Google May Find Success In Mobile Phone Foray

Last month, Google unveiled plans to reshape the mobile phone market with a new platform for mobile-handset software that will bring Internet access to smartphone platforms. The company started a consortium to promote the platform — a move that other companies have tried and failed, according to semiconductor research firm iSuppli. In a new report, iSuppli questions whether Google's mobile-phone venture can be successful, potentially creating a market of 324 million units and ad revenue of $3.8 billion by 2011, and possibly making Google the market dominator for mobile advertising and location-based services (LBS). iSuppli investigated the smart phone market, Google's goals, and similar case histories to conclude that the software giant may indeed stand a chance. With the release of the Apple iPhone, Google's investment comes at a time when the smart phone market has a high growth potential. Also, Google's software will be open-source, which ultimately provides a means for creating cheaper consumer devices. These factors are a positive sign for Google's venture, according to iSuppli. Google’s goal of becoming the main provider of LBS and mobile advertisements on wireless handsets is an ambitious one, which may prompt the company to acquire a provider of map navigation software. While this is a significant investment, potential returns are high: worldwide mobile video revenue is forecasted to rise to $3.8 billion in 2011, up from just $135 million this year, according to iSuppli. One case history may provide a relevant but foreboding example for Google — the venture launched by Go Corp./AT&T Microelectronics to support pen-based mobile computing. In the early 1990s, Go and AT&T attempted to create an industry ecosystem for a new type of product that combined wireless communications and computing that would usher in a new category of mobile devices. Go created an operating system and software while AT&T sought out other market participants to cultivate an ecosystem for the new product. But the venture faced major competition from Microsoft, which announced its own pen-based extensions to the Windows operating system. Though Microsoft did not bring them to market until a decade later, the pre-emptive strike crushed the AT&T/Go initiative. Google is using a similar strategy by pursuing supply-chain partnerships, according to David Carnevale, vice president, multimedia content and distribution for iSuppli. The idea is to get a mobile-handset company to be first to market with a successful product that uses the Google software. "Google needs to get someone to be the first to make a phone that really creates the category and quickly results in millions of units sold," Carnevale said in a statement. "Previous efforts at establishing standards have largely been failures. Selling a lot of products creates de-facto market standards and that’s why the iPhone has attracted so much attention." Google also faces considerable competitive challenges, vying against software solutions from big rivals like Apple, Microsoft, Nokia, Palm, and Research in Motion. But Carnevale said the Google initiative stands a better chance of success than the AT&T/Go effort because of Google’s significant strength in providing Internet information to users.