DMN3 Blog

Mobile marketing and smart phones are the “current big thing” in the online world. According to Forrester Research, 17% of cell phone subscribers now use smart phones, as opposed to last year's 11%. It is no wonder that the two leading online brands, Apple and Google, are now on a collision course toward mobile marketing domination. Google has now gone into the smart phone business, and Apple has entered the mobile advertising business. What was once a close relationship between the two companies, has turned into a head to head competition in the smart phone and mobile advertising arenas.

(In this post I will give my thoughts on Google’s efforts with regard to mobile devices. In a future post I will espouse my thoughts on Apple’s strategy with the iPhone and its purchase of the mobile advertising company, Quattro.)

Google’s Strategy: Their plan is simple...to dominate the mobile device landscape by creating an open operating environment. The first part of their strategy was creating their Android Operating System. Google spent four years creating a complete mobile OS (operating system) and application stack with very advanced capabilities, all for the purpose of giving it away.

They've created an OS and adopted a licensing model that enables third parties to effectively build and sell Android phones. Android is being distributed under a permissive open source license that lets carriers, device manufacturers and system integrators use it, sell it and modify it.

The second part of their strategy is to market the Android-equipped mobile devices directly to consumers and businesses, along with the traditional carrier distribution model. By breaking the major manufacturer/carrier distribution model, Google hopes to create a large base of Android users who will champion the OS's superior capabilities, compared to other phones on the market. Naturally in order to meet customer demand, providers will be forced to adopt Android.

As part of this strategy, Google worked with HTC to design a “super phone” (their words, not mine) to maximize the capabilities of the Android operating system in a single phone. Nexus One was unveiled on January 5th and Google will sell it directly through its online store. Buyers can choose the network provider at an unsubsidized price ($520) or subscribe to T-Mobile for two years to obtain the subsidized price ($179).

Why does Google want to dominate the mobile device market? The answer is obvious - to make lots of money. Google's business model is almost entirely based on advertising, and almost everything Google does is designed to place ads on as many pages and screens as possible. Google accomplishes this by offering compelling ad-supported products like Gmail and Google Docs and with its search advertising (AdWords & AdSense).

Plus, to add to Google's 'leg-up' in the mobile market, they are pro's at tracking user behavior, demographics and preferences, all with the goal of delivering the most targeted advertising possible. Now, Android extends Google advertising and tracking to mobile in a way that goes far beyond current Google mobile products like Search and Maps, which are not easy to use with current mobile operating systems. 

However, Android is intended to change that by combining faster, easier input and output with personal data from the handset (i.e. location, contact names and addresses, calendar and to-do entries) and data known to Google (i.e. maps, web index, and the user's search and  purchase history) to deliver a revolutionary user experience. It will also feed data back to Google helping it to better sell and deliver targeted advertising.

Google is also in the process of buying AdMob, a mobile advertising network for $750 million. (Read about it here: Google Buys AdMob in Bid to Boost Mobile Ads) That purchase, if approved by regulatory agencies, will give Google a key set of technologies to expand its advertising footprint beyond its signature text search ads.

Google is betting that mobile marketing will become an increasingly important part of the advertising mix. The fact that advertisers spent $416 million on mobile ads in 2009, and are expected to grow to $1.6 billion by 2013. While this is small compared to the $22 billion spent on Web site advertising, Google expects mobile advertising to grow into a very significant revenue source in the years to come.