Mountain View (CA) - In a conference call to analysts this afternoon, the top executives of Google put to rest any rumors that the company may be building its own Web browser, or acquiring any small firm with an interest in a browser. The denials - particularly one from CEO Eric Schmidt - could also be interpreted as stating that Google is unlikely to merge with any other major firm in the near term, if only in the interest of acquiring audience share.

Google CEO Eric Schmidt

"The industry is obsessed with this browser question," Schmidt told a Lehman Brothers analyst, "and our observation is that you have a number of fine browsers now, [and] people have some good choices." He cited nearly every brand except Microsoft's Internet Explorer 7 as making good gains, including Firefox, Opera, and Safari for the Macintosh.

Why wouldn't Google want to build a browser, one analyst asked, in light of the fact that it could potentially drive audience share gains, and that IE7 is being delayed until 2007 by virtue of the Windows Vista delay? "The way Google operates," Schmidt responded, "we would not build a browser for the fun of building a browser and creating another choice...We would only do something along the lines you're describing if there was a real end-user benefit. So far, we've seen the end-user benefit has been to augment or expand both AJAX and JavaScript, which is available on all the browsers. We're working closely with Firefox, we have a good partnership with Safari and with Opera and a couple of others as well. That seems like a good answer for us right now, strategically."

Last week, Google announced an historic partnership agreement with Dell which will place several Google software components, including Toolbar, Desktop, prominent placement in IE's search pane, plus a new integrated home page featuring functions from both Dell and Google. "I think the thing that distinguishes the Dell deal from the others is its comprehensiveness," said Schmidt. "Most of the other deals were just around the Toolbar; this one is much more comprehensive...There's certainly intent to replicate this deal to the extent that we're able to."

Google executives declined to comment on the specifics of the Dell partnership agreement, citing a confidentiality clause between the two firms. However, Schmidt was heard to murmur that a hardware barter was not part of the deal, even though Google prefers Dell equipment. An RBC Capital Markets analyst was cited by Bloomberg News last week as saying Google would pay Dell a flat fee of $5 for each Dell unit sold with Google software pre-installed.

It's partnerships like the one with Dell, Schmidt said, that model the kind of business expansion that Google is most interested in, rather than purchasing a small browser or browser company, or merging with some other firm that claims a sizable segment of Web audience share. Responding to a question from a Susquehanna Financial analyst about whether we should expect any mergers and acquisitions (M&A) in Google's future, in the interest of acquiring audience share directly from the acquired party, Schmidt flatly responded, "M&A as a method to acquire traffic has not historically worked. Again, we would never rule something like that out, but it's unlikely that, in and of itself, we could just buy customers. It typically doesn't work...It's a bad business strategy, and it's not consistent with Google's values and business strategy culture anyway."

Partnerships are more preferable, Schmidt added, because both parties to the deal retain their exclusive incentives to improve their own products, yet both parties jointly benefit from those improvements. In the absence of improvements or progress, each party retains the right to sever the deal and look for other partners; and the fact that partners retain this right always keeps them on their toes.

One emerging partnership which Google is in the midst of putting together involves retailer Best Buy. Here, as senior vice president Jonathan Rosenberg explained, Google Base, Local, Maps, and Froogle are being put to use cooperatively, as a means of discerning when a Google user is looking for a specific electronics component. In a system currently being tested, an inventory database linked to Google Base would enable a query to direct a user to the nearest store in her neighborhood where a desired component is in stock, and could conceivably direct the store to put that item on hold for her.

"We really want to be able to offer an ad that is going to be able to give the user a chance to consummate a transaction," said Rosenberg, "and obviously, in order to do that, having knowledge of a physical location nearby where they can actually get it, is important."

Another effort Google is working on with partners involves improving the responsiveness of Google context-sensitive advertising in order to omit ads from irrelevant queries. For example, explicit searches like "dog parks" "Mountain View" should perhaps not include advertising for anything having to do with dogs, parking, mountains, or looking around. Competitors looking to maximize visibility might include such ads for their customers in those market segments, explained Rosenberg, though Google customers might find the absence of irrelevant or distracting ads more valuable. In turn, the value of relevant ads could subsequently increase.

As a result of the changing market dynamics introduced by the Internet, Rosenberg remarked, demographics are becoming less and less a factor in devising an appropriate advertising scheme. Its replacement, he said, is personalization. As a case in point, he cited an instance where he - a father - looked up prices for Barbie dolls on his own company's search engine. The fact that he is not a pre-adolescent girl or the mother of one, he explained, should not prevent him from seeing relevant results and advertising related to where he can find his own daughter a Barbie doll. Thus the same dynamics that apply to how a television ad is produced, for instance, might not apply to how an Internet ad should be produced. It may take further exploration of this subject, with the help of Google partners, to determine just what these as-yet-undiscovered advertising dynamics should be.