Google Phones and Advertising

Google's leverage in Internet advertising might mean that offering an all-in-one cellular phone could be significantly less expensive than an iPhone, perhaps even free. Industry watchers believe that advertisers would offset the phone's cost, making the Google Phone an entirely new business model in the mobile device market. Instead of collecting fees from customers, Google would collect revenue from advertising sources. Companies could pay Google to have their results pop up first whenever you use your phone to search for something, like a nearby sushi restaurant or hotel. A few bloggers even think that the phone service itself would be free -- advertisers would foot the bill for everything.

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Some fear that letting revenue dictate search results will turn away customers. The fear is that if you don't pay for Google to feature your business, your business will be buried under a host of other search results, even if you provide the best service. Others worry that advertising dollars will come before accuracy, meaning that you might get search results that have little or nothing to do with what you actually are looking for just because those companies paid a premium advertising fee.

Another possibility is that Google will incorporate Gadget ads in its phone software. Gadgets -- also known as Widgets -- are small icons or displays that link back to products and services, almost like a miniature Web page. You could download a Gadget that displays the local weather report, for example. Google calls Gadgets "Websites within Websites" [source: Google AdWords].

Some think that Google isn't seriously considering entering the mobile handset market at all. They say that the market has a low profit margin and that Google doesn't have a lot of experience with hardware. It's much more likely, in their view, that Google will follow one (or more) of the following three strategies:

  • Become a phone network administrator and service provider, joining the ranks of other companies like Sprint and Verizon. Google wouldn't build the hardware, but would provide phone service to customers.
  • Create an operating system to compete with Symbian, Windows Mobile, Linux and other smartphone systems. Phone coding is complex and difficult, leading some speculators to believe that Google would avoid trying to reinvent the wheel and instead concentrate on the third option.
  • Offer a suite of applications and programs for existing handsets. In this scenario, Google would sell suites of applications to vendors, making phones much more compatible with the Internet.

Analysts with Lehman Brothers believe Google will unveil a phone by February of 2008 [source: The Independent]. Other analysts believe that Google will announce its mobile device software platform before the end of 2007. Either way, it looks like the mystery surrounding the Google Phone will soon be solved.