The pieces are all coming together. Last week rumors abound over a Reuters research company (Anian) report that Google already invested millions of dollars in a Taiwan company to build a Linux based cell phone (dubbed “GPhone”). The story was picked up by the Wall Street Journal, the London Telegraph and worldwide blog sites claim prototypes have already been show to various carriers. All this comes on the heels of Google’s vocal input in getting the FCC to offer open access for a portion of the 700MHz wireless spectrum to be auctioned next year.
At first blush, most consumers don’t make the connection. Why a search engine company would want to get into the cell phone business? Well in my best Austin Powers voice: “It’s the ads baby!” And the ad revenue is nothing to sneeze at.
A recent newsfactor.com article quotes Frost & Sullivan numbers for the mobile advertising in the U.S. alone will generate $2.12B in revenue by 2011 compared to $301M in 2006. And that could be just the tip of the iceberg. The article goes on to state The Shoesteck Group estimates at a whopping $10B globally by 2010, while EJL Wireless Research pegs the worldwide mobile advertising market at $9.5 billion by 2011.
What? You my muse, ads on my cell phone, no way! Yes way, and here’s how. These are not necessarily ads in the traditional TV programming sense but click through ad revenue of the internet ilk. The GPhone is no ordinary phone, but follows in the convergence trend of the ground breaking smart phones including Apple’s iPhone. Like the iPhone, it delivers “mobile internet” putting the internet into the palm of your hand, anywhere, anytime—just like cell phones gave us mobile dial tone 25 years ago.
Oh, there will be traditional advertising too, an article by Pete Barlas last week reported that Google is testing different video ad formats including pre-roll and post-roll video ads that run before and after its popular YouTube spots. They are also looking at in-stream ads than run between segments of a program, much like commercial spots on TV. Google is also testing placing special display ads around videos.
But click-through is still the company’s bread and butter, and this is bound to continue with mobile web access. After all, one of the key selling points of the iPhone is that you get a fully functional web browser, with cool orientation sensing (landscape and portrait) and two-finger zoom to easily read and navigate web content.
Well, what of the entrenched “cellco’s” and how will the 800 pound web gorilla change the landscape in wireless delivery you may ask? Google could upset the apple cart here with a unique new wireless service model based on ad revenue. The company has already said it will bid on wireless spectrum and may be willing to go head-to-head long term. But for now, they need the wireless backbone to deliver content. So don’t look for dramatic change in the way phone services is offered anytime soon.
Make no mistake Google is looking to keep the engine of growth going as the company rides the next wave in digital convergence and mobile web delivery is that wave. The good news is Apple, Google and other digital based companies are finally gaining leverage over the entrenched “cellco’s” forcing movement in ways unthinkable (like open access) just a few years ago. –SS
