Rivalry May Help Google, CEO Says

Google Inc., facing mounting competition in the Internet search advertising market from Microsoft Corp. and Yahoo Inc., expects that rivalry to drive up ad prices and increase its revenue, Chief Executive Eric Schmidt said Wednesday.

“There is a surprising, if not bizarre [fact that] more competition in auctions can actually produce more revenue, rather than less,” Schmidt said at a news briefing at Google’s Mountain View, Calif., headquarters.

Schmidt also suggested that in the long run, enabling people to search the Web via mobile phones could be as big a business as its computer Web search business, which last year generated about $6 billion in revenue.

Google is the leader in Web searching, with 60% of the global market. It derives virtually all of its revenue from selling text advertisements alongside search query results.

More competition “can in fact cause prices to rise,” Schmidt said, adding that this would benefit not just Google but other players as well.

He singled out Microsoft and Yahoo, which in recent weeks have introduced major upgrades to their search technology that will be available this year.

“There is room for [Microsoft and Yahoo] and more to succeed,” he said.

Google’s advantage is that the overwhelming focus of its business is on search, he said.

Regarding mobile phone searches, Schmidt said that as “people do more searches, it should balance out” with computer-based searches. But he ruled out speculation that Google might be looking to become a reseller of wireless telephone services.

Schmidt said Google appeared to be benefiting from a “limitless growth model” that showed no signs of ending.

“If this all comes together it will work as a continuous cycle,” Schmidt said, noting that more users, more advertisers and more content will serve to create further demand.

Google shares fell $5.82 to $402.98.