18 Jan 10

Do you understand Google's mobile strategy?

Jonathan Sepulchre, Trainee Digital Planner Buyer, offers his take on Google's mobile assault.

In November 2008, during Telstra's annual investment day, Steve Ballmer, CEO of Microsoft, questioned the ability of Google to make money with Android. He declared: "I don't really understand their strategy. Maybe somebody else does?” He was struggling with why Google would want to give an operating system away for free instead of adopting the Microsoft business model of selling the OS on to mobile manufacturers.

15 months later, Google launches its first phone, the Nexus One, in partnership with HTC. When I read all the reviews saying this “Google phone” is competing with the iPhone I can see that many people are reacting in the same way as Steve Ballmer did. They don’t really understand, because for the vast majority of the blogging community the Nexus One is not an “iPhone Killer”, just a good challenger like the Palm Pre, the Blackberry Storm or the Nokia N97. So, what is the point in Google simply releasing a good smartphone as opposed to an "iPhone killer"?

I don't think Google want to compete with Apple because they are actually very close partners. When you buy an iPhone you have direct access to Google products: YouTube, Google Maps and Google search for example. In August 2009, Eric Schmidt, the CEO of Google had to resign from Apple’s board. It wasn't due to the fact that Apple and Google are competitors but because the American Federal Trade Commission began an investigation into whether the companies' close relationship violated antitrust laws.

If you still think Google wants to make money in the hardware business you are probably wrong. In my opinion, Google is using the Android system as a Trojan horse to ensure that they maintain their impressive domination of search on the mobile platform. Every Android phone is a fantastic promotion tool for Google’s mobile search engine. They will replicate their very successful business model across this channel. Advertising is still the key element for Google, 96% of their revenues in Q3 2009 came from advertising, and the company is so successful despite the economic crisis that they have no reason to change this approach. A few days ago, Google announced that advertisers will be able to run Click-to-Call Ads on Mobile Devices with Google AdWords. As per the norm with AdWords, advertisers will only pay if a user calls the number. It is a killer application in the mobile advertising market with many businesses focusing on ROI more than ever. Google will undoubtedly extend its domination of search to the mobile market retaining that top spot. The only real threat is likely to come from Brussels via an antitrust trial…