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The search giant bought the ubiquitous video site for $1.65 billion in 2006, but has yet to discover of way of turning its huge popularity into hard profit. Indeed, despite the fact the site accounts for 10% of all internet traffic, the company failed to even mention YouTube in the lenghty summary of its Q1 earnings this year.

The Google boss says its imperative his company finds a way to turn the site - which has a 78% share of the video market according to Hitwise - into a money-spinner.

"We're working but have not yet, in my view, gotten a breakthrough around monetisation," Schmidt admits in an interview with CNBC. "So while we have lots and lots of traffic and we have lots and lots of interesting and creative people and all sorts of controversies - we're blocked in countries, so on and so on - I don't think we've quite figured out the perfect solution of how to make money, and we're working on that. That's our highest priority this year."

Schmidt says the company will soon unveil a series of products on YouTube that could help it reach its goals. "We believe the best products are coming out this year. And they're new products. They're not announced.

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They're not just putting in-line ads in the things that people are trying. But we have a number - and,
of course, Google is an innovative place."

The Google CEO also admits the company is struggling to earn revenue from its advertising deal with MySpace. "We have pointed out, and I'll repeat again, that the whole social networking space has been harder for us to
monetise - that is, develop advertising businesses again - than some of the other spaces that we're in," he admits.

"When you think about it, you're in a social network, you're looking at people's photos, you're figuring out where your friends are. You're not as likely to be purchasing a new car at the same time or purchasing clothes or purchasing a book."

Talking a new language

Looking beyond its existing business, Schmidt says "the next big thing" for Google could be online translation services. "I've always thought that the scariest piece of innovation is knowledge understanding and language translation," he says.

"I don't understand how it works, but to watch a computer - literally watch it - read something in English, dissect what it's about, translate it into a language that I don't speak and having that other person say, 'Wow, that's incredible,' to me, that's magic.

"And it isn't magic, it's just very good computer science, very good artificial intelligence, very good physics. And that's where we are. So the things that are most impressive to me are the things where the computer does something that nobody could do, literally translate things 100 language in parallel, summarise something for me, take me to something which I didn't know I was interested in but knows that I cared about it. And we're right on the cusp of that."