As far as those hoping to “do no evil” in Mountain View are concerned, mobile differs from desktop in one key respect.
Forget about screen size, disregard download speeds and ignore the dramatic differences in levels of advertising expenditure.
Because, to anybody wanting to make money out of mobile internet, there is one fundamental inescapable reality.
Between them, the network operators and handset manufacturers dictate who can win and, more importantly, who will lose. Offend or threaten them, and they can deny users access to your application, innovation or service.
The mobile platform is anything but open.
Compare that to your computer. No retailer, manufacturer or ISP now even attempts to tell you what applications you can install or websites you can access.
For example, try using Skype on any mobile phone network in the UK apart from 3. It ranges from the downright impossible to, should you be a Vodafone customer, the financially punitive.
Yet the evidence suggests that over a 24 hour period Skype consumes no more than 0.8MB on standby, and devours about 1MB of data for every minute of voice conversation.
Even with what Vodafone jokingly call their “unlimited” data plan, in reality capping data usage at a mere 500MB per month, you could still use Skype to converse daily over the internet for more than 15 minutes without breaching your allowance.
Were you to do so, you could talk to other Skype users anywhere in the world on your mobile for less than 5p per minute.
However Vodafone, who can charge subscribers an additional £5 per month to enable international calling and then as much as 30p per minute to actually phone overseas, has a business to protect.
To be fair, following much customer disquiet and considerable prevarication, Vodafone recently did decide to allow Skype usage, but only to those signing up to a “Via the phone” option costing an additional £25 every month on top of their existing price plan.
We can safely say, for obvious reasons, that no mobile operator is going to voluntarily sacrifice control unless sufficiently compensated.
Google CEO Eric Schmidt admitted as much when discussing mobile strategy with the Frankfurter Allgemeine back in May 2008.
“We are concerned,” he warned, “that the carriers in the United States might close off the network.”
For Google, any such exclusion could be fatal. Schmidt explained his reasoning to an audience of political and economic leaders at Davos in January 2008.
“The arrival of a truly mobile Web, offering a new generation of location-based advertising, is set to unleash a ‘huge revolution’,” he enthused. “It's the recreation of the Internet, it's the recreation of the PC story, and it is before us.”
Prior to that, in May 2007, Schmidt had informed Walt Mossberg: “There are more cameras in phones than standalone digital cameras; there's GPS in phones. That makes for a very interesting platform.
“We've been internally saying mobile, mobile, mobile," he added. “That's because everybody in the world takes their phone everywhere.”
As a result, he explained to the Frankfurter Allgemeine: “the advertising gets more targeted because phones are personal. So targeted ads are possible. And that means the value of the ads will grow. The next big wave in advertising is the mobile internet.”
Google intends to profit from this wave. To do so they need access to the network. And that, Schmidt understood at least four or more years ago, would make Google beholden to the handset manufacturers and operators.
As AdMob founder and CEO Omar Hamoui recently wrote on his blog, having just sold his business to Google: “I’ve been working in mobile for over 7 years now. Before AdMob, I founded two separate mobile startups that never got significant traction.
“It was so frustrating to build what I knew was an incredible service only to find myself unable to distribute or monetize the product without a carrier or handset deal.
“Turns out, I wasn’t the only one. Talk to any veteran in mobile and they will tell you just how hard it was to get things done only a few years ago.
“Then came the iPhone. Suddenly, Apple solved so many problems that had plagued mobile for so long.”
Yet, from Google’s perspective, the iPhone fundamentally changed nothing. Apple might permit and profit from third party apps, but Cupertino still rigidly controlled the iPhone ecosystem.
Google has always known this. To begin with the Google CEO was a non-executive director of Apple for many years. More recently Apple refused to allow the Google Voice app to be made available on the iPhone.
Consequently, from the moment Google decided to go mobile, Schmidt and his colleagues realised they had to not only work with both network operators and handset manufacturers, but ultimately to find a way to work without them.
Every mobile acquisition and related strategic investment the company has made since, and there are several, has helped to further that objective.
From the beginning Google realised so great were the stakes and so large the potential advertising prize, no third party could be permitted to dictate the Mountain View monolith’s destiny.
The solution, Google concluded, was threefold, and it did not include manufacturing handsets.
Instead, as Business Week reported in July 2005: “in what could be a key move in its nascent wireless strategy, Google has quietly acquired startup Android Inc.
“The 22-month-old startup,” wrote Business Week, “brings to Google a wealth of talent, including co-founder Andy Rubin, who previously started mobile-device maker Danger Inc.
“Android,” Business Week went on, “has operated under a cloak of secrecy, so little is known about its work. Rubin & Co. have sparingly described the outfit as making software for mobile phones, providing little more detail than that. One source familiar with the company says Android had at one point been working on a software operating system for cell phones.”
Perspicaciously Business Week then recalled that in a 2003 interview, just two months before first incorporating Android, Rubin mentioned there was a tremendous potential in developing smarter mobile devices more aware of their owners’ locations and preferences.
"If people are smart, that information starts getting aggregated into consumer products," Rubin was quoted as saying.
From that day, this insight has been pivotal to Google’s plans to profit from mobile.
And Andy Rubin now rejoices in the role of Vice President, Engineering at Google, with responsibility for the overall product strategy and development of the Android platform.
In his May 2008 interview with the Frankfurter Allgemeine, shortly before its launch, Schmidt described Android as a development platform for java-based applications for mobile phones.
“It has nothing to do with Microsoft,” he emphasised, “it is free, and modifying is easy. That is the bet.”
The gamble was that Android would succeed as a Trojan Horse.
Schmidt knew that for any number of reasons Microsoft, along with Apple, Nokia, Palm, RIM and anybody else with control of an operating system, might try to thwart Google’s ambitions.
Conversely the likes of HTC, LG and Motorola, all of whom lacked their own mobile OS, might well welcome an alternative to Windows Mobile.
Being free, Android is and was always merely a means to an end. The profit potential is to be found elsewhere. It exists to ensure Google can get its apps installed on handsets, apps that are essential if Google is to fully capitalise on the advertising opportunity.
To understand what Google has in mind take a look at Maps for Navigation, a free app which, when announced, resulted in an immediate and radical reduction in quoted SatNav company share prices.
“When you use Google Maps Navigation,” Google proclaim, “your phone automatically gets the most up-to-date maps and business listings from Google Maps — you never need to buy map upgrades or update your device. And this data is continuously improving, thanks to users who report maps issues and businesses who activate their listings with Google Local Business Center.”
As Schmidt originally told his audience in Davos, he was confident location-based advertising able, for example, to direct hungry travellers to nearby restaurants, would be "a very, very good business". Those restaurants, he anticipated, would be very happy to richly reward Google for delivering those hungry travellers to their door.
For the moment Google Maps Navigation is only available on Android 2 devices. But that is almost certain to change. And given that it is both free and a more than adequate alternative to, say, the TomTom SatNav app, you can see why other smartphone users will want it.
After all, iPhone owners currently have to pay TomTom £59.99 just for coverage of the UK and Ireland, and more should they to want to add any other countries.
Inevitably many iPhone users will want to make use of the Google alternative. This may not please Apple, given they probably make £20 for each TomTom app sold through the iTunes store. But the alternative, of seeing users desert the iPhone for other platforms, is likely to prove even less appealing.
Consequently the ability to offer apps sufficiently compelling that users would, if necessary, change handsets in order to have them is the second key to Google’s mobile strategy.
Ultimately Google has no real interest in which network we join, what handset we choose or the operating system it runs. All that matters is that it will provide open access to Google’s apps.
And Google is prepared to pay to accelerate the process.
Schmidt told Business Week in August this year: “We actually share in the revenue for the ads that show up on the phones. So the advertiser pays us, and then we share it, literally, with the handset and mobile operator.”
In the same way, the acquisition of AdMob also made sense.
Bloomberg reported Schmidt as saying: “AdMob is clearly the best of its ilk for applications monetization. We think that’s as strategic as search monetization, which, of course, we’re very good at.
In combination with AdMob Google now becomes the largest mobile advertising company, with about 30 percent to 40 percent of the market, according to Karsten Weide, an IDC analyst.
“One the key success points for the iPhone was this enormous development of apps, and particularly free apps, which are advertising supported,” Schmidt went on. “Now that we have our Android platform coming out, and really with some serious partners behind it, it will also be important to have that be true for Android as well as the others.”
Consequently the other benefit of the purchase is the understanding AdMob offers Google of how, when, where and which applications people are using on the iPhone, for how long and for how often.
Owning such data can only help Google improve its Android offerings and consolidate its position still further.
But ultimately, no matter how much it knows about users, no matter how good its operating system and no matter how desired its applications, Google continues to be vulnerable. It still depends on others for access to the network with the possibility, no matter how remote, that access could be denied at any time.
Schmidt still remembers when T-Mobile opted to switch from Google software to Yahoo software. He told Frankfurter Allgemeine:
“That was a pure business decision. The things T-Mobile wanted to do made sense to them whereas we didn't want to do it the way they wanted to do them. It is a reasonable business decision for T-Mobile and for us. We still have a very good relationship,” he added diplomatically.
Consequently it is no surprise that Google has also invested, to the tune of $0.5 billion, to diminish its dependence upon the network operators by providing, for many users, a viable and open alternative in the guise of Clearwire. Other strategic investors in Clearwire include Intel Capital, Comcast, Sprint, Time Warner Cable, and Bright House Networks.
Shoud this third key to Google’s mobile strategy succeed, the company will at last be able to control over its own destiny.
Clearwire currently provides 4G and 3G services utilizing WiMAX and pre-WiMAX technology to more than 420 municipalities and more than 40 million people in Alaska, California, Florida, Hawaii, Idaho, Minnesota, Nevada, North Carolina, Oregon, Texas, Virginia, Washington and Wisconsin, as well as over 1 million people in Spain, Ireland and Belgium.
In other words Clearwire enables consumers to access the mobile internet wherever they are in cities such as Brussels and Dublin, Nashville and Seattle, without having to deal with the likes of Verizon, AT&T, Vodafone and T-Mobile.
As far as Schmidt is concerned: “Our investment in Clearwire is a good business and it also supports the principles of openness. We really want open competition among those players,” he informed Frankfurter Allgemeine, referring to the network operators.
Earlier this month Clearwire raised a further $1.5 billion from its other investors to fund future expansion, with the intention of expanding its CLEAR 4G network coverage to as many as 120 million people by the end of 2010.
Google did not participate in this round of funding. But that was probably to avoid offending the network operator Verizon, who have just agreed to market Android handsets in the United States.
Yet almost simultaneously Google did announce the acquisition of Gizmo5, a company that provides Internet-based calling software for mobile phones and computers. Like Skype, Gizmo5 allows users to make voice calls over the internet.
For Google the beauty of Clearwire and WiMAX is that it offers alternative network access in densely populated urban areas, precisely those locations where mobile search and mapping advertisements can most readily be sold.
Essentially Google believes that by creating demand for its apps and ensuring users can access them on a multiplicity of handsets, networks and operating systems it will, provided it can continue to offer perceptibly better solutions, continue to maintain its presence.
Those apps will of course continue to be free to the user, and in all probability superior to their paid alternatives.
Indeed, such could be the user demand for those applications, both network operators and handset manufacturers may be forced to offer them in order to remain competitive.
Once that happens Google will effectively have ensured they have open access to the network. In doing so they will eliminate the one potential impediment to their inevitable dominance of the global market for mobile advertising.
At that point Schmidt and his colleagues have realised their objective. And the network operators will find themselves dancing to Google’s tune.
