Everybody Wants to Rule the World

As with any criticism that gets up this much steam, those critics have a point. What they are saying, in fact, is undeniably true, and even the most ardent Google fanboy would have trouble dismissing it.

The only problem with this point is that it is beside the point.

Its akin to saying that Microsoft Corp. (Nasdaq: MSFT) makes money only on software. Well, duh. The fact is that Microsoft makes a boatload of money in software, thank you very much. Advertising is even bigger than software, and Google is on its way to showing us just how much money can be made with its recent moves to dominate mobile advertising.

Sure, folks have talked about the opportunity in mobile advertising for years, but its really happening this time. The big missing piece was a Web browsing experience on a small device. Now Apple Inc. (Nasdaq: AAPL)s iPhone has shown us that Web users will browse on their phones if the experience is good enough, and Google is going after a mobile business model based on something much more powerful than hardware sales.

You guessed it -- advertising.

Now, theres a natural limit to how low iPhone prices can drop, because the hardware is what Apple makes its money on. And theres a natural limit to how much AT&T Inc. (NYSE: T) and other network carriers can subsidize prices, because they must make the money back on their two-year service contracts. And phone users hate the weird charges, the lock-in on both phones and contracts, and they always like something cheaper.

Sounds like a market Google would love to disrupt.

Enter the Android platform. Any handset maker and any network carrier can use it. At least one report says Android will capture 14 percent of the world market share by 2012.

For Google, the point is that all you Android phone users will be predisposed to use Google software for email, calendars, and oh yes, search. And youll be looking at all those pretty Google ads -- and clicking. (In contrast, Microsoft must pay carriers to feature Bing as the default search, but Google just hands them an operating system.)

And those ads arent any ordinary ads, either. As you use your Android phone and your Google apps (on your phone or any other device), Google learns more and more about you to target ads that work better, which means they can charge more for them. But thats not all.

Recently, Google rolled a bomb across the floor, directed at the GPS industry. Android phones now feature a free turn-by-turn directions app based on Google Maps.

First, sell your Garmin stock. (Ill wait right here for you.) Now, ask yourself how much Starbucks will pay to make sure that its their coupon being flashed on your phone instead of one from Dunkin Donuts. Oh yeah, but thats just advertising, right? Yes, but now its advertising that is even smarter because it knows where you are and what is around you. But thats not all, either.

Despite a raft of denials, Google is rumored to be working on a Google-branded phone that uses data networks to do VoIP phone calls only.

Why do that when so many handset makers are embracing Android? Some speculate that these Google phones might be free and unlocked for use with any carriers data plan, just as a way to seed the market for Googles mobile advertising.

And you thought giving away the razor to sell the blades was old hat.

Make no mistake, folks. Google has many guns pointed at the same thing: Advertising more powerful and more lucrative than anything the world has seen before. But yes, they dont seem to make money at anything but advertising.

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Tag: Google, Mobile

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