Google's Mobile Phone Challenges Wireless Carriers
- by Mark Walsh @markfwal, November 9, 2007
But they agreed that Google's new open mobile platform will help accelerate expansion of the mobile Internet and pose a serious challenge to carriers' "walled garden" strategy of tightly controlling content on their phone menus.
While the full implications of the deal aren't yet clear, it will make Google a powerful player in the mobile realm as well as in the PC-based Internet world, they say. "This opens the door for Google to be the network for the operating system the way Microsoft adCenter powers MSN," says Jeff Janer, former CMO of mobile ad platform Third Screen Media. "So I think the impact will be major."
Others speculated that the move could have as dramatic an effect as the launch of Apple's iPhone earlier this year, by making mobile Web browsing a user-friendly experience. And as an operating system built on open standards, Google's Android platform could unleash a wave of new mobile applications and commerce.
"This could be the development platform of the future," says Greg Sterling, founding principal at Sterling Market Intelligence and a senior analyst at Opus Research, a mobile market research firm. In addition to Google's own heft, he notes that the alliance of heavyweight industry players including T-Mobile and Motorola lends the effort increased credibility.
While its partners stand to benefit from joining with Google, wireless companies need to come up with new business models to ensure their relevance. "The carriers need to start thinking of how they should play in the value chain so that they don't get marginalized like the Internet service providers," says John Styers, president of mobile consultancy Mobilico and a former Sprint executive.
Wireless operators have long feared that by giving up too much control over their mobile decks they could become "dumb pipes," like the Internet providers that get revenue only from subscriber fees but don't get a piece of content provider's ad revenues. Such concerns have led carriers such as Verizon Wireless and AT&T not to embrace Google applications, and likely played a role in their absence from the Google-led Open Handset Alliance.
During the conference call announcing its mobile platform on Monday, Google Chairman and CEO Eric Schmidt said he envisioned developing ad-sharing arrangements with alliance partners, although he didn't offer further details.
Opus recently released data forecasting that North American and European mobile ad revenue will surpass $5 billion in 2012--up from an estimated $106.8 million at the end of 2007, according to a new study. The North American market, primarily the United States, would account for $2.3 billion of the total.
Analysts say that Google could benefit in particular from increased local mobile search. "Google can't grow fast enough off the back of the PC-based Internet," says John Gauntt, senior wireless analyst at eMarketer. "It must extend search to new interactive platforms...and new advertisers who aren't currently online."
If Google and its mobile alliance partners are viewed as the big winners, companies that create proprietary applications for the carriers' mobile portals or handsets are viewed as among the biggest losers from the deal. These include companies such as JumpTap, Abaxia, Sky Mobile Media and Sasken. "Android increases uncertainty for these participants," wrote John Jackson, vice president of Yankee Group's Enabling Technologies group, in a research note on the Google mobile announcement.
Even so, analysts and others say Google's ambitious new mobile strategy isn't assured of success. Many questions remain about whether developers will flock to the Android platform, how consumers will respond and what types of business models will emerge. "Those of us in the business tend to forget that 85% of the population still thinks of a mobile phone as a communication device and a fashion accessory," says Styers.
