Google expects to launch new products for its YouTube web video service in the next few months and sees reason for closer cooperation with Yahoo, Google chief executive Eric Schmidt said on Thursday.

Schmidt has said getting the video sharing site to make money is the web search company’s top priority for the year. He did not give details of the products, however, and they are not even in initial, or beta, testing.

At the company’s annual shareholder meeting, Google co- founder Sergey Brin said YouTube and DoubleClick, an online advertising company bought by Google earlier this year for $3.1bn (?1.55bn), are still small businesses compared with its core search and advertising business.

"They both have potential, but for it to be a sizable part of our revenue, you’re going to have to wait at least a couple of years," said Brin in response to a question about when those acquisitions would make a significant contribution to the company’s bottom line.

Google bought YouTube for $1.6bn in 2006.

The web search leader played a large role in the takeover battle between Microsoft and Yahoo. During a two-week test, it sold search advertisements on rival Yahoo last month as part of Yahoo’s attempt to find an alternative option to Microsoft’s offer.

Schmidt said the trial run provided good reason for the companies to discuss cooperation, but there was no deal yet.

"We view the test as successful," he told reporters before the web company’s annual meeting. "That’s a good basis to talk to Yahoo some more."

The Google CEO, speaking later at the shareholder meeting, said the company will continue to growth faster outside of its home market. Google generated 51% of its revenue outside the United States in the March quarter, but Schmidt said he expects that figure to grow over time.

Without giving a specific time frame, Schmidt said he expects 65% of Google’s revenue to come from abroad. Eventually, non-US revenue could be even higher.

Google co-founders Brin and Larry Page also fielded a request from one shareholder who asked the pair not to split the company’s stock, which closed at $583 on the Nasdaq.

"I think that’s the first time we’ve had that request," Page said with a chuckle.

Brin played the straight man: "We have had no problem honoring that thus far and I don’t expect that anything will change in that respect."

Will Google and Yahoo come together on a search advertising partnership? The two companies have been discussing an agreementunder which Google would deliver some ads alongside Yahoo’s search results. Since Google on average earns much more than Yahoo for every search, the deal, at least in theory, would boost Yahoo’s revenue. The two companies conducted a two-week experiment to make sure that was indeed true and both companies have called the test a success.

No deal has been announced yet, and the reasons the companies have not come to terms are unknown. But a person with knowledge of the discussions said Google has been thinking about a conundrum: deal or no deal, the company could end up with something of public relations black eye.

If the companies reach a deal, Google is certain to face antitrust scrutiny. Eric Schmidt, Google’s chief executive, said Thursday that he was confident that the companies could structure an agreement in a way to avoid it being blocked by regulators. That may be true. But it doesn’t take a public relations expert to realize that coming under scrutiny as a powerful monopoly, whether or not it ultimately leads to a deal being blocked, is not good for a company’s image.

If Google, on the other hand, pulls away from the deal, it could face some criticism too. Google’s co-founder Sergey Brin said Thursday that Google’s offer of a search ad deal to Yahoo was not an effort to scuttle Microsoft’s takeover attempt, but rather rather an attempt to give Yahoo options in the face of a hostile takeover attempt. The possibility of a search deal emboldened Yahoo’s board to hold out for a higher price. Rather than fight, Microsoft decided to walk away.

if Google walks away, essentially cutting off the lifeline it had offered Yahoo, it won’t be seen as playing nice.

Spokespeople for Google and Yahoo declined to comment. Source: N.Y. Times