Google Pushes Tailored Phones
To Win Lucrative Ad Market
By AMOL SHARMA and KEVIN J. DELANEY
August 2, 2007; Page A1
Google Inc. is searching for growth in cellphones.
The company, which has made billions of dollars in Web
advertising on computers, is courting wireless operators to carry
handsets customized to Google products, including its search engine,
email and a new mobile Web browser, say people familiar with the plans.
It wants to capture a big chunk of the fast-growing market for ads on
cellphones.
Google has invested hundreds of millions of dollars in
the cellphone project, say people who have been briefed on it. It has
developed prototype handsets, made overtures to operators such as
T-Mobile USA and Verizon Wireless, and talked over technical
specifications with phone manufacturers. It hopes multiple
manufacturers will make devices based on its specs and multiple
carriers will offer them.
For wireless operators, the plans are a double-edged
sword. Google’s powerful brand and its popular Web services could help
operators sign up more subscribers to data packages, on which they
increasingly rely as voice revenue declines. However, operators have
been wary about losing control over the mobile-ad market.
The long-rumored Google phones are still in the
planning stages, and wouldn’t be available to consumers until next year
at the earliest, say people familiar with the idea. Some details are
likely to shift as the plans develop.
The Mountain View, Calif., company has made clear it
is serious about developing advanced software and services for
cellphones. “What’s interesting about the ads in the mobile phone is
that they are twice as profitable or more than the nonmobile phone ads
because they’re more personal,” said Google Chief Executive Eric
Schmidt at the D: All Things Digital conference in May.
A Google spokesman yesterday declined to comment on a
Google phone project, but noted: “We are partnering with almost all of
the carriers and manufacturers to get Google search and other Google
applications onto their devices and networks.”
The Google phone project goes far beyond Google’s
existing deals to include its search engine or applications such as
Maps on select handsets, say the people familiar with the matter.
The company’s past efforts to get its software on
cellphones have raised some concerns in the industry. Verizon Wireless
Chief Executive Lowell McAdam said the carrier has chosen not to
integrate Google’s Web search engine tightly into its phones because of
Google’s demands to get a large share of search-based ad revenue.
“What this really boils down to is a battle for the
mobile ad dollar,” Mr. McAdam said in a recent interview. “They want a
disproportionate share of the revenue.” Mr. McAdam declined to comment
specifically on any Google phones.
Google has announced that it may bid for
wireless-spectrum licenses at a coming government auction. The Federal
Communications Commission on Tuesday approved rules addressing some of
Google’s concerns about the sale.
If it owned spectrum, Google might turn into a phone
operator itself. However, such a project would take years to come to
fruition and cost billions of dollars. For now, Google has to work with
existing cellphone operators to get its mobile products to consumers.
In recent months Google has rolled out mobile versions
of products such as the YouTube video-sharing site. It has made deals
to include its search engine or applications such as Google Maps and
Gmail on select handsets. But the company has sometimes been frustrated
at the limited distribution it has achieved. In some cases, Google has
managed to get around operators. Its 411 location search service can be
accessed by dialing an 800 number from any handset.
Now it is drafting specifications for phones that can
display all of Google’s mobile applications at their best, and it is
developing new software to run on them. The company is conducting much
of the development work at a facility in Boston, and is working on a
sophisticated new Web browser for cellphones, people familiar with the
plans say.
The prize for Google: the potential to broker ads on
the mobile phones, complementing the huge ad business it has built
online. Google even envisions a phone service one day that is free of
monthly subscription charges and supported entirely through ad revenue,
people familiar with the matter say.
Last year, global spending on mobile-phone
advertising, including placement of ads in text messages, Web pages,
video and all other content, was only $1.5 billion, according to
eMarketer. But that figure is projected to grow to nearly $14 billion
by 2011, the market research firm says.
The proposed Google phone, Apple
Inc.’s iPhone and efforts by other technology companies are aimed at
making Web and computer functions easier for consumers to use on
cellphones. Today, surfing the Web, listening to music and watching
video on cellphones are often clunky experiences.
Unlike Apple, whose cellphone is available exclusively through AT&T,
Google is hoping that multiple operators will offer its phone. And
Google is ready to relinquish some control over design, allowing
manufacturers to create devices based on a common set of specifications.
Google has approached several wireless operators in
the U.S. and Europe in recent months, including AT&T, T-Mobile USA
and Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone Group PLC, people familiar with the situation say. T-Mobile USA, a unit of Deutsche Telekom
AG, appears to be the furthest along in considering it, these people
say. Andy Rubin, who helped design T-Mobile’s popular Sidekick phone,
now works at Google and is involved in its handset project.
Google recently struck a deal with Sprint Nextel
Corp. to have a wide array of its services bundled into devices for
that carrier’s high-speed wireless network based on the nascent WiMax
technology. Both companies declined to comment on whether that
relationship would extend to offering Google-customized phones on
Sprint’s existing cellular network.
The specifications Google has laid out for devices
suggest that manufacturers include cameras for photo and video, and
built-in Wi-Fi technology to access the Web at hot spots such as
airports, coffee shops and hotels. It also is recommending that the
phones be designed to work on carriers’ fastest networks, known as 3G,
to ensure that Web pages can be downloaded quickly. Google suggests the
phones could include Global Positioning System technology that
identifies where people are.
People who have seen Google’s prototype devices say they aren’t as revolutionary as the iPhone. One was likened to a slim Nokia
Corp. phone with a keyboard that slides out. Another phone format
presented by Google looked more like a Treo or a BlackBerry. It’s not
clear which manufacturers might build Google wireless devices, though
people familiar with the project say LG Electronics Co. of South Korea
is one company that has held talks with Google. Google has already
lined up a series of hardware component and software partners and
signaled to carriers that it’s open to various degrees of cooperation
on their part, the people say.
Google doesn’t plan to charge a licensing fee to
hardware makers or operators, people familiar with the matter say. The
company has suggested the phones could carry the Google brand alongside
the brand of the operator, or they could be distributed without the
Google name. The Google brand has yet to appear on a significant piece
of consumer hardware.
Some executives at cellphone operators were skeptical about Google’s efforts. They noted the case of Walt Disney Co.’s ESPN, which introduced a sports-centric handset but was forced to shut down the venture last year amid soft demand.
Apple’s iPhone could be a formidable competitor among
consumers — and also present strategic complications. Four of Apple’s
eight directors also serve as directors or advisers to Google. Mr.
Schmidt, the Google CEO, is on Apple’s board. Those with ties to both
companies might find it difficult to avoid conflicts of interest.
Google has generally had better luck in Europe than in
the U.S. in getting its software on cellphones. It has forged a
relationship with the United Kingdom’s Vodafone Group PLC to provide
the search bar on the carrier’s branded Internet homepage, with results
customized for cellphone users. T-Mobile in Europe integrates Google’s
search bar into its welcome screen for users who have a data plan
designed for heavy Web browsing. It’s unclear which carriers in Europe
Google is working with on its handset plans.
–Cassell Bryan-Low, Jane Spencer and Evan Ramstad contributed to this article.
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