At the Goldman Sachs Ninth Annual Internet Conference in Las Vegas on Thursday, Nicholas Fox, director of business product management at Google, dismissed concerns about the competitive impact of Microsoft's Live Search cash-back program, which rewards Live Search users with rebates on selected purchases.

"We have no plan to pay our users to use our product," Fox stated. Google, he said, will compete through user experience and quality, rather than "paying users nickels and dimes."

Intriguingly, Fox said that Google believes strongly in cost-per-action advertising, which Google has been testing among a limited group of advertisers for more than a year. Cost-per-action advertising -- Live Search cash-back is a variant of this model -- involves a fee for a specific online action, like buying a product, rather than a fee for a click on an ad. "The results have been extremely encouraging," he said. "It's been part of our vision for a while and we're actually starting to see some really strong results."

Fox brushed aside worries about the impact of departing talent on Google. "The level of churn is actually very, very, very low and easily outweighed by the high-profile additions we bring on board," he said. "It's not something we're particularly concerned about internally. ... Honestly, I think it gets overblown in the press."

Fox's message to investors was that revenue opportunities for Google abound, particularly through refinements in search relevance, user experience, and ad quality.

The percentage of queries for which Google actually serves ads remains fairly small, said Fox. "A large portion of those queries really should have ads," he said.

The challenge for Google is developing systems to help advertisers place ads automatically for relevant queries that they haven't planned to bid on. "We need to surface these opportunities to advertisers so they know what they should be targeting," he said.

Fox explained that Google continues to improve ad quality, which means serving ads to those most likely to respond to them. He offered the example of bidding on the search keywords "Harry Potter," which would result in a low click-through rate because so many people with different goals search using those words. What Google hopes to do is give advertisers more insight into the intentions and desires of its users. Thus, those seeking to buy a Harry Potter book, as opposed to, say, those seeking information about Harry Potter films, could be presented with the opportunity to buy the relevant book via an ad.

That sort of targeting remains Google's goal in the context of social networks, which haven't proven to be very effective places to advertise. "The whole industry has probably been surprised in the difficulty in monetizing social networks," said Fox.