Google Forgoes Easy Money

Additionally, a compelling reason to make deals with old media is the aggressive competition from other video-sharing upstarts. At the Bear Stearns conference, Schmidt iterated that Google feared getting hit unexpectedly from start-ups that are not on its radar, more so than from known competitors Microsoft(MSFT) and Yahoo!(YHOO).

That paranoia may be well justified when it comes to YouTube, for which Google has high and long-term hopes. In the core search business, however, Google's position is virtually unassailable by start-ups.

The company has a well-guarded technology that it keeps honing, it pours billions into infrastructure to keep performance going, and its brand name is synonymous with "Web search."

But there are few proprietary barriers protecting YouTube in the same way, and Google has already experienced the vagaries of the video market firsthand. After all, it was plugging away on its own Google video site before YouTube came out of left field to dominate the market.

By using Google's clout to negotiate deals with content owners, though, YouTube could give users a unique draw apart from rocketing momentum. Having enough agreements with media companies in place -- such as the one Google announced with the BBC last week -- would give YouTube an anchor in the mercurial market.

But gaining leverage in eventual media negotiations means forgoing ad dollars to continue growing traffic at full throttle. And though the plan may seem shrewd long term, it won't present the type of kick that investors looking for Google to diversify would be seeking short-term.

Meanwhile, Schmidt is left playing tech visionary -- waxing philosophical about the power of mobile ads, organizing the world's information and talking up seismic shifts taking place in computing.

And as he prophesizes, billions of dollars will be bypassing Google's coffers as the company ups the ante in the high-stakes media game it's playing.

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