If the Web has a single point of failure, you’d think it was Google, given the outcry over the the outages suffered by some of the company’s services Thursday. Something went wrong this morning and whatever it was had widespread effects on a broad spectrum of Google services–Google Search, Gmail, YouTube, Google News, Blogger, Google Analytics, Google Docs. It outraged Twitter users and provided Microsoft’s (MSFT) Live Search team with no end of amusement. “Sympathies to the Google servers. Happens to everyone. But this is why the world needs more than one search engine,” it quipped in a tweet.

The source of the disruption? A system error that sent a bunch of Google (GOOG) Web traffic to Asia and waylaid about 14 percent of it, apparently.

This just in from the Google Blog:

“Imagine if you were trying to fly from New York to San Francisco, but your plane was routed through an airport in Asia. And a bunch of other planes were sent that way too, so your flight was backed up and your journey took much longer than expected. That’s basically what happened to some of our users today for about an hour, starting at 7:48 am Pacific time.

An error in one of our systems caused us to direct some of our web traffic through Asia, which created a traffic jam. As a result, about 14% of our users experienced slow services or even interruptions. We’ve been working hard to make our services ultrafast and ‘always on,’ so it’s especially embarrassing when a glitch like this one happens. We’re very sorry that it happened, and you can be sure that we’ll be working even harder to make sure that a similar problem won’t happen again. All planes are back on schedule now.”

In advance of its shareholder meeting today, Google is holding a press event at its Mountain View, Calif., campus with CEO Eric Schmidt presiding. Also on hand: Dave Drummond, senior vice president of corporate development; Susan Wojcicki, vice president for product management, Kent Walker, general counsel, and Marissa Mayer, vice president, search products and user experience.

Hot topics of the day: Google’s and Apple’s interlocking boards, YouTube and the company’s thoughts on the econalypse, AOL and netbooks.

This liveblog paraphrases most questions and answers. It is not, in other words, a verbatim transcript of the event.

A theme of the meeting is the just-opened inquiry by the Federal Trade Commission into Apple’s and Google’s interlocking boards. Schmidt gets right into the topic with a joke: Looks like we’re at a legal deposition. He adds that he doesn’t believe Google (GOOG) views Apple (AAPL) as a primary competitor. If there are issues that are competitive during a board meeting, he will recuse himself, he says, just as he has regarding the iPhone.

Would Schmidt consider resigning from the Apple board?

Schmidt: “Hasn’t crossed my mind.” Ken Walker adds: “The law is clear that there is safe harbor for companies that don’t have overlapping revenues, and we’re comfortable with that position.”

Regarding the recession, are there any signs that we’re at the bottom?

Schmidt: “We don’t yet see a change.”

As Google gets bigger and faces more antitrust scrutiny, does this change how the company approaches partnerships?

Schmidt: Information is incredibly important, and we should expect governments around the world to pay attention to what we do and hold us to the principles we’ve articulated. Internally we tell our employees to pay attention, there are consequences to mistakes they make.

In the last few years, we’ve worked harder to anticipate the concerns of people affected by the power of the Internet. In my biased judgment, we’re getting better at anticipating those concerns.

We are more careful about when and how we do things that are raising the concerns of any party, but that care doesn’t stop us from doing those things.

Is there anything you haven’t done because of that?

Schmidt: I can’t think of a specific.

What do you think of the long-time monetization potential of social networks?

Susan Wojcicki: “We’ve been learning a lot about monetizing social inventory. And we believe there are ways to monetizie it over time, but those ways are different from search.”

Why did Google decide to sell its stake in AOL?

Schmidt: “We love AOL….We also like money… and look, we sent our best guy over there to run it,” he says referring to Tim Armstrong who recently left Google for AOL.

When will YouTube be profitable?

Schmidt: YouTube will eventually be a successful product and business. We don’t know how long that will take. But YouTube is a huge traffic phenomenon. (Wojicki jumps in to note that that traffic is attracting a lot of advertiser interest, so there is monetization going on. She adds that Google is adding new ad formats to the site, prerolls and click-to-buy ads on music videos.)

How does Google continue innovating given the cost-cutting measures it recently implemented?

Schmidt Innovation is a cultural value at Google, so this hasn’t really been an issue. Cutbacks were more efficiency-related, a move to stay lean but nimble in the midst of a recession.

What’s your take on the balance between Android being an open platform and the trade-offs the company needs to make with handset makers?

Schmidt: “On the one hand, you benefit by having free access; on the other hand there is some sacrifice of stability. We are doing our best to achieve stability without exercising too much control.”

What about China?

Dave Drummond: It’s an “ongoing challenge” to operate there. YouTube is blocked. There is a government preference for local business that makes things very difficult. That said, “we think we’re doing well there.”

Schmidt: “We will continue to do business in China….We would like YouTube unblocked.”

How do you respond to critics who argue that Google is the new Microsoft (MSFT)?

Schmidt: “They obviously don’t remember the old Microsoft.”

In recent public forums you’ve been asked about acquisitions and you’ve said the price isn’t right right now. Has there been any change in that opinion?

Schmidt: No change. There’s simply just not a lot of activity out there now.

What are your thoughts on netbooks?

Schmidt: “The netbook phenomenon looks very real. It looks like it will be a significant element of growth in the PC industry over the next few years.” Schmidt further notes that Google is obviously interested in the market given its business. “Watch the space,” he concludes.

When [Google CEO] Eric Schmidt says he worries about the newspaper industry, it’s crocodile tears.

– Brian Tierney, chief executive of Philadelphia Media Holdings, which own The Philadelphia Inquirer and The Philadelphia Daily News

Leave it to Google to find a bit of meat on the revenue-starved bones of the newspaper industry. On Wednesday, the company extended its AdWords program to Google News, serving up text ads alongside news searches in much the same way it does regular Google searches. Search for news about, say, mesothelioma, and you’ll be shown the broad spectrum of ads touting mesothelioma legal services (click on image below).

Google (GOOG) announced the move in a post to its official blog:

In recent months we’ve been experimenting with a variety of different formats, like overlay ads on embedded videos from partners like the AP. We’ve always said that we’d unveil these changes when we could offer a good experience for our users, publishers and advertisers alike, and we’ll continue to look at ways to deliver ads that are relevant for users and good for publishers, too.”

The addition of AdWords to Google News was inevitable as the economy continues to weaken and Google looks to expand its revenue streams. But so too may be the outcry over the move. In 2006, the World Association of Newspapers demanded that Google News stop indexing its member sites on the grounds that Google was profiting from the use of their copyright material. Agence France-Presse sued Google for the same thing in 2005. At the time, Google News carried no advertisements and hence, no obvious revenue stream. What will they, and other members of the fast-deteriorating newspaper industry say now that it does? As Searchblog’s John Battelle quips, “This one will kick up some dust.”

The World Association of Newspapers said Monday that it opposes the deal, adding its name to a growing list of critics that now includes not just Microsoft, but the Association of National Advertisers and European Union as well. Late Monday, WAN, which represents 76 national newspaper associations and more than 18,000 publications on five continents, issued a statement condemning the Google-Yahoo deal as disastrous for the newspaper industry. Surprisingly hostile in tone, it argues that the proposed advertising alliance between Google (GOOG) and Yahoo (YHOO) will weaken competition in the online advertising space and solidify Google’s dominance in search at a time when the company is expanding its own content businesses:

The upshot is that the deal will force newspapers to become even more dependent on Google than they are today. By handing Google control of up to 90 percent of paid search and content advertising, Google will exert tremendous power over both newspapers’ ability to reach readers and their ability to generate online advertising revenue. Perhaps never in the history of newspaper publishing has a single, commercial entity threatened to exert this much control over the destiny of the press.

It is particularly worrisome that this consolidation of power is occurring at the same time that Google increasingly takes positions that are adverse to newspapers and other content creators. Google already owns several content sites that directly compete with content developed by newspapers and other creators–often by simply copying others’ content without authorization. Usually, Google alone profits from this misappropriation. Take, for example, the case of Google News, which a Google senior executive recently admitted drives $100 million in advertising revenue to Google itself yet provides nothing–not a penny–to the newspaper companies whose works appear on those pages.

Clearly, newspapers have quite a few axes to grind with Google, and WAN appears intent on grinding them all at once. That said, Google’s partnership with Yahoo would be limited to the United States and Canada, so the protestations of a group of international newspapers may not carry as much weight with the regulators reviewing the deal as WAN would like. Especially after the U.S.-based Newspaper Association of America so quickly distanced itself from them. Said NAA CEO John F. Sturm, “While NAA is a member of the World Association of Newspapers, I would like to clarify that the NAA Board of Directors has taken no position on the proposed advertising partnership between Google and Yahoo.”

“Today we’re releasing a new feature to find your local news by simply typing in a city name or zip code,” Google software engineers Andre Rohe and Rohit Ananthakrishna wrote in a post to the official company blog. “While we’re not the first news site to aggregate local news, we’re doing it a bit differently–we’re able to create a local section for any city, state or country in the world and include thousands of sources. We’re not simply looking at the byline or the source, but instead we analyze every word in every story to understand what location the news is about and where the source is located.”

Location-based news targeting. Pretty slick. Or it will be, once they get the 90210 bug worked out. Still, as Topix co-founder Rich Skrenta notes, Google’s a little late to this particular game. “This was pretty neat stuff when Topix launched in January 2004,” Skrenta quips. “Now if Google just added 50,000 vetted local blogs to the mix, and a community with 100K posts/day, they’ll have something.”

“We’ll be trying out a mechanism for publishing comments from a special subset of readers: those people or organizations who were actual participants in the story in question,” Google software engineers Dan Meredith and Andy Golding explained in a blog post. “Our long-term vision is that any participant will be able to send in their comments, and we’ll show them next to the articles about the story. Comments will be published in full, without any edits, but marked as ‘comments’ so readers know it’s the individual’s perspective, rather than part of a journalist’s report.” You know, just like Topix. Passive news, active dialogue.

Google says it will vet comments by confirming the identity of their authors–which it must, if it’s truly serious about this initiative. But is that even possible? Comments@google.com is certain to become the Augean stable of email accounts in short order. Who’s going to manage it? And what of legal liabilities? And unintended consequences?

Of course, if Google does pull this off it may well upend traditional news as we know it. “The fact that Google is trying this is, in one sense, testament to an abject failure on the part of traditional news operations,” says Dan Gillmor, director of the Center for Citizen Media. “With the Net, they could have given people the chance to comment in this way–above and beyond the standard comment published as part of a story or a letter to the editor. They didn’t, and left this opening. If Google pulls this off, it will be a huge boost for one company–Google–because people looking for responses to news articles will head to the search site, not just to the site of the original story.”

Observers have pointed out the irony of the situation, because Google’s terms of service prohibit other sites from reproducing or creating derivative works from Google News, so it will be the only place they can get it. Yet Google News wouldn’t even exist if news providers were to demand it abide by similar terms.

Apparently not. “If all of the newspapers in America did not allow Google to steal their content, how profitable would Google be?” Sam Zell, the new owner of the Tribune Co., asked reporters during a speech at Stanford University last month. “Not very.”

Here’s a question for Zell: If Google were to suddenly stop indexing Tribune publications, how happy would Tribune’s advertisers be? Another question: If Tribune is truly burdened by referrals from Google News, then why hasn’t it opted out of the service? Could the answer be that, like most other newspapers, its publications get about 25% of their traffic from search engines?

“The newspaper of the future needs to fight for audience–fight for its life, before someone comes and takes it from them,” Topix.net’s Chris Tolles once wrote. “Similar to the strategy of the American auto industry to rely on its capacity and sell Americans the cars they build, when smaller and more nimble rivals are instead building the cars that Americans want, newspapers need to build the products their audiences and advertisers want, rather than basing their strategy on a capacity for great journalism and printing pages of classifieds. The successful newspaper business of 2010 might look a lot like the successful newspaper business of 1910–and the connection to Pulitzer won’t be his prize, but rather his business methods.”

“The change means that the Belgian papers will now again begin receiving traffic from Google, something which they lost after suing to get out of Google News,” Sullivan said. That lawsuit resulted in them being taken not just out of Google News but Google entirely. The traffic drop had to have been painful. A new report from Hitwise shows that, at least for the U.S., newspapers get 25% of their traffic from search engines.”

If the metrics for European newspapers are even remotely similar, Copiepresse really shot itself in the foot by trying to strong-arm Google.