The Twitter Tug of War: Can Google Win?

Here's a quiz for you.

Why did Google CEO Eric Schmidt make the following statement recently about Twitter and similar services: "I view all of these as sort of poor man's e-mail systems"?

a. He doesn't get it.
b. He not only gets it, but he's afraid of the threat posed by Twitter.
c. He's devaluing Twitter to position it for a possible Google acquisition.
d. All of the above.

Incredibly, despite the fact that some of these contradict each other, I believe the answer is (d). Here's my reasoning.

First of all, you have to understand that Eric Schmidt is one of the brightest people in the entire electronics industry. It is often forgotten that he began his career as a research scientist at legendary brainiac places like Bell Labs and Xerox PARC, then became chief scientist at Sun Microsystems (where he led the development of Java) and only then became a businessman.

In other words, Schmidt is really, really smart. And he's also very clever. Scary clever. And since he took over Google, Schmidt has also become quite shrewd, a real corporate chess player -- and when you talk with him you often feel that he is already several moves ahead.

So what do I mean when I say that Schmidt doesn't "get" Twitter? I mean that he probably doesn't get the gestalt of the technology, why it is so appealing -- indeed, addictive -- to millions of people.

When you think about it, that's understandable: He is not really a Twitter-type person. He's about to be 54 years old, and looking at a technology designed for 25-year-olds. Moreover, Twitter is a tool for people in the audience, not on stage -- and as the CEO of a Fortune 500 company, Schmidt is most definitely the man on the stage. He has no time to maintain a real-time diary on his day.

But if Schmidt doesn't get Twitter in his heart, he most certainly gets it in his head. Keep in mind what Google's real business is: It sells to advertisers the information created by traffic moving through its search engine.

The more traffic, the more revenues for Google. That's why Schmidt and the two founders have consistently said throughout the years that Google's long-term goal is to be the portal through which all of the world's information passes.

Now, along comes Twitter -- it is free, carries no obvious advertising and appears both innocent and unthreatening. Even the two founders, Biz Stone and Evan Williams, profess to having little immediate interest in monetizing the company, and only reluctantly take venture capital money.

Twitter's Hidden Power

In other words, it is just like Google a decade ago. And just like Google, what it is really is very different from what it appears to be.

What Twitter appears to be is a fun little service that enables users to share with others what they are doing at any given moment. But Twitter really is an incredibly powerful tool to gather aggregate information about people's behavior and opinions in real time. In other words, Twitter has discovered and nurtured a vast new database of incredibly valuable data outside the Web and, thus, outside the reach of Google.

None of this is lost on Schmidt. And even if he personally finds Twitter a dispensable novelty, he knows that isn't the case for millions of other people. And he also knows that Twitter is creating a vast cache of valuable and useful information that is outside the reach of Google -- and that is, in many ways, more valuable than anything Google can produce with its search technology.

Most of all, for someone who obsessed for 20 years on how to defeat Microsoft … and then did so by concealing a powerful business engine behind a cute, free and very useful technology … he certainly recognizes that Twitter now is busily applying the same strategy against him.

For all of those reasons, Schmidt may have decided he wants Twitter inside the Google tent, just as he did when YouTube exploded and threatened to create another non-Google data cache. And he's certainly not alone. Over at Facebook this week, Mark Zuckerberg introduced a new Twitter-type feature on that service's home page.

We know that Facebook already tried to buy Twitter, but was rebuffed (reportedly over the price). So, Zuckerberg has apparently decided to pursue the old Microsoft bundling strategy of defeating a competitor by selling its own version as a new feature to its millions of users.

Remember, when Bill Gates tried this strategy, Microsoft was labeled as the Evil Empire and was hauled in front of the Justice Department. And Facebook already has a sullied reputation for fast and loose business practices (like the sudden change to its "terms of service" last month, which you can read about in my column here.)

Google's Future: Buying Twitter or Competing With It?

But if Facebook is taking a risk trying to move into Twitter's market, isn't Google taking an even bigger one? You bet, but that could be one of the reasons that Google had such a presence at the Democratic National Convention and has been all lovey-dovey with the Obama administration. I told you that Schmidt thinks several moves ahead, and if Google does have designs on Twitter, it certainly would help to have a pliant White House not asking too many questions.

So that brings us to (c). If Google really does want Twitter, what does it hurt to talk the company down? Ev and Biz haven't taken Schmidt's comments personally and, certainly, there is nothing in his words that would kill a deal. On the other hand, it could knock a little off the acquisition price by showing that Google isn't desperate to make a deal. And if Google has its own Twitter-killer application hiding in one of its skunk works, it can't hurt to minimize Twitter's appeal to potential users until Google is ready for its own unveiling.

If this all sounds absurdly convoluted, welcome to the world of billion-dollar, high-tech companies. And the real question is not whether Schmidt can hold contradictory thoughts in his mind -- he can -- but whether this scheme will work.

We'll know the answer very soon, I think.

This is the opinion of the columnist and in no way reflects the opinion of ABC News.

Michael S. Malone is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, The Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is the author or co-author of a dozen books, notably the best-selling "Virtual Corporation." Malone has also hosted three public television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the ABCNews.com "Silicon Insider" columnist since 2000.