Google goes mobile with Android
Ring. Ring. Hello, who is calling? Google. Can I call you back? No, I don’t have a phone yet.
Following months of speculation, Google formally announced it is entering the mobile phone market. While the announcement did not introduce a working operating system or phone, Google’s statement it would start shipping its mobile devices by the end of 2008, set the industry in motion. Google’s much anticipated entrance into the mobile sector is based on four foundations:
Google’s mobile operating system known as Android (name taken from its acquisition of Android Inc. back in August 2005), will be a Linux-based open source platform, aimed at creating a flexible platform for developing applications, software and content. Google’s Android will compete directly with the leading mobile-phone operating systems: Symbian, partly owned by Nokia; Microsoft’s Windows Mobile; and Research In Motion’s BlackBerry. Google’s Android has an uphill battle against leading mobile operating system Symbian, which has roughly 70 percent of the market.
The reality is that fragmentation has always been the biggest barrier to the growth of mobile applications (especially in the enterprise sector); Google’s Linux based OS could drive consolidation into a common mobile platform. However, Google will have to enforce some rules, such as requiring developers to use the same type of Linux software, in order to avoid a fragmented platform. Furthermore, the freedom of the open-source license, which gives developers, handset makers and carriers a lot of freedom to add proprietary extensions and modifications, could increase technical fragmentation without established rules.
Google collaboration strategy was further supported by the formation of the Open Handset Alliance, comprised of more than 30 technology and mobile industry companies including Motorola, Qualcomm and T-Mobile. However major smartphone vendors and carriers are missing, including: Microsoft, Vodaphone, Nokia, Palm, Verizon and Symbian. Their absence not only underscores the fact Google will have to contend with large industry gatekeepers but cements the notion that phone carriers avoid such groups because they would rather keep their networks and the devices that run on them close to their pockets.
Unlike Microsoft, Google won’t make its money from licensing (industry analysts estimate Microsoft generates license revenue of $8 to $15 per handset, depending on configuration). It will make money from the advertising that’s heading mobile. According to Opus Research, mobile advertising spending in North America and Western Europe will reach a combined US$5.08 billion by 2012, up from an estimated $106.8 million at the end of this year. This represents a compound annual growth rate of 116 percent. While these projections are tremendously optimistic they serve Google’s business plan well.
Google’s advertising funded mobile model would allow is to share revenue with mobile phone operators, allowing it to offer consumers and enterprises services for free or at a minimal cost. Three words describe Google’s advertising model for mobile. Localization. Localization. Localization. Google’s recent launch of AdSense for Mobile, a contextually targeted ad platform for mobile website content is not the answer. The answer is in opt-in personalized local services, applications and content that pulls relevant advertising offers.
Unlike phone manufacturers or Apple, Google will aim to gain market share for its mobile services with software rather than hardware. The focus on services and applications combined with a Linux platform could propel Google in the lucrative mobile enterprise sector providing the company with some time to tackle the consumer market in which sleek hardware, design and usability are paramount.
For months Google has been lobbying to enter the auction for the 700MHz spectrum in the United States, which is regarded as the last piece of real-estate left among wireless airways; extending the delivery of mobile broadband services. A review of Google’s “strategic goals”, “What is going to make the Internet most available to the broadest number of people at the lowest price possible?” makes a bid very possible and significant. Drew Clarke at GigaOM.com has an informative piece on the 700MHz spectrum.
One thing is clear from Google’s announcement. There is no gPhone, and likely won’t be a gPhone. An exclusive device branded by Google for it does not follow the company’s stated goal of getting its search, applications and software in front of as many people as possible.
While Google might have the engineering and business resources to succeed in the mobile sector, mobile phone subscribers will ultimately decide the future of Google’s mobile offering.
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