Google CEO Eric Schmidt believes in the power of partnerships to propel Google’s future growth. Schmidt focused on the importance of Google partnerships during his prepared statements for the company’s Q2 2006 Earnings Conference Call earlier this month and Google addressed various partnership initiatives throughout the call.
Schmidt’s opening remarks on Google partnerships:
I'd also like to emphasize the role of partnerships. In your questions and comments, let's explore a little bit how the partnerships that we're developing -- not just the ad partnerships, which have been studied for many years, AOL and those sorts of things -- but a lot of the new partnerships. You can see how we're behaving with partnerships when you see the tremendously important Dell deal, Adobe deal, and others coming.
We're learning how to operate, learning how to build a stronger ecosystem. The strength of that ecosystem is central to our strategy, because we can't do it alone. We benefit by having the reach, impact, financials, and frankly, help from the partnerships, not just even the ones I named, but in content, in distribution and in access, all of which are announced with many, many more coming.
During the call’s Q & A Schmidt was asked about how Google formulates its partnerships:
On the philosophy around our partnerships, we've typically given the majority of the value, if you will, to the advertiser, to the partner who brings the end user. So typically, in the structure we help drive, the majority of the revenue -- and the shares are pretty high -- goes to companies like AOL and Ask Jeeves and so forth. We get tremendous benefit, though from that, because then those advertisers are part of our overall advertiser network and so our Google.com property gets that benefit.
Although the specific terms with, for example, Dell are very much proprietary and part of a contract, we entered a similar arrangement with Dell after an awful lot of testing. The idea was that here's Dell, a very, very interesting, very, very important company, and their end users would benefit by having more access to Google. It's worth it to us to share that revenue in whatever financial structure makes sense, so that the end user is satisfied; Dell, of course, it's a good business for them, and it's a very good business for us.
So the answer depends on the kind of partnership. Is it a content partner? Is it a distribution partner? Is it an ad partner? Do they bring in users? What is the economic structure of their industry? But all of them have some form of financial sharing -- although maybe not revenue, there may be other ways of doing it -- that gets them to where they need to be with respect to their economics, and gets our goals aligned.
Google has struck a partnership deal with the Associated Press to compensate the organization for news content made available to Google. The compensation may be formulated on a pay-per-click basis, according to Mercury News reports.
Schmidt is quoted:
The people who own the content did a lot of work to generate the content. We want them to get the majority of the revenue from advertising.