Summary:

A quarter ago, Google (NSDQ: GOOG) “had no idea where the bottom was,” CEO Eric Schmidt said during the company’s earnings call Thursday. Bu…

Eric Schmidt, Business Okay
photo: AP Images

A quarter ago, Google (NSDQ: GOOG) “had no idea where the bottom was,” CEO Eric Schmidt said during the company’s earnings call Thursday. But now the business “appears to have largely stabilized,” he said, calling out the recovering performance of several verticals, including shopping and travel. (A notable exception was finance). Schmidt also noted the performance of the company’s YouTube division and its display advertising business — which both have had their performance questioned recently — saying both had “performed very well.” And how about a recovery? “Too early for us to tell,” Schmidt said.

Other highlights:

YouTube: “Monetized views” on YouTube have more than tripled over the last year, said SVP Jonathan Rosenberg. Executives would not say whether YouTube was profitable, although they did say it was on a trajectory to become a “very profitable business for us” in the “not too distant future,” giving a collective heart attack to analysts who have speculated about how much money the site is losing. In a follow-up call with analysts, CFO Patrick Pichette said that the company wanted to reaffirm that YouTube’s business model was credible. “There’s been so much press with all these documentations of massive costs and no business model,” he said.

Search initiatives: Schmidt said search remained “an unsolved problem” and Rosenberg talked about how the company was adding new features for people who are running increasingly complex queries. Executives said that they had seen no “large shift” in share since the introduction of Bing.

Google Chrome OS: Schmidt said that the company’s planned desktop operating system was an example of how the company continued to invest in innovation, saying “you don’t just change the world incrementally.” Asked about how the company would monetize it, Schmidt said that if it was widely adopted there would be “many opportunities to build profitable services on top” of it, although he reemphasized that it would be free.

Paid services: “Eventually … the web will have a very successful advertising model as well as a fair number of subscription services (including) micropayment systems … That infrastructure has yet to be built broadly,” Schmidt said. He did not say whether Google would build it.

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