Speaking on CNBC in the US, Schmidt said: "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."
He added that YouTube planned to introduce several products aimed at generating advertising revenue.
"We believe the best products are coming out this year. And they're new products," he said. "They're not announced. They're not just putting in-line ads in the things that people are trying."
Schmidt also revealed that Google remains open to a long-term deal with Yahoo, under which the latter company would replace some of its ads that run alongside its search results, with Google-delivered ads.
He added: "The Yahoo team is trying various new forms of advertising, ones which are much more participative, much more creative and much more interesting in, and of, themselves."