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Report: Google Working on Cellphone to Compete in Mobile Market

By Chris Hogg     Aug 3, 2007 in Technology
If you work for a phone company, you might want to sit down for this news: Google could be getting into the cellphone biz. This mobile could hit the market next year and airtime could cost consumers nothing. Zilch. Nada. We told you to sit down.
Digital Journal — According to an article in the Wall Street Journal, Google has created a prototype cellphone (GPhone?) and the company plans to give free subscriptions to consumers by bundling ads with its search engine, Web browser apps and Gmail.
Google is staying very quiet on this news, but the WSJ reports the prototype cell is currently being showed to manufacturers and network operators. Reports say Google is trying to learn how to improve tech specs to make the phone a better tool for Web browsing (iPhone anyone?).
"We are partnering with almost all of the carriers and manufacturers to get Google search and other Google applications onto their devices and networks," a Google spokesperson said.
Google has so far refused to deny the report, as rumours have started circulating all over the Internet. In a statement, the company said, "What our users and partners are telling us is that they want Google search and Google applications on mobile, and we are working hard every day to deliver that."
According to the report, Google also envisions a world where its phone service could one day be free to consumers, where subscriptions are subsidized by ad revenue.
"Free" is not a word any competitor wants to hear.
Surprisingly, the WSJ says people who have seen Google's prototype say it's not as "revolutionary" (to use Steve Jobs' marketing lingo) as Apple's iPhone; they compared it to a slim Nokia phone that has a keyboard that slides out, while others said they saw a phone that looked more like a Blackberry or Treo. It's not clear yet who built the phones for the Internet giant, but insiders have suggested LG Electronics in South Korea was one company that held talks with the Big-G.
The WSJ reports Google has already done a lot of the leg work, lining up hardware and software partners, and telling carriers they are open to cooperate.
Google is interested in making itself a comfy resting place in the growing world of cellphone advertising, reportedly investing "hundreds of millions of dollars in the cellphone project."
Google looks to be courting multiple phone manufacturers to make the mobiles that will push Google's Net portfolio.
As the WSJ notes, Google will face some serious challenges in this market as operators have been very reluctant to relinquish control to third parties, fearing they will be left in the dust in the mobile advertising market. Verizon has already held back on fully integrating Google's search engine because the company said Google was demanding a large chunk of search-based ad revenue.
The fears of carriers are warranted, as Google has shown it can come into many markets and hang the competition out to dry — no matter how big they are. And the lack of total support from carriers frustrates Google to no end.
But Google has an ace up its sleeve, as it always does; it can push data packages. Carriers often rely on revenues generated from voice packages, as data transfer can get expensive and thus usually adopted mostly by the business world. But with Google's tools being integrated directly into a phone, it could offer incentive for consumers to upgrade to data plans.
It's a dangerous game of cellphone Russian Roulette that carriers must play now: Partner with Google and get more customers, while at the same time risking a loss of control (read: revenue) to the Internet mogul. Either way, Google wins.
Mobile ads are where it's at for the growing arena of digital advertising. At the "All Things Digital" conference in May, Google CEO Eric Schmidt, said, "What's interesting about the ads in the mobile phone is that they are twice as profitable or more than the non-mobile phone ads because they're more personal."
It's a sign Google has its ear close to the ground, and it's ad network model could transition easily into the world of mobiles.
In addition, the future could be far more profitable than just embedding search engine and maps in other carriers' phones: Google says it might bid for wireless-spectrum licenses, and earlier this week the FCC approved Google's bid to open up access to a spectrum that would carry any wireless device, software or network.
Essentially, if Google owned the spectrum, it could potentially grow into a cellphone operator itself. As the WSJ notes, it would cost billions and takes years.
But anyone in the tech world knows Google is not afraid of long-term investment.
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