and prosper, while its citizens are left with few options without the benefit of Google Search functions. Even if that search function was based upon an older algorithm, the opportunity for people to have access to information using Google Search has been effectively eliminated. It reminds me of the boy in grade school who came to class and had a brand new ball and was very popular but didn't like the local rules at the school. He took his ball and went home, much to the detriment of the children and everybody else. No one got to prosper when that happened. Another Silicon Valley big company, eBay, refused to close down operations in foreign European countries who banned or outlawed the sale of items that were deemed offensive under local laws and customs.
Some of those items were like World War II German military vehicles and action figures with World War II German uniforms. I'm not saying that the world's perfect. I'm not saying it's going to be perfect in our lifetime. Restricting access to Google search and advertising abilities doesn't appear to be in the best interest of progress or the stakeholders. My ultimate two questions are, one, what are we going to do to stay viable in China? Two, how are we going to assure that investments in energy are in the best financial interest of the shareholders?
Patrick, can you talk about the investments we've made? Because last time I looked, they were really smart financial investments, too, weren't they?
Yes. I think it's worth noting that not only, as Larry commented, we have an objective of being carbon neutral, but all the investments that we do in green energy actually have a high cost of capital, meaning they have a high hurdle rate. In order for us to invest in them, they do actually very well from a returns perspective. We actually benefit from a number of assets at Google that we can benefit from, which is smarter engineers that understand the technology. We also have a capital structure and tax structure that enables us often to actually get a lot of benefits out of them. I can assure shareholders that these investments are actually really good return in addition to fulfilling Larry's requirements for being carbon neutral.
Sorry, I'd like to correct one thing. We do two classes of things. Patrick's referring to kind of things like existing wind farms, where the capital return is very known. There's a long-term purchase from a power utility or something like that, and it's a strict financial investment. We also do other kinds of more speculative startup investing. We're doing that in areas where we think that we can make a real difference. They're obviously speculative, but they're small in scale, and they're areas where we think that by us participating, we can really change the world significantly. We believe in what the company is doing. I just wanted to separate those two things.
In both cases, we have high hurdle rates.
David and Larry, you want to talk a little bit about China?
To the part of your China question, I think a couple of things to remember to make clear: we didn't leave China. We're in China. We have hundreds of employees in China, and we continue, we expect to be there for a long time. What we did was to shift, to not operate a search engine within China that would have to require us to do all the censorship that they required. The second thing to remember is the reason why Chinese users, to the extent they're restricted, it's because their government doesn't want them to see, to use the unrestricted version of Google, which is available to anybody in China if the government would let them do it.
I think our plan is to be there in the market and to serve the market with advertising, with all kinds of other services, but to do it in a way that's consistent with our principles because our global reputation, at the end of the day, is worth even more to us and to you than any one country. It's important to remember we're there, and we haven't left the market.
Let's see. Go ahead. Yes, sir.
Actually, just one thing I wanted to add on that, too, from the advertising perspective that I think is important to point out is Google does sell display advertising in the market. We are one of the largest display advertising providers in China. The second way that we sell advertising in China is given the importance of export in China. There are many advertisers that want to be able to reach global markets. We are selling advertisements to Chinese advertisers who want those products to be found. There are significant investments from the advertising business in those two areas.
Yes, sir.
Good afternoon, Dr. Schmidt, Mr. Page, fellow shareholders. I'm John Simpson. I'm a shareholder. In spirit of full disclosure, I'm also Director of Consumer Watchdog's Privacy Project. I wanted to ask you about Do Not Track. Since December, when the FTC suggested that users be able to have a Do Not Track function, there's been a great movement growing. There's legislation that's been introduced both at the state and national level. Three of the four browser companies have added a way to send a Do Not Track message. You folks with Chrome have not done so. Do you intend to add a Do Not Track function? How will your websites honor the Do Not Track message that is currently being sent? If there is legislation and Do Not Track becomes a fairly effective thing that people opt into, will it have an impact on your revenues? Thank you.
David, you want to start?
I can start. Other people can jump in. Do Not Track is something that we have definitely been looking at and something that we have been wanting to participate in, in terms of understanding better what that header actually means. Although some of the different browser companies have implemented it, it has not been clear exactly what the response is when you get that header. We have been working with the different groups to try to understand that and the different advertising groups to try to understand what would be something that would actually benefit the users and that would make sense as something we could implement. We definitely have been looking at it, and our focus has been on trying to define what exactly that would mean. I will say from the privacy standpoint, we have been very, very focused on enabling transparency.
If you look at our ads, we are always telling our advertisers who have served them and where they have come, as well as control. Control has been super important so that all of our advertisers can always opt out of that. If you look at the work that we've actually done in display, we've raised the bar in terms of offering more notification, transparency, and control than the other networks who participated in that space beforehand. We do take the privacy very seriously of our users.
I have anything on the legislation question?
Yeah. On the legislation, there are a lot of different flavors of it. We're involved in a lot of those discussions. I think, as Susan said, we come at this as sort of the industry leader when it comes to informing people of what's going on with their ads and giving them control over it, which really should be the hallmarks of any kind of legislation. I think the key here is to make sure there's the appropriate balance between making sure people know what's going on, protecting their privacy, but not squelching innovation. I think we're involved in those discussions to make sure that we don't have that situation because that's not going to be good for anybody. Obviously, whatever comes out of this, we will follow. We're in the middle of it to make sure it goes in the direction of protecting privacy, but also protecting innovation.
We'd look forward to an opportunity to have some of those conversations at the same table that you're at and have repeatedly made that suggestion. We'd look forward to trying to do that.
Happy to talk to you.
Thank you very much.
Question toward the back.
Yeah. My name is Jim Sutton. I'm a stockholder, also a publisher, also buy AdWords. I use Google Apps and kind of the whole kit and caboodle out of things.
Great. Thank you.
Yeah. I guess the particular, I don't know if it's a question or a comment or maybe a mix of both that I would like to raise, is really to start off in my role as a publisher and then ends up in my role as a stockholder in the company, which is there's been a lot of press lately about the recent algorithm change in search. I have a number of websites that I'm involved with, either full owner or partial owner of, and some of those sites were negatively impacted by that. That's okay.. I understand there's the goal to improve the quality of search.
I guess what's concerning to me is that in an effort to go back and understand what it is that search is looking for in these ads or in these sites, I've taken a look at a number of sites that made big jumps up to number one search position on the first page or number two or three in the markets we're in. A number of those appear to be just absolutely pure spam. Before, they were lower. Now they're higher. They seem to have been promoted in the relative scheme of things by the recent algorithm change. Of course, that comes to the detriment of publishers like myself, although I'm sure it helps the publishers who are doing the keyword stuffing and the other kinds of things that have resulted in them becoming number one.
Also, what I found is in a couple of cases, I have websites where the traffic has gone up significantly, but the monetization of those sites has gone down significantly since the algorithm change, which seems to indicate that we're being delivered less relevant ads and/or ads that are more poorly monetized, so to speak, worthless to us. From a publisher's point of view, I guess my concern is pretty obvious here, which is that it seems like the algorithm change has had what I would consider to be, at least in many cases that I've examined, directly the opposite effect of what the world, if you will, would want or the people doing search would want.
From a Google stockholder point of view, that worries me because it says that the whole Google experience and being a publisher using Google's facilities and so on is becoming less valuable to me. That all leads back into kind of, I guess, what the real question out of the matter is, is there some way to communicate with Google about any of this? There doesn't seem to be, frankly. I mean, you know the blogs, the help forums just seem to go into black holes and never get any response. I'm concerned as a shareholder that the value of my shares go down as the value of my experience as a publisher goes down and that others might be sharing that.
Given we sort of run over time, I want to sort of have a little quicker questions and answers going forward. Larry, do you want to talk about the ranking changes, Susan?
Hello. Sorry, mic was broken. I think it's possible, obviously, that there will be some instances, as you mentioned, where not the right thing happened. When we make those kind of changes at this scale, there's always some possibility of that. We're pretty sure that we caused a very significant positive impact. We're very sure of that. It wouldn't surprise me if there are no such instances of also a negative change also when you change results for hundreds of millions of people. That being said, I think in general, the gist of your question that we should be providing better services to publishers is absolutely true. We should have better communication channels and all those things. Those are areas we're actively working on. Maybe Susan can comment on the monetization question.
There's no reason that the monetization of those sites should be linked to the algorithmic change we made in search. That should not be the case.
I will just second what Larry said from a monetization standpoint, that none of our monetization algorithms changed with the search change. Search runs a different set, one set of algorithms in terms of how they rank sites. In a completely different part of Google, we do the monetization, and the monetization is independent of the search algorithm. There should not have been any monetization change that occurred, or at least it was not correlated to the algorithm change. The other thing I wanted to say is we are working very hard to enable all of our advertisers and publishers to contact us and to be able to get phone support. We have been in the process of rolling that out. We have been emailing groups of advertisers and our publishers, and we plan to put that in the front ends over time as we scale that up.
Within the next quarter, pretty much everybody will be able to contact us via phone number. We definitely recognize that and are working on it.
Let's move to more tighter questions, if I could ask.
Yes, sir.
Every year when I come here, there's an issue in the previous year with Google in China and not in a positive way. This is a country, just to remind you, that seems to not know the word human rights. It's just learning about environmental awareness and doesn't seem to respect intellectual property law that we have in the West. In order to really do no evil, why not just flip then the bird and show that value-based business is more important than making another dollar?
We would argue very strongly that we have made the appropriate change based on our rules and our culture by moving our previously censored and now uncensored results into the other China. Remember, it's two systems, one China. We moved it to the other system because we prefer that. That's a pretty strong response, and it's had a lot of repercussions throughout the world.
Yes, sir.
Hi. My name is Greg Coladonato. I'm a shareholder and a proud former employee. I'll make my two questions very concise in deference to our Chairman. The first one is about management structure. Could you guys give us some insight into whether Google grew beyond the scale at which a functional organization can work effectively, and that at this size and up, it's all business units going forward? Is it the sort of thing where some organizations are one style for 10 years, and then they switch to the other one hoping it'll be better, and then they switch back because the gains weren't there? Do you expect that this is—I’m sure that everyone always expects that it's a permanent change. What do you guys think there? The second question is—I forgot the second question.
Let's answer your first question.
Every high-tech company goes through the phenomena that you just described, the question of fitting into business units. Larry and I felt very strongly. You want to talk about the restructuring that you actually drove on your first day as CEO?
Yeah.
I think we're failing to give you a microphone that works. What is that message?
Yeah. I think we haven't moved to a business unit structure. That's not actually what we've done. We basically have moved the product areas of the company up a level. That's really what we've done. We're still functionally organized for important areas. In general, we don't talk a lot about our internal structure.
Your second question?
Second question, which I remembered, is a couple of years ago when the economy turned from bad to good, Hal Varian, your Chief Economist, was very vocal in sharing data you had from search engine use and so forth that we were out of the woods. If the economy were to turn south again, would Google also share information showing that things were slowing down? Or should we only expect that sort of information when the news is good?
Thank you. It's probably better if we don't answer a hypothetical. We prefer to believe that the United States will have nothing but a seamless and perfect recovery for the next 20 years.
The current data appears to suggest something different than that, especially yesterday's data. What do you guys currently think about things going?
Let's not answer a hypothetical question. As you know, we also don't give guidance. Yes, sir.
Yes. John McQuaid, a small shareholder, short question. Google knows a lot about everybody. There's been a recent breach of security with your email, and with cloud computing also becoming a big issue, what is your plan for security in the future?
I would say also the thing we announced yesterday with regards to email was people's passwords kind of being taken from them. It was not a breach in our security, although we take it seriously as there are users. I think that improved security in the cloud, we're able to detect those kind of things because of the cloud, which I think will enable us to provide much better security to people over time.
In the back? Yes, sir.
Hi. Thank you for running your company. Quick comment and a question. The comment is, I wouldn't presume to tell the smartest people in the world how to invest in the energy business. I'm really glad that you invested, especially in solar. I hope that you continue to find that worthwhile. It's really important for the future of the energy in many different ways.
Thank you.
Question is, you recently announced that you're going to be hiring a lot of people. I think it was thousands of people. For the new employees coming in, what would you say to them, Larry, I guess in particular, about making better products faster? What would you say to them if they're detecting some bureaucracy or they're detecting that things are not going as fast as they might like? What might these people do in order to safely express that kind of concern? I'll be able to take that one. We run a process at Google. Google is very open, as you all know. On a very constant basis, people basically show up here at Charlie's and ask any questions they want. Googlers vote on it, and whatever is the top question is the first one that's answered every Friday.
In the same way, we run a process called Bureaucracy Busters. It's the same process. It's all-encompassing through Google. Everybody actually throws their ideas in, and then we have kind of two sets of categories: anything that can be fixed in 60 days that can benefit the vast majority of Googlers, and others that actually take a little longer than 60 days but are really actionable short term. These processes run on an absolute regular basis. People vote in. We kind of make a bit of a party out of it. We show all the stuff that doesn't make any sense because it's like spring cleaning. You've got to go at it all the time. They're very participative. Both the Nooglers, our new Googlers, and everybody else love to chip in. We get them all the time.
Because they know that a couple of us run these processes, you can imagine, I get like once a week at least on top of that, just showing up out of nowhere. We act on them. We think bureaucracy is kind of that's part of what's slowing us down. We really kind of have these sharp, repellent processes to make sure that it's not a one-time item. It's part of everyday life at Google. Thanks. Go for it.
Thanks for the model.
Thank you. Let's have these be the three final questions, because we've run way over. Yes, ma'am, can you ask your question real quick?
I'm Susan da Silva. I have a comment about how Google Docs and chat have changed something that I work with. I'm involved with an organization called Free Speech Radio News, and the people who put it together and the reporters are all over the world. Nobody ever sees each other. A lot of the work is done through chat. It's not unusual to have eight people in a meeting using Google Docs, all working on the same document, and how fast we can get something together that's really wonderful when we're all typing on the same document at the same time. It's really amazing. If you had to do it by email, where you had to send things, it would be impossible. It makes it possible for things to get done really quickly. Thank you.
Thank you very much. This story is why Google Docs and Google Apps are doing so well, more than three million businesses doing particularly well. They're built around collaboration. By the way, we use them as collaboration tools ourselves. Your story is exactly how we run the company. You got to, yes, sir.
Good afternoon. Even owning one share of Google stock is like a sprinkle on the icing on a cake at Google.
Thank you.
Being in front of all the brilliant people here today, I'd like to make a case to be able to have that brilliance shine on me and possibly be able to melt into the cake and add value to it. I can contribute to Google in many ways, including marketing, advertising, public relations, accounting, and administrative supports. I have many ideas to contribute. One of my ideas I'd like to present right now would be something I'd like to call Google self. We, as people, doing searches, it's hard to find out sometimes, for instance, what exactly your symptoms are and then who can treat them. They say that early prognosis is actually the best medicine of all. For all of us out there, we have methods to search for symptoms, and then we find diseases based on symptoms.
Adding on to that, add value to that, of adding possibly searches for a doctor in your area who would be able to treat those symptoms more easily, or preferences for doctors. In a sense, males may prefer to have male doctors see them, or females may prefer to have female doctors see them, as opposed to just having random searches where they would show up all the doctors in the area. Having to go and call each one individually would waste a lot of time, and people might lose track of what they're actually focused on. That hit me really hard recently that I had a strange mark on my side. I looked up symptoms for it, and then I had to do another search and another search to find out exactly what doctors in my area would be able to best help me.
As our generation is also older, there will be more illnesses out there.
Could you make your question or?
OK. My question is very brief and straightforward. I would like the opportunity to be able to work at Google and to be able to add value.
I want to congratulate you for having a lot of courage. We look forward to talking to you later. Thank you for your product suggestion. We love product suggestions. Yes, sir.
Thank you.
My name is identified as Joseph Vladislav Alexander Bertinsky, according to your sign-in sheet for the interview. I'm an advocate for persons with disabilities and government transparency. I'd like to point out that in your announcement regarding the live webcast, it made no mention of it being archived. My kids and other people who I'm giving the gift stock to would probably like to have the advantage of this particular meeting. May I suggest, A, that you're archiving? From the standpoint of your nice presentation regarding Chrome and the translation service, could major points or major statements you make be annotated so there can be some references down at the bottom of the page so that my kids and I can understand how to follow up on the translation service?
As well as from the standpoint of a publication standpoint, to be real-time, I'd suggest that maybe this particular presentation be annotated maybe every three months so we can go back to the website and see possibly what you want to share, not annually, but in some kind of periodic basis.
I think that's a very good suggestion, David. You'll take that under advisement.
Okay. Thank you.
By the way, the meeting is being archived, I believe.
It is being.
You can find it on our investor relations site and previous meetings.
We have two people who snuck in after the bell. Using Chairman's discretion, we're going to have them ask their questions. Yes, ma'am? Real quick.
Thank you very much. Thank you for running a great company here.
Google is not a country. It's just a company. It's important to establish this.
I love what you do, and I love how you do it. I'm a share owner, and I'm an organic farmer rancher, Wagyu, which is American Kobe beef, and organic blueberries. I have one constructive suggestion here, I hope, which is when share owners call in, we never get a call back. It would be nice to have that facility so that when we call in, we get a call back. Other than that, thank you so much for what you do and how you do it.
Thank you. Thank you for your suggestion. Yes, sir.
My question is a simple one. I was wondering why Google doesn't consider a stock split. Now, I understand the value of a stock, whether it's that you've got 10 shares at $1,000 or you've got 100 shares at $100. Just recently, Kramer gave you guys a big thumbs up after being negative on you for quite a long time. If you listen to him, he says Google's price is too high. The only way you should invest in Google is deep in the money calls. I was wondering, with this new philosophy, and there are more and more people that listen to him, and his books are out all over the place, wouldn't it be better or advantageous to Google to make a stock split and therefore cut down the velocity or fluctuation in the prices?
Mr. Kramer is a phenomenal television show stock picker. We know him well, and I personally like him a lot. I can tell you that the board has discussed this matter quite a bit.
Thanks.
Would anyone like to add anything else?
Most of the research actually points that stock splits don't create any value. They're good for marketing in the same way that Mr. Kramer does it. Actually, there's no empirical evidence from any deep research that points to any value creation.
We have one more person jumping the line. Yes, sir.
I've said this every time I've come here. My name is Jack Easterling. I appreciate what you're doing. Do not split the stock, because all you do is allow those people that play with the market to play with Google. I think that's wrong.
I think that's a great thought to end on. Thank you so much. We'll see you next year. Thank you for our panelists.