Google Calls a New Play: New Android Phone Impacts Market

At the recent ANA conference in Scottsdale, AZ, Eric Schimdt, CEO of Google, said that Google was very excited about the mobile market.  Google has seen searches on mobile devices increase by 30% in the first half of the year, and they intend to grow this developing channel.

The New York Times confirmed that Google is planning to launch a smartphone in early 2010.  They have partnered with HTC, the Taiwanese handset manufacturer, to create the ‘Nexus One’ based on Google’s hardware specifications.  Google has made no official announcement yet, although their mobile blog states that they have distributed the handset to employees solely for testing new technology and features.

Speculation around the new device has run rampant.

Allegedly, the Nexus One will be sold directly by Google as an unlocked phone on the GSM network (T-Mobile and AT&T).  Reports indicate that it will be a touchscreen only smartphone with no physical keyboard, putting it in direct competition with the iPhone and BlackBerry Storm.  The new phone will most likely be heavily subsidized by Google in order to promote the rapid growth of mobile advertising.  It will run on the new Android 2.1 operating system and come preloaded with all Google apps, including free turn-by-turn navigation (Google Maps Navigation) and image recognition (Google Goggles).  There is also speculation that it will come with a data-only access plan thus reducing monthly carrier costs significantly.

We surmise that Google’s decision to move ahead with a branded handset was based these key factors:

1.     Google doesn’t want to be dependent on partner manufacturers to gain market share for its Android platform or for increased adoption of its mobile apps.

2.     Owning both the device hardware and software allows Google to not only define the out-of-box experience for the end user but also gives them unique the ability to gather data directly to improve overall capabilities.

3.     Google believes that consumers will eagerly adopt a more affordable, full-featured smartphone that does not lock them into long-term contracts.

4.     Google doesn’t want to rely on closed platforms like iPhone and Apple to approve innovative (and potentially disruptive) mobile applications on their AppStore as we saw with the Google Voice controversy.

5.     Google wants mobile ad consumption to grow faster globally and this unlocked handset has the potential to quickly capture market share internationally.

6.     Google wants to leverage its strong global brand to extend into a product category that will become the primary way to access the Internet.

Impact of ‘Nexus One’

Sophisticated applications like Google Goggles, GPS, and other Google innovations will come to Android first, driving demand for these phones – with other platforms developed later.  Google Voice will be used for voice communications rather than using traditional voice plans which will drive voice plan costs lower.   With Google’s strong global brand, extensive marketing expertise, and broad international presence, we expect Google to gain market share in all GSM-capable countries.  Carrier and handset customers will now view Google as a direct competitor instead of a trusted partner, changing the dynamic of that symbiotic relationship.   Handset manufacturers will be forced to put even more focus on applications and developer ecosystems in an effort to stay competitive as apps become a top decision criteria for device selection.   The power to offer inexpensive mobile access (voice and data) in exchange for opting in to specific advertising channels may be the way of the future, and as most will admit, Google has the upper hand in that game.  The winners in the smartphone race will be those with the quantity and quality of applications they support – sounds like a replay of the OS wars, doesn’t it?

Actionable Insight #1: Prepare for large mobile growth in the next year.

Mobile advertising should be top of mind and a standard in every media plan.  Think outside the box–there is an effective way to incorporate mobile marketing into every marketing plan in almost every industry.  Don’t limit yourself to the traditional ecommerce or lead generation end goals, rather think of mobile marketing as a very personal way to interact with and activate your customers and prospects.  Take the time to understand how mobile users differ from desktop users and modify your marketing plan accordingly.

Actionable Insight #2: Invest in mobile sites and mobile applications.

Is your website usable and useful on most mobile devices?  Do you have a product or service that would make a good mobile app?  Do your potential customers have a problem that an application can help solve?  If so, consider investment in mobile site and mobile application development sooner rather than later.