Google’s Latest Ad Play: Becoming A Wireless Carrier
Last week, Google finalized a deal to become a mobile virtual network operator (MVNO), offering consumers branded mobile services through a partnership with Sprint.
For the uninitiated, a MVNO is essentially any company that buys wholesale mobile services from a physical network operator (ATT, Sprint, T-Mobile or Verizon in the US) and repackages them for retail sale to consumer or business customers.
On the surface, this sounds like a pretty straightforward and safe model, especially for a trusted brand like Google, but succeeding as a MVNO is tricky business, and there are more casualties, including high profile brands like Disney, than there are success stories like Virgin Mobile.
So why is Google doing it?
Google is a pragmatic company, and their play is more about protecting and growing their core revenue stream (advertising) than it is about furthering Android’s already globally dominant market share. As the price of mobile services continues to decrease, and consumer dependency on smartphones and tablets continues to rise at the expense of desktop usage, mobile ads are becoming increasingly important. Despite Google’s already significant percentage of the mobile ad market, they have to be aggressive and creative about channel growth since mobile ad rates are significantly lower than their desktop counterparts.
This leads to two important, related questions…
- How does Google plan to succeed?
- What’s in it for me, the consumer?
Google is an Internet company that makes money from ads when we consume content, not when we make phone calls, so expect big, attractively priced data bundles to facilitate increased consumer data consumption.
Tiers are Falling
We’re already accustomed to inline ads on the web, in mobile apps, etc. (unlike Amazon’s kindle with offers which places awkward ads alongside books), so Google may offer dramatically reduced-cost / subsidized tiers in exchange for additional ad placements. If so, these tiers are likely to be the lowest prices consumers have seen, and expect that the ad solution will be something much more creative than just increasing the volume of ads served.
In addition to serving ads, Google will have access to a different level of personal information about every subscriber (name, address, credit score to just scratch the surface) for behavioral profiling and targeting. Their subscription agreement may require use of this data, or they may let subscribers opt-in for less expensive service (see above).
Google will likely be successful operating as a MVNO, in part for doing the necessary tightrope walk to offer Android handsets on their service while nurturing Android OEMs and carriers, even though their primary play isn’t selling more Android handsets… but that’s not all.
Google will be agnostic with regard to handsets. We’re about to be in a world where iOS devices (and Windows Mobile and Blackberry too) are made available on a Google branded service, which leaves me wondering about the future Apple’s spartanly branded iPhone. I’m fairly certain this won’t work for Tim Cook and company: