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This is Part 2 of my series of posts summarizing a fascinating recent hour-long one on one interview with Google CEO Eric Schmidt.

Early in the interview I asked Schmidt about the future of search. I brought up the “search is 90% done” misunderstanding from last summer. Said Google Vice President Marissa Mayer at the time:

Search is a science that will develop and advance over hundreds of years. Think of it like biology and physics in the 1500s or 1600s: it’s a new science where we make big and exciting breakthroughs all the time. However, it could be a hundred years or more before we have microscopes and an understanding of the proverbial molecules and atoms of search. Just like biology and physics several hundred years ago, the biggest advances are yet to come. That’s what makes the field of Internet search so exciting.

Specifically I asked Schmidt “What are the hard things to be solved in search in the next ten years?”

His lengthy answer meandered around a central theme, that Google needs to move “from words to meaning.” In other words, Google needs to understand queries better, and return results that best match the real meaning of a query. “We have to get from the sort of casual use of asking, querying…to “what did you mean?””

He then took a detour and shared a (non-serious) approach that cofounder Sergey Brin has talked about internally – direct brain implants:

Now, Sergey argues that the correct thing to do is to just connect it straight to your brain. In other words, you know, wire it into your head. And so we joke about this and said, we have not quite figured out what that problem looks like…But that would solve the problem. In other words, if we just – if you had the thought and we knew what you meant, we could run it and we could run it in parallel.

When I (again, jokingly) asked if Google was working on that product, he answered “Well, I wish we were. But we don’t exactly have all the medical clinics necessary to test brain insertion.”

But he also had a serious point. One big problem with search is a proper understanding of what exactly the user wants. And then how to pair that with exponential growth in datasets:

Okay. So to me, the question is sort of, what’s next, is really basically how far does the artificial intelligence technology go here? How many signals can we get from who you are, where you are, what you’ve been, what you’ve done and so forth to refine that querying? And at the same time, you also have this enormous expansion of data sets. I think what people are missing is that the amount of information on the Internet is growing very, very rapidly…Because it gets more open, people put more data on it and so forth and so on and that’s wonderful. Also, you have all these dynamic databases that are now – they basically publish that at web pages and again index them as well.

The long term goal of Google search, he says, is to give the user one exactly right answer to a query:

So I don’t know how to characterize the next 10 years except to say that we’ll get to the point – the long-term goal is to be able to give you one answer, which is exactly the right answer over time. Okay, you know, the question I’ll ask today, how many Americans have – what percentage of Americans have passports?…The Google’s answer was a site, which was somebody who had attempted to answer that question and had multiple answers. It’s quite interesting actually to read…So you go to a very good definitive site. And what I’d like to do is to get to the point where we could read his site and then summarize what it says, and answer the question…Along with the citation and so forth and so on.

SHANGHAI — Three days after announcing that he was resigning as the head of Google’s China operations, Lee Kai-Fu said he had raised $115 million to create a company that would fund high-tech start-ups in China.

That company, Innovation Works, will search for talented Chinese engineers and entrepreneurs and help them develop the next generation of Internet and mobile computing technologies, Mr. Lee said in a telephone interview Monday.

“We’re going to collect the best ideas, and we’re going to hire the best engineers and entrepreneurs,” he said. “After one year, we’ll send the companies into the open. If they get venture capital funding — great; if they don’t, they won’t live.”

Innovation Works is being backed by the YouTube co-founder Steve Chen, Foxconn Technology, the Legend Group, New Oriental Educational and Technology Group and WI Harper Group, the American venture capital firm. Foxconn is one of the world’s biggest manufacturers, producing everything from Apple’s iPhone to HP computers. Legend is the parent company of Lenovo, the Chinese computer maker.

Mr. Lee, 47, a former Microsoft executive, said that he was leaving Google after four years because he had simply found a new challenge.

He dismissed as “outrageously wrong” the notion that his departure had anything to do with Google’s difficulties in complying with China’s strict censorship rules or due to fierce competition from China’s leading search engine, Baidu.

“In my career I’ve never run away from anything — I run toward things,” he said. “There’s clear evidence Google has doubled its market share in China under my leadership. It’s on the upturn.”

In a telephone conference call with Peter Liu, the chairman of WI Harper, one of the lead investors, Mr. Lee said part of the logic behind forming the company was the lack of early stage funding of high-tech start-ups in China, or angel investors — who could provide financing and coaching of young companies.

Talented managers now working for technology companies in China were primed to leave those companies to become great entrepreneurs, he said.

“Our experience is in company building,” he said. “I can coach them with my many years of experience.”

China is already a hotbed of high-tech growth, with fast-growing Internet companies like Baidu, Tencent, Shanda and Alibaba already worth billions of dollars. Venture capital funds are aggressively scouting out new companies that can capture share in what is already the world’s largest Internet market, with over 300 million users.

Innovation Works recently signed a lease to rent part of a building in Beijing’s high-tech district, next to Google’s offices, and the company will house its start-ups there.

Despite the economic downturn, Mr. Liu of WI Harper, said he had no trouble raising the money for Innovation Works.

“We raised the money in less than 30 days,” he said, and called the hiring of Mr. Lee “a miracle.”

“He can identify the next Google in China or the next Baidu,” he said.

Source: NYTimes

Google has launched an unfinished new search engine Google Caffeine Search Engine. The search engine is expected to improvise on the index size, speed of the queries and most importantly, changes the value of search engine rankings.

A post describing the new search architecture, code named Caffeine, mentions that the new infrastructure sits “under the hood” of Google’s search engine, which means that most users won’t notice a difference in search results.

Some parts of this system aren’t completely finished yet, so we’d welcome feedback on any issues you see. The Google’s new infrastructure is found at http://www2.sandbox.google.com/.

“Right now, we only want feedback on the differences between Google’s current search results and our new system. We’re also interested in higher-level feedback on ranking discrepancy as engineers will be reading the feedback,” wrote Sitaram Iyer, staff software engineer, and Matt Cutts, principal engineer at Google, in the official blog site.

The public testing of the new engine comes two weeks after Microsoft Corp. struck a deal to replace Yahoo Inc.’s search engine, with its own Google competitor, called Bing. Yahoo Search and Bing are the second- and third-most popular engines after Google

Search engine giant Google has released beta version AdSense an advertising platform for mobile applications. The application is initially available only on Apple s iPhone and Android phones.

The AdSense mobile platform allows developers to integrate Google s AdSense network ads into mobile applications facilitating advertisers to bid for placement in mobile apps.

“Advertisers are looking for ways to reach potential customers when they are engaged with mobile content, and application developers are looking for ways to show the best ads to their users,” said Susan Wojcicki, VP (product management) at Google in a blog post.

Google however isn’t the first to venture into this space — other contenders in this arena include Vdopia, AdMob, Medialets, Pinch Media, and PurpleTalk, which have been trying to turn mobile advertising into a viable revenue stream for mobile application developers.

Google traditional use of targeted keyword and geography is now extended to mobile platform, said Steinberg, director of business development at Urbanspoon, one of the companies in Google’s closed service trial.

However a study by Pinch Media, a mobile analytics company says that Google’s entry into the space is likely to be developers with extremely popular applications. According to Pinch Media, for mobile users to benefit from this technology is still long way the reason being the AdSenses platform works only on most high-performing mobile applications - which is currently less than 5% of the total share.

It’s hard for me to imagine going without email for a day. It’s such an easy and convenient way to communicate with my friends and family. However, there was one limitation that bothered me: my family members and friends who prefer to communicate in Hindi did not have an easy way to type and send email in their language of choice. I am extremely happy to announce the launch of a new feature in Gmail that makes it easy to type email in Indian languages.

When you compose a new mail in Gmail, you should now see an icon with an Indian character, as the screenshot below shows. This feature is enabled by default for Gmail users in India. If you do not see this function enabled by default, you will need to go the “Settings” page and enable this option in the “Language” section.

When you click the Indian languages icon, you can type words the way they sound in English and Gmail will automatically convert the word to its Indian local language equivalent. For example, if a Hindi speaker types “namaste” we will transliterate this to “??????.” Similarly, “vanakkam” in Tamil will become “???????.” We currently support five Indian languages — Hindi, Tamil, Telugu, Kannada and Malayalam — and you can select the language of your choice from the drop-down list next to the icon.

We built this new feature using Google’s transliteration technology, which is also available on Google India Labs, Orkut, Blogger and iGoogle. I hope you find this feature useful to communicate with those of your friends and family who prefer to write in their native language, and it will be available soon to businesses and schools using Google Apps. Now back to replying to all those Hindi emails I got from my family and friends today!

Even search engine giant - Google, does not seem to be immune to the global recession. On Friday, it announced that it will be cutting down around 200 jobs in its sales and marketing divisions.

In a posting on the Official Google Blog, Omid Kordestani, SVP (global sales and business development) said, “When companies grow quickly it’s almost impossible to get everything right-and we certainly didn’t. In some areas we’ve created overlapping organizations which not only duplicate effort but also complicate the decision-making process. That makes our teams less effective and efficient than they should be.”

He also admitted that Google had over-invested in certain areas. Kordestani said the company had no option but to restructure their organizations. Google will give each outgoing employee time to find another position at Google, outplacement support, and provide severance packages for those who will have to leave the company, the posting read.

This is not the first time this year that the Internet behemoth has announced structural and strategic changes to its organization in order to trim costs. In January, Google reduced its number of recruiters by 100. It also announced the closing down of engineering centers in Arizona, Texas, Norway, and Sweden. Some of the engineers, around 70 in number, were moved to other centers, while others were asked to leave.

Google has finally brought in certain elements of semantic search into its search engine that brings about better search results by linking and associating different concepts.

The new technology will offer more useful related searches (the terms found at the bottom, and sometimes at the top, of the search results page), said Google.

For example, if you search for principles of physics, the Google algorithms will also associate concepts like “angular momentum,” “special relativity,” “big bang”, and “quantum mechanic” to your search.

Google said the new related searches would be available in 37 languages globally starting today. The Internet giant also said that information snippets that accompany every search result will also be increased in case of longer queries

Google has begun accepting paid applications into its Android Market mobile app store — a move that lays the groundwork for potentially following Apple’s lead in turning smartphone applications into a sizable moneymaker.

Initially, the Android Market offered only free applications. Now, however, the search giant confirmed plans to next week begin selling applications through Android Market after rumors began circulating earlier this week.

Users of the Android-based T-Mobile G1 smartphone can expect to see the paid apps available starting in the middle of next week, according to a Google (NASDAQ: GOOG) post on a blog for Android developers. The search giant said Google Checkout will serve as the payment and billing mechanism for the service.

The company started accepting paid applications from developers today, though it is limiting the program to U.S. and U.K. developers for the time being. Germany, Austria, Netherlands, France and Spain are slated to be added by the end of March.

The move puts Google more closely into competition for developers with Apple, and in particular, the PC maker’s popular App Store for its iPhone and iPod Touch.

Part of that motivation may stem from the fact that downloads at Apple’s (NASDAQ: AAPL) App Store are off the chart. During last month’s earning’s call, Apple’s CFO, Peter Oppenheimer, said there are 15,000 apps on the iPhone App Store, and downloads have surpassed 500 million.

App Store frenzy

The App Store concept has caught the attention of all the big mobile providers. In October, BlackBerry maker RIM unveiled plans for an App Store of its own, starting in March.

In mid-December, Palm launched its own mobile storefront, the Palm Software Store. The company’s storefront opened with 5,000 applications for over 25 existing Palm (NASDAQ: PALM) devices, with about 1,000 of the applications available for free.

The next month, the Treo manufacturer gave a first look at its upcoming smartphone, the Pre, which will hinge heavily on a sleek design, an iPhone-like touchscreen — and downloadable apps.

Microsoft (NASDAQ: MSFT) is also thought to be weighing an Apple-like storefront for mobile downloads. In fall, it began dropping hints about launching an App Store-like effort.

The software colossus is expected to detail some of its upcoming mobile efforts — including, potentially, a mobile storefront — during next week’s GSMA Mobile World Congress in Barcelona.

Google this week said it’s preparing to launch new services for mobile users, offering free U.S. calls, unified text messages and voicemail across numbers and integrated speech-to-text and search functionality.

But the new only available to existing customers of GrandCentral Communications, a telecommunications firm Google bought in July 2007.

The Google Voice service will automatically transcribe your voicemail to text — though it can be shut off in the settings page of the service — and you can search through past voicemails as well as archived SMS messages.

“Users can access their voicemail and SMS messages by phone, e-mail, or the Web. From the Google Voice inbox, a user can search for a specific voicemail message or SMS message,” a Google spokesperson said.

While Google has long baked advertising into its core products — running ads in tandem with search queries and within services like Gmail — it’s still not clear whether Google Voice run ads alongside these transcripts or elsewhere in the new service.

“We don’t have specific plans to share at this time regarding advertising within Google Voice,” the spokesperson told InternetNews.com.

But industry analyst and consultant Greg Sterling speculated that Google may introduce advertising if it needs to help offset costs for the free calls and if the service becomes popular.

He also said the specter of advertising in the interface is what rankles privacy advocates.

“There are possibilities, though sometimes you expect Google to introduce ads at some point with a new service and they don’t,” he said. “But they could scan the content of voicemail transcripts and insert text ads.”

“I can envision a situation where the interface has ads ties into it, they could even be behaviorally targeted ads, based on their announcement yesterday, and this is what goes right at the heart of what privacy advocates are concerned about,” he said.

Sterling also raised the possibility of audio ads, given that Google recently shuttered its radio ad unit but didn’t scrap the infrastructure and said it would still look for distribution channels.

“Audio ads could be inserted, whether branded or contextually relevant, into voicemail,” Sterling said.

In terms of privacy issues, he said that Google is smart to take a wait-and-see approach before monetizing Google Voice, avoiding interference with the user experience until its widely adopted and politically prudent.

“The key is integration with other services like Gmail, that’s the appeal for the user is everything is all working together in a centralized way,” Sterling said. “But that’s also what raises concerns with privacy groups. The political part is Google doesn’t want to confirm fears of data mining.”

It’s too early to tell how Google Voice will impact the VoIP market in the long-term, and in particular how it will affect big players in the sector such as Skype.

The Google Voice news comes as eBay is betting on growing Skype well beyond its chief current focus as a PC-based voice chat and videoconferencing application, yesterday describing plans that could see Skype doubling revenue by 2011.

Meanwhile, though, Skype just last week began its own voicemail-to-text service using U.K.-based SpinVox, though it’s a paid offering.

Sterling said that Google’s competing release is impressive, and depending on how much the search leader promotes it, could have a big effect on the industry. On the other hand, initiatives such as Google Checkout, which was touted as a “PayPal Killer,” never gained wide adoption despite big marketing campaigns.

The launch comes just days after inventor Judah Klausner said he had settled a lawsuit with Google over Klausner’s patents covering “visual voicemail,” which gives users e-mail like controls for managing voicemail.

Klausner’s company had previously sued and settled with Apple (NASDAQ: AAPL), which includes visual voicemail in its iPhone.

Effective May 5, Google Checkout is moving to a tiered fee structure and is eliminating its AdWords discounts for sellers who use the search giant’s online payment processing system.

The new pricing effectively raises rates for most online merchants, and puts the online payment system more in line with PayPal’s rates.

The new rates will range from 1.9 percent plus 30 cents per transaction for monthly sales of $100,000 or more, to 2.9 percent plus 30 cents per transaction for monthly sales of less than $3,000. And, any transactions with buyers outside your home country will incur an additional 1 percent fee.

Currently, e-commerce site owners pay 2 percent plus 20 cents per transaction, with no monthly, setup, or payment gateway service fees.

Google also said it would discontinue the AdWords credit promotion that’s tied to Checkout. The way it works now, merchants who advertise with Google AdWords are eligible for free transaction processing for some or all of their Google Checkout sales each month. For every $1 spent on AdWords each month, merchants were allowed to process $10 in sales the following month for free through Google Checkout.

Google did say any AdWords transaction processing credits accrued during April 2009 will be applied towards transactions that occur on May 1 to 4, 2009, and Google Grants recipients will still be eligible for free donation processing until 2010.

When Google released Checkout in June 2006, there was speculation that it might overtake PayPal as the primary online payment processor, even though the two differ. Checkout provides another gateway for Google users to make credit card purchases online, while PayPal primarily acts as a replacement to using a credit card to complete an online transaction.

But Checkout never really became widely adopted in the marketplace, though some studies have shown it to be popular with males ages 18 to 34, and recently it’s being promoted for the mobile Android platform. Because Google never reveals the number of users who use Checkout, it’s hard to discern what impact the new pricing will have, and whether the change is due to its failure or success.

Regardless of numbers, it’s bound to be good news for PayPal, which now offers more merchant services for about the same cost, and just mapped out an agenda to double its revenue by 2011.

Google did not respond to a request for comment by press time.