By Working With The Mobile Chain Rather Than Against It, Google’s Future Looks Bright

By Working With The Mobile Chain Rather Than Against It, Google's Future Looks BrightWith Google being criticized over trying to take over the wireless industry with its broad initiatives, the company seems to be shifting focus away from re-writing the rules, and instead is working within the mobile supply chain to make its voice heard without stepping on any toes.

This is the message detailed in a new report from iSuppli entitled, “Google: The Elephant in the Wireless Room”.  In it, a strategy is chronicled that could help Google remain successful in its bid to transform the wireless industry from its traditional voice-subscription model to one supported by broadband-based mobile advertising revenue.

Like much of the rest of the mobile value chain, Google is seeking to uncover new user behavior patterns and to drive social networking services through the promotion of cloud storage and computing, mobile advertising, and a variety of location-based services. All of the free Google offerings are driving toward this goal, and has the intention to strengthen the mobile industry, not dominate it.

“During the past three years, Google has continually targeted the mobile communications industry with a series of initiatives,” said Dr. Jagdish Rebello, director and principal analyst at iSuppli. “From offering free Wi-Fi services, to developing a free and powerful open operating system for smart phones — Android — to offering free maps and turn-by-turn navigation services, to introducing a Google branded phone — the Nexus One — the Internet search giant is revolutionizing the mobile value chain in an attempt to unlock new value and to expand an industry desperately searching for the next inflection point.”

Google also has encouraged the adoption of the Android operating system among device OEMs, mobile operators and application developers by creating an ecosystem where everyone benefits.  While OEMs pay no licensing fee for incorporating the Android operating system and have the capability to customize the User Interface (UI) to their own specific requirements, the application developers and mobile operators split the revenue from the sale of downloaded applications at a ratio of 70:30.  This is a variation from the present industry norm, where application developers evenly split revenue with the operating system platform provider.

While the industry is worrisome that Google is getting too large too quickly, they should understand that Google is providing the services and mobile content that will foster the growth of the mobile ecosystem, not define it.  Android is the perfect example.  While many see it as Google’s attempt to take over mobile devices and spread its reach, it was actually developed to help operators and device makers offer more value to their subscribers and customers.

“While all the facets of this multipronged strategy will not be successful, it is clear that Google is pushing toward the strategy of monetizing mobile search by leveraging its leadership in Internet search with relevant location-based services and mobile advertising,” Rebello said. “iSuppli believes that if the company executes this strategy correctly—by working with and not against the rest of the mobile value chain—the wireless industry will be well positioned to unlock the next trillion dollars of value by the end of this decade.”