Wireless Federation

After many months of speculation, we have finally gotten some whispers on Google’s plan for taming the next great Internet conduit, the mobile phone. Contrary to speculation, the Google phone, or GPhone as “the cloud” has named it, is not a hardware offering but a software initiative. The plan is to provide an operating system for mobile phones that will be based on open-source Linux software. Google will then port and refine its applications for the mobile platform including mobile search and maps.

The approach seems as appropriate for Google as the iPhone is to Apple. Apple is, at its very core, a company that provides elegant hardware solutions enhanced with innovative software. As you may recall, efforts to provide the Apple OS to third parties, enabling “clone Macs” were scuttled when Jobs took the helm again. Google, however, is a software company that has dominated the Internet. Google is among the premier advertising aggregators. Providing a software OS or handset client to enable optimal Internet based applications and digital advertising is in their core competency.

At this point, it is important to note that the analysis presented here is based on “whispers.” It has not been confirmed by any official Google announcement. Normally, MultiMedia Intelligence does not base its analysis on rumors; however, there are a handful of companies that have game changing capabilities. Google is certainly on of those.

The purported Google strategy seems to lead to the advent of an open-source competitor to Windows Mobile. This is a development that will make the environment for Windows Mobile much more challenging. Although Microsoft has agreements with almost 50 handset vendors, it’s software still will only power 10 to 15 million phones that will be shipped this year.

What’s the big deal?

Google’s need to enter the wireless market seems obvious when you consider the alignment of industry and Google-specific trends.

First, the mobile industry is embracing mobile advertising. Mobile advertising, segmented across mobile messaging, mobile search, mobile TV, and mobile internet, promises to see explosive growth over the next 3-5 years. MultiMedia Intelligence forecasts a US$2 billion opportunity by 2011 in mobile video advertising alone.
Second, the mobile industry is embracing location-based technology. Location-based technology will be vital in an emerging set of applications, with advertising being critical.
Third, the mobile industry converging with the Internet.
All three of these trends play to Google’s core capabilities.

A Google entry into the market promises to turn the economics of cellular services on its ear. Instead of offering a fully subscription based revenue model, the cost of the phone may be partially subsidized by advertising. We have already seen a host of trials by companies looking at providing services based on advertising supported subsidies. The key is the opt-in. Consumers and advertisers must give something to get something.

The cellular handset is a particularly intriguing platform for delivering advertising as it is inherently interactive and personalized. Interactivity and personalization gives advertisers and vendors detailed and specific advertising metrics and unmatched targeting capability. This not only provides value to advertisers, but value to consumers since advertising is more relevant. Once consumers see value from advertising, they would sign up for more. In the end, the conversion from advertising to purchase would be higher, since customers have identified specific product interests and buying intention.

Advertising in Hardware

Although it does not look like it is the approach of Google, advertising in hardware holds the potential to bring the solution to another level. Ideally, subsidized devices need to be hardwired so they are dedicated and solely designed for the brand they represent. Hardwiring guarantees the investment of the branding company. Just ask AT&T. Hacking the iPhone seems to be a trophy, allowing hackers to offer free unlock programs for iPhones. Hardwiring or hard coding a phone would prevent this and maintain the integrity of service and the advertiser’s revenue. Phones, computers, TVs and similar products can all be “dressed-up” with brands, but its just skin deep. Advertisers subsidizing a product at an integrated device level would be different, essentially creating a portal to everything about that brand.

Going to the extent of hardwiring the branding will be argued to be excessive by some. Much of the branding at which we are looking can be done at the surface with simple software applications, such as the rumored Google solution. However, creating branding at the software level creates two problems. First is that the software can be overwritten. Even the strongest of protections will be broken, resulting in the brand owner losing the ROI for the device subsidy. Second, hardware allows for optimized solutions that software cannot deliver.

Implementing Advertising in Hardware

There are many potential solutions for hardwired branding. Semiconductor manufacturers are not currently offering designs that enable advertising in hardware; however, they have the ability to easily integrate circuitry that would in effect, brand a device permanently. In other words, advertising would be permanently hardwired into the core of the main electronic system components (also known as SOCs or systems-on-chips). The resulting devices in which the chips are integrated would be owned by the “Brand” that paid or subsidized the chipset. Each component can be branded in multiple ways. For example, video or display drivers could hold hardwired watermarking that ensures the when the screen is on, the brand is always displayed. Any I/O device can insure the brand is intact. Various forms of memory can be hardwired or have permanently burned cells that maintain a brand owner’s image.

Utilizing sophisticated processors or SOCs, branding can be taken to a completely different level. Hardwired or hardcoded into the SOC could be instructions to reach-out to the Internet or operator network and pull new images, updated information, or coupons specifically for the branded device. It could also tell the brand owner that phone is not being used for the proper service or has been tampered. This brings a new level of security to the OS owner as well. The chip manufacturers could enhance margins by implementing this level of brand control.

Brand owners could then start dealing with customers that really want their product not waste money on inefficient advertising. The customer is happy, the brand owner is happy, and everyone benefits.

The End Goal

Whether in hardware or software, Google’s foray into wireless is indicative of a much larger trend. Advertising in wireless is an inevitability as marketers salivate over reaching billions of subscribers with targeted, interactive campaigns. Google’s combination of Internet-dominance, interactive advertising expertise and powerful applications makes for an impressive hand as they turn their strategic focus to the billions of wireless subscribers.

This MultiMedia Intelligence Brief is based on recent research, “Advertising & Technology Collide: Semiconductor Companies, Technology Providers, Media Companies and Ad Agencies Partner to Move from Disruption to Monetization,” (MMI070301DA). The research examines the impact of new technologies on the advertising industry. It first examines why current advertising is becoming less effective and the critical role of the DVR. It then addresses the resulting impact on the “upfronts” and the impact on ratings providers, such as Nielsen. Digital technologies, platforms and the impact on advertising will subsequently be examined. This includes such platforms as set-top boxes, PCs, game consoles, DVRs and portable devices. It will finish by discussing new and creative ways that advertisers can utilize core technologies and examining some of the new digital advertising opportunities, including Internet advertising, IPTV advertising, Internet TV, mobile TV advertising, and in-game advertising.

Wireless Mobile Telecom Wireless News Mobile Advertising