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…

  1. How does Google plan to succeed?
  2. What’s in it for me, the consumer?

Big Data

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.

Hyper(Active) Targeting

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).

Predictions

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:

google_iphone

The Impact of Content Ecosystems on User Experience

 

It’s no secret that consumers want an alternative to cable. Even heavyweight HBO has responded to the call, announcing earlier this year that they will launch an a la carte digital service in 2015 (details pending). Sister channel Cinemax will likely leverage the platform, and competition will follow in short order.

Although an everything on-demand world is amazing for the instant gratification the Internet has provided, it requires a significantly different way of thinking about programming. It’s a great benefit that we no longer have to know a program schedule (or set a DVR to record a whole season, etc.), but all these channels we want on an a la carte basis are dependent on some kind of hardware to deliver them to your television, and the agenda of the hardware manufacturers is where some important issues arise for the consumer.

On the surface, the aesthetic interface of all these devices (Amazon Fire TV, Apple TV, Roku, etc.*) is very similar. Channels represented by square-ish buttons, which reveal scrolling bands containing that channel’s content, etc. Scratching beneath this mostly interchangeable veneer reveals some pretty drastic user experience implications based on the business model of the device manufacturer:

Amazon Fire TV: By design, this is another Amazon cash register designed to get you to all things Amazon first. Despite the box implying that there’s a ready-to-go suite of 3rd party channels (e.g. Hulu, Netflix, Showtime, etc.), you have to find and download them. This isn’t difficult, but they are buried in the “Apps” menu… hardly the most obvious place to look for what people currently think of as a TV channel. Once added, they become part of a seemingly useful “most recent” band of items near the top of the screen, but in a world of on-demand, how relevant is the last channel viewed being at the top? There’s also a top-level search on the Fire TV, which was initially promising, but searching for “Homeland” only reveals purchase options via Amazon, a complete miss from a Showtime subscriber’s perspective.

Apple TV: Not surprisingly, Apple TV is centered around their iTunes ecosystem. True to form, they also control what third party services and channels are available on deck, and their order. As a long-time Apple user, I’m not going to debate Apple’s control of what’s on their devices, but controlling the order certainly cripples and for some probably kills the user experience. The problem is that the order is clearly the result of business deals, not a focus on users (e.g. channels or services individuals don’t subscribe to or care about should be removable, or at least moveable to the bottom). The only presumable benefit of a dictated order is that one becomes familiar with what channel is where, but that starts to feel like a one-size-fits-all cable lineup, not like any of Apple TV’s iOS sister products.

Roku: Until the supreme court ruling against Aereo, Roku was probably the lead contender for actually being able to cut the cord and not look back. Roku is the most flexible of the three, with literally 1000s of services and channels that include pretty much everything except iTunes. Granted, nobody would need more than a couple of dozen on the high side. And while M-GO has prime placement for movies because of a revenue share deal, even that doesn’t box a consumer in. One of the nicest feature is Roku’s top-level search, which actually looks across all subscribed services and channels (in addition to M-GO), and gives results that include the cost from each. The order of the channels is also editable, which is useful since most of us are, ultimately, creatures of habit.

A key (theoretical) benefit of cord-cutting from a consumer perspective is the ability to quickly find and watch desired content which, likely to the distaste of individual channels and services, isn’t led by a channel’s brand. Although it’s early in the game, what’s happening so far is more akin to trading out a cable subscription for a device whose manufacturer has their own “me first” content agenda appended with a la carte services. Using the “Homeland” example above, what matters to a consumer is that they are able to get to the content intelligently from the top level of their device of choice, not have to navigate to it by channel hierarchy or pay for it again if they already subscribe to Showtime.

To some degree, there is a parallel to how the music industry responded to the (pre-Napster) wild west days of web 1.0. Record labels thought they could go direct to consumer by delivering music online, bypassing retail record stores. It didn’t work because even a band’s biggest fans don’t typically know what label they are on. The difference here is that the channels are being delivered by third-party devices that still choose to organize content primarily by channel. To be clear, it would be foolish to lose channel branding entirely, but it is becoming less primary and should evolve into an optional organizational method for consumers that lives somewhere underneath a global search-based design.

Unfortunately, as channels begin to offer a la carte subscriptions independent of cable subscriptions in 2015, the main user experience change cord cutters are likely to see is a separate bill for each service and channel. This is for two reasons: there’s a hard cost in device manufacturers aggregating subscriptions (which will have consumers crying foul in no time), and there’s a conflict of interest with each hardware manufacturer’s content ecosystem.

* Google Chromecast was intentionally left out, not to imply it isn’t a significant player, but because I haven’t personally used one.