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June 1, 2006

Investor Conference Call

Google had an Investor Update Conference Call yesterday. You can read the transcript. Some of the interesting questions are highlighted below:

* Google doesn't want to compete with eBay, they just want to automate the process of buying products advertised in AdSense

* Google doesn't intend to develop a browser and recommends alternatives to Internet Explorer

* There isn't a connection between the Dell deal and the integration of MSN Search in IE7, Eric Schmidt says.

So here are the most interesting 3 answers.

Regarding Google Wallet:

Mark Mahaney - Citigroup

The question I was alluding to on the beta test was that we saw some news that some testers out there are testing shopping from high-quality merchants for products like iPods, music cell phones. People are wondering, is that some sort of version of an eBay Express or an Amazon functionality?

Jonathan Rosenberg - Google

In general, the answer to that question is no. We have been working to automate the advertiser click cycle. In other words, what we want to do is the moment the customer decides to purchase something, we want to make that as fast as we possibly can.

Google does have what is generally known as a payment system that would enable that. But it’s not the kind of payment system that eventually results in the kind of product that you’re describing. Think of as much more advertiser automation, very much focused on making the advertiser satisfaction much higher. Advertisers will see quicker returns, more click-throughs, better conversions, and then the rest is history.

Regarding Google Browser:

Douglas Anmuth - Lehman Brothers

Does it makes sense for Google to build a browser? Given the Company’s focus on increasing distribution and the three goals that you identified at your recent Analyst Day of improving the brand, increasing market share, and providing a platform for future products, why doesn’t it makes sense to build a browser, particularly one that ties together multiple Google products?

I know that you want to develop products and technology that serve an unfilled need online. A browser is also one that could potentially drive material share gains in search and also be highly strategic in light of IE7 and Vista. Thank you.

Eric Schmidt

We would make the decision based on what end users want, and not based on some strategic calculation that we made about competitors. The industry is obsessed with this browser question. Our observation is that you have a number of fine browsers now, and people have some good choices. We have a very, very active partnership with the Firefox folks. IE7 is coming out and, in response to competition from Firefox, has gotten better. Safari, which is the Apple browser, looks like a very strong offering in the Mac space. So it looks like people have some good browser choices already.

The way Google operates is we would not build a browser for the fun of building a browser and creating another choice. By the way, I omitted Opera and a few others that are also very interesting. We would only do something along the lines you are describing if we thought there was a real end-user benefit.

So far we have 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 very, very closely, as I mentioned, 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 right now for us, strategically.

Regarding Windows Vista:

Mark Rowen - Prudential

Eric, you have been pretty vocal about Vista and the new version of Internet Explorer that is coming out, and your thoughts that it might put you at some sort of disadvantage.

I wonder if you could give us a big picture perspective on specifically what you don’t like about that? The settings and things. What kind of advantages might Microsoft get from that, what sort of disadvantages might it put you at?

Then, in the context of the Dell deal, how much does that alleviate that pressure?

Eric Schmidt

I’m not sure how vocal we have been. Vista is scheduled to ship in 2007, and we’ll see how it actually comes out. There’s a lot of opportunity for Microsoft to change what they are doing based on customer feedback and other factors.

As they currently reported, there is a default setting in Internet Explorer 7, which, if the default setting is not set, is then set to Microsoft Search. We want to make sure that the use of the power of Windows is done in a correct and legally appropriate way. That’s a concern.

With respect to the Dell deal, the Dell deal was really driven by this end-user focus issue and not about the Vista issue. Again, Google’s brand and usage and products are very, very strong. So this is a specific point. But certainly, Vista is a product that people have been waiting for, for a long time. We’ll see how successful it is in integrating search in the various places that they claim they are going to be doing.

Mark Rowen - Prudential

So assuming that they don’t change that, and the default settings for those that are not set, move people to MSN Search instead of Google Search, do you think that that’s a big disadvantage for you? Or do you think that it’s not such a big deal in the final scheme of things?

Eric Schmidt

Well, it’s an example of the increasing competition. We at Google are very, very focused on having the very best search. So hopefully, if that were to occur, people would naturally see that our product is that much better.

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