Google CEO: Android update "could replace credit cards"

SAN FRANCISCO (CNNMoney.com) -- The next generation of Android is coming in a few weeks, and that update to the mobile operating system "could replace credit cards," according to Google chief executive Eric Schmidt.

At the Web 2.0 Summit in San Francisco, Schmidt said Android 2.3 (code-named Gingerbread) will combine location services with "tap-and-pay" functionality.

"Imagine that instead of typing my search, my phone is sending me information all the time," Schmidt said. "Maybe I tell [my phone] I need a pair of pants, and I get relevant information as I walk down the street."

Android, an open-source operating system widely used in smartphones, will soon use so-called "near-field communications" sensors to read RFID tags and link up with other phones and payment systems. That move will put Google squarely in the center of the growing field of developers working on mobile payments.

Schmidt showed off an "unannounced device" running on Android. The phone, which was black with rounded edges, looked like the rumored Nexus S.

Schmidt also unleashed a new statistic: a whopping 35 hours of video are uploaded to Google's YouTube every minute.

The rest of Schmidt's talk was a grab bag, with the CEO commenting on recent controversies around Google data's, its competition with Facebook, and Google TV.

Addressing "creepy comments": Schmidt laughed off questions about recent comments he made about Google "knowing where you live and what you do." His take: "In the new world, you have to label jokes."

But conference moderator John Battelle pushed Schmidt on Google's in-hot-water status over data breaches. Last week, the Federal Communications Commission said it is investigating whether Google broke the law by inadvertently collecting personal information from Internet users while gathering data for its Street View mapping technology. The Federal Trade Commission opened its own inquiry, but ended it without any action three weeks ago.

"There's a creepy line we don't want to cross," Schmidt said. "For example, we could track people in real time, or use face recognition -- but we won't."

Is Google making a "Facebook Killer"? Rumors have swirled this year about "Google Me," a social network Google is reportedly working on to help it compete with Facebook.

Schmidt didn't directly answer a question from Battelle about whether Google (GOOG, Fortune 500) is "developing a suite of products around social" that could compete with Facebook in the coming months or years.

"Because of this [atmosphere of] crazy competition, everything we do is seen as competitive," Schmidt said.

Google agrees social information is powerful, he said, citing search as a classic example -- a user can get better search results if they can build on their friends' searches.

Google TV: Schmidt acknowledged issues with finding content for Google TV, a just-launched Internet television platform that brings Web search and other online capabilities to televisions. Major content providers including Fox have refused to allow their shows on the platform.

"No one has fundamentally unified Internet television," Schmidt said. "We understand the industry concern, but at some point ... well, one executive said to me, 'Do you realize you're taking a dumb television and making it smart?"

In his classic deadpan, Schmidt intoned his response: "We said: Well ... yes."