With 'phone' project, Google has mobile ad dollars in its sights
SAN FRANCISCO: For more than two years, a large group of engineers at Google has been working in secret on a mobile phone project. As leaks about their efforts have trickled out, expectations in the technology world …
Context & Ripple Effects
Google has kept a large engineering team working on a mobile phone project under wraps for more than two years, but leaks have been trickling out for weeks — Forbes reported on the effort at the start of October — and expectations across the technology world are building ahead of any official announcement.
The strategic logic is already public: as the New York Times laid out the same day, for Google, advertising and phones go together. The project is aimed squarely at capturing mobile ad revenue, extending the search-advertising model that funds Google's desktop business onto the handset.
First-order effects
- Carriers and handset makers now face the prospect of a Google-branded or Google-powered phone entering their market, with an entrant whose business model is advertising rather than device margins or subscription revenue.
- Google converts two years of secret development into a public positioning battle, forcing rivals to state their own mobile strategies before it has even announced a product.
Second-order effects
- Carrier-controlled 'walled garden' portals — the current gatekeepers of on-deck content and mobile ad inventory — come under pressure if Google routes users to the open web, where its search and ads capture the value instead.
- Handset makers and mobile operators must decide whether to partner with Google's platform or compete against it, reshaping alliance patterns across the wireless supply chain.
Third-order effects
- If the pattern holds, mobile economics shift from carrier billing and device sales toward ad-funded services, making whoever controls mobile search and distribution the toll-taker of the phone internet.
- A credible open challenger to carrier-centric phone design would push the industry toward the platform-and-software model that has governed the PC business, with regulation of wireless openness likely to follow the commercial fight.
The trend: Advertising money is migrating from the PC to the phone, and Google's secret handset project is its bid to make mobile search the next core of its ad business.