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Bear Stearns Media Con: Google Evinces Confidence On Clicks, Economy And MSFT-YHOO

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The two big issues Google (NSDQ: GOOG) has been dealing with these days – aside from waiting for approval of its pending $3.1 billion merger with DoubleClick – are the recent drop in its January click-through rates, which sent its stock price downward, and whether media companies should view Google as a partner or challenger. Both got airtime during a discussion at the Bear Stearns Media Conference taking place today in Florida.

Clicks and quality: Tim Armstrong, Google president for advertising and commerce, sought to explain why Google’s January click volume drop is actually a good thing. The argument: as Google improved the quality of its searches, users didn’t need to click as much. Also, the evolution of how and when users conduct online searches was a part of the decline in clicks. “People changed their search timing, one of the big changes from its effort to improve the quality of results. Furthermore, better quality will lead to more convergence, bringing more benefits.”

Friend, foe or “frenemy”: At nearly every speaking opportunity for a Google exec, there is a strenuous insistence on Google not representing a challenge to media companies. David Eun, Google’s VP, Content Partnerships, joined Armstrong to offer this defense: “People don’t understand our intent. We are a platform partner, no intention of creating content. We don’t demand exclusivity and the conversations with partners have been increasingly positive.”

When will YouTube make money?: Eun: “One of the things we did after YouTube acquisition, was improve the experience. We just launched our 19th locality, in Korea. We’ve been careful about different approaches. We’ve purposely not taken the easy money. We could have taken cut-down TV ads and done pre-rolls. We ask how much money you’re losing? We’re turning up the volume on ad revenue this year.”

On Viacom: Eun: “We think the Viacom (NYSE: VIA) suit is a mistake; it’s an attack on innovation. We respect copyright; wouldn’t have so many content partners if we didn’t. The headline is: we can filter copyrighted materials. But how can you channel the energy and enthusiasm for your content? You don’t have to take it down. We’re working with thousands of content partners and we’re creating real momentum.” He added that Google is working with about 70 content companies on refining YouTube’s Video
Identification technologies.

Economy: No company’s been more careful about advertisers money. What are the overall trade winds? There’s a separate trade wind that’s moving money to the digital side, and Google is part of that. Consumer packaged goods, financial services are still strong. There’s more to financial services than mortgages, which are naturally being affected by the subprime housing crisis. Looking internationally is also important as a countervailing force against an economic slowdown.

MSFT-YHOO: Armstrong said he hasn’t thought about the impact of a possible Microsoft (NSDQ: MSFT) takeover of Yahoo: “Competition’s really good… We have a plan for staying really focused in the marketplace either way.” Eun: “This will allow us to accentuate the differences in our program from our competitors. We have an infinite shelf to offer products. We offer users control. That’s not the approach everyone takes.”

Success in advertising: Armstrong: To be successful in online advertising, you need four components: the right customer list, the right targeting and creative, the right inventory and measurement. “Fortunately in search, we’ve had all four of those things and we’ve been quite good at it.” As for building up its strength in display advertising, if and when DoubleClick closes – it’s expected to on Tuesday – “We will have right types of targeting for that space…Individually, YouTube alone is probably the brightest light for potential display ad growth.”