Google Inc. faces mounting competition in the Internet search advertising market, but expects such battles to drive up prices and increase revenues across the entire industry, Chief Executive Eric Schmidt said on Wednesday.

"There is a surprising, if not bizarre (fact that) more competition in auction can actually produce more revenue, rather than less," Schmidt said in introductory comments at the company's annual press day at its Mountain View, Calif. headquarters.

Schmidt singled out Microsoft Corp. (MSFT.O) and Yahoo Inc.(YHOO.O), which are introducing major upgrades to their search technology.

Google is the leader in Web searches, with 60 percent of the global market. It derives virtually all of its revenue from selling ad results it delivers to Google users.

More competition "can in fact cause prices to rise," Schmidt said, adding that this phenomenon is likely to benefit not just Google but other players in the market as well.

"There is room for (Microsoft and Yahoo) and more to succeed," he said.

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