Schmidt: Google's social ad strategy is "trial and error"

Google's strategy for monetizing the social web is one of "trial and error", says CEO Eric Schmidt in a recent interview with German publication FAZ.net. "That's the way we do it at Google".

When asked specifically about Google's arrangement with MySpace in which the search giant has guaranteed ad revenues of $900 million up until 2010 irrespective of how many ads are clicked on, Schmidt echoed earlier comments this year by Google co-founder Sergey Brin saying that the results have been dissapointing:

"MySpace did not monetize as well as we thought. We have a lot of traffic, a lot of page views, but it is harder than we thought to get our ad network to work with social networks. When you are in social network, it is not likely that you'll buy a washing machine. It is not a long term problem but it is taking us longer than we thought. We are trying new ways, new approaches all the time", says Schmidt.

The challenge is to find way of making ads more engaging but the solution hasn't been invented yet, according to Schmidt: "The advertising has to be more entertaining, more interesting, more immersive compared to what we have today... We are not there yet but I am optimistic that it could work very well."

Also see: Report: MySpace turning News Corp. stock toxic; advertisers shy of UGC

More revealing, Schmidt concedes that web 2.0 isn't the revenue opportunity it's often been made out to be. "This is not where the money is", he says.

Instead, look to the next frontier -- mobile.

"The most obvious large space of advertising is the mobile internet... Just take the success of the iPhone: It has the first really powerful web browser on a mobile device - and many more are still coming. Nokia has one coming, Blackberry has one and Motorola has one. They are all supposed to be released this year. By these products, the advertising gets more targeted because phones are personal. So targeted ads are possible. And that means the value of the ads will grow. The next big wave in advertising is the mobile internet."

In the end, says Schmidt, "mobile will be a larger business than the PC-Web. But it will take a few years."

Of course, that's no revelation. There's Android (the so-called GPhone), Google's wireless spectrum political maneuvers, the Wimax investment, and the company's public opposition to Microsoft buying Yahoo -- a strategic move by Microsoft that was really about Mobile.