Google's $19 billion 'scary' mobile advertising problem

Google’s $19 Billion ‘Scary’ Mobile Advertising Problem
Written by Donna Bogatin, Contributor
Nineteen billion dollars worth of global mobile marketing and advertising is to be had by 2011 (ABI Research) and, in good Googley form, CEO Eric Schmidt is gunning for the lions share. 

And, despite Google’s inability to show any successful diversification offline, many are gunning for Google in the mobile space too, predicting an inevitable replay of Google’s online search dominance on the handset. 

After all, mobile Internet advertising should develop faster than PC internet ads, is the conventional wisdom, because the learning curve has supposedly already taken place on the desktop.

Why wouldn’t Google naturally achieve similar dominance in mobile that it has achieved in PC-based online advertising?

What’s more, Google will be its own mobile master, as it is online, so it is believed, not a mere third party agent, as it finds itself relegated to being in its radio, print, TV….initiatives. 

But alas, Google does not have clear mobile sailing.

In Google: The REAL Dish on EchoStar TV ad sales deal earlier this month I underscored:

Google (will be) a monopoly, an ONLINE ADVERTSIING one. But, what assets does Google really bring to the offline advertising table?

Google owns the online search market, literally, with its own 50% plus market share Google.com, backed up by a proprietary “massively scalable infrastructure.”

How about offline? What does Google own exclusively that an advertiser can not get elsewhere?

NOTHING, as I analyze in “Why Google Television will NOT make money,” despite the “groundbreaking, new advertising system” announced for EchoStar’s DISH Network's 125 national satellite programming networks. 

Google is not a proprietary slam dunk in mobile either, due to the pesky wireless carrier problem, a very “scary” problem for Google.

Christopher Sacca, Head of Special Initiatives at Google, including alternative access, communications, and related product development, decried carrier power last November during an appearance at Oxford University:

We've been getting notes from some of the telco carriers who are saying, look, you need to stop our customers from downloading this thing. They're inserting themselves in between you and an application that you want. I think that has scary, scary implications.

What is really “scary’?

Google’s “fundamental lack of understanding of the mobile data space,” Shawn Conahan, Intercasting Corp., suggests:

To put it simply, the carriers are not “inserting” themselves between consumers and the applications they want as Chris says, rather, Google is inserting itself into a relationship that the carrier already has with the consumer. 

I talked to three people at carriers who thought Chris’ comment was an indication of Google’s arrogance (The first guy brought it up unsolicited, like, “Hey – did you see that Google guy’s comment?”),

The carriers have a direct relationship with their customers and they make a lot of money on those relationships. They would like to make more, and that means offering their customers 3rd-party content and services. The 3rd-party content and service providers would also like to have a direct relationship with the carriers’ customers, but there is the pesky carrier trying to make sure it doesn’t happen, and in a relatively closed network environment such as a proprietary wireless network, the carriers have the ability to protect that customer relationship. And they should, not just from a competitive standpoint, but because spectrum costs a lot of money.

The 3rd-party content and service providers calling for the carriers to open their networks and be dumb pipes should consider the effect of flooding such a network with unmetered access to broadband content. It’s not like you can just light up more dark fiber whenever you want. Google just doesn’t understand what it means to operate in a closed network environment.

The bottom line is that, believe it or not, Google needs the carriers more than the carriers need Google. Yes, Verizon Wireless would like to see higher data ARPU, but let’s not forget that regardless of data revenue, they throw off well in excess of $6 billion in free cash flow, and it isn’t coming from ringtones, games and Google Maps. As such, the carriers are in a position to dictate the terms by which they will have Google on their networks.

Google dictated to?

Eric Schmidt believes the “Power Law” is inevitably in its favor, but may need to come to terms with the fact that other organizations sometimes actually do have more power than Google.


ALSO: Google Engineering: The REAL story and
Google aims to usurp campus email systems and
What Microsoft is telling Google about mobile search and
Google News is NOT newspaper driven: Zell vs. Schmidt and
Why Google IS afraid of Microsoft, big time

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