"Wouldn't it be nice if Google understood the meaning of your phrase, rather than just the words that are in the phrase? We have [done] a lot of discoveries in that area that are going to roll out [soon]," Schmidt said.
It also keeps fine-tuning its ad-serving technology to improve the relevance of the ads that it matches to queries and to external partner Web pages, he said. Google wants to apply the successes it has had with search PPC text ads to display ads, where it has been a nonplayer historically but where it plans to make a splash thanks to its DoubleClick acquisition.
Google also sees big opportunities in mobile ads and search with its Android platform, and remains committed to its Enterprise unit, which markets enterprise search appliances and hosted business software to organizations of all sizes.
Jonathan Rosenberg, senior vice president of product management, said Google continues to expand its universal search project, in which it increasingly mixes more search result types, such as news, videos, books and images, into its general Web search engine, instead of just providing regular Web page links.
For the full year 2008, Google had revenue of $21.8 billion, up from $16.6 billion in 2007. Net income rose to $4.23 billion, or $13.31 earnings per share, from $4.20 billion, or $13.29 earnings per share, in 2007.
"We had a strong quarter and what turned out to be a strong year, and business is quite healthy, especially given the tough economic climate," Schmidt said.
Google-owned sites generated 67 percent of the fourth-quarter revenue, while 30 percent came from ad network partners. Although Google didn't say, the remaining 3 percent probably came from smaller sources, such as the Enterprise business. By geography, half of the quarter's revenue came from the U.S. and half from abroad.
Google also announced Thursday it plans to offer employees a voluntary, one-for-one stock option exchange intended to create more incentives for employees to remain at Google.
Employees will get the chance to exchange all or part of their stock options for the same number of new options between Jan. 29 and March 3.
Google expects that new options will have an exercise price equal to the closing price per share of its common stock on March 2 of this year.
In the past two quarters, about 85 percent of Google employees have had at least some of their stock options fall "under water," meaning the exercise price is significantly higher than the current market price of the common stock, Schmidt said.
Paid clicks on Google sites and partner sites increased approximately 18 percent compared with 2007's fourth quarter.
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