Analysts: Google Plans Lack Substance

As much of the technology sector goes ga-ga for Google (Nasdaq: GOOG) after this week's announcement of the Android open software initiative, industry analysts are excited, but many aren't yet sure exactly what to make of it. (See Google Makes Mobile Move, Google: Android's Not Evil, and Android's Data Impact.)

With the free Linux-based, open-source Android operating system, Google aims to speed the development of Internet applications for mobile handsets. And the Internet giant has galvanized an impressive list of mobile players to support the Android platform and kickstart the Open Handset Alliance . A few of the big shots in the alliance are China Mobile Communications Corp. , NTT DoCoMo Inc. (NYSE: DCM), and Qualcomm Inc. (Nasdaq: QCOM).

But analysts are not clear on exactly what Google's proposition is, and some doubt Google's ability deliver on vague goals related to mobile advertising.

"It's difficult to analyze because they haven't given much detail," says John Delaney, principal analyst at Ovum Ltd. . "How much of this is about posturing and how much is it about delivering something new? We're always in danger of ascribing omnipotence to Google."

Delaney doesn't think Google's proposal to reduce the fragmentation in mobile phone software is actually all that new -- that's what Sun Microsystems Inc. has attempted to do with mobile versions of Java.

Vincent Poulbere, (another) principal analyst at Ovum, agrees that Google's plan lacks details.

"The announcement comes as a criticism of existing platforms -- namely Symbian Ltd. ," says Poulbere. "But it's an announcement without much concrete in it yet."

Ultimately, there is potential for Google to replicate its wired Internet advertising-based revenue model in the mobile sector. But the mobile advertising business model won't be a near-term reality because of the relatively low use of mobile Web services.

"That's a very steep hill to climb," says Delaney. "As more of [Internet applications] happen on the mobile phone, the more conducive it will be to advertising."

One analyst also questions how Google's ad-supported Web services will work for mobile pre-pay customers, which make up roughly 70 percent of the world's mobile users. In many markets, operators do not require pre-pay customers to register their personal details, which will make targeting those people somewhat of a challenge.

"Web content is not friendly for pre-pay customers," says Dean Bubbley, founder of Disruptive Analysis Ltd. . "Perhaps [Google] will be happy chasing after the same 30 percent of high-end contract customers [as everybody else]."

The one thing that didn't surprise analysts about the online giant's mobile move is the absence of a Google handset. They say the device manufacturing business is just too far removed from Google's business model, which is based on advertising revenues. (See The G-Phone Cometh, 3G G-Phone, G-Phone, No Strings, Google Phone: Out of India?, and Google's Mobile Hiring Frenzy.)

"I never thought they would develop a phone," says Delaney. "It's clear why Apple Inc. (Nasdaq: AAPL) would, because it makes most of its money from hardware. Google doesn't make money from hardware or end customers."

"Google isn't looking to offer just a product," says Frank Dickson, chief research officer at MultiMedia Intelligence . "What they're doing is allowing people to monetize other applications."

As for Google's mobile infrastructure ambitions, those plans remain elusive. Google has indicated an intention to participate in the upcoming Federal Communications Commission (FCC) 700 MHz spectrum auction. And it has invested in femtocell startup Ubiquisys Ltd. . (See 'Open Access' Gets Closer, FCC Straddles Open Access Issue, Google Eyeing UK Broadband?, Apple Joining Consortium Bid for 700MHz?, Google Pledges $4.6B for Spectrum, and Femtocell Startup Pockets $25M.)

One analyst says that being some form of infrastructure provider is a more likely fit with Google's business model than making a mobile handset.

"Google has an interest in getting as much spectrum operating under an Internet model rather than a telecoms model," says Ovum's Delaney. "That fits with what they do. It's about furthering access to the Internet."

Bubbley at Disruptive Analysis is not convinced Google will actually become a mobile network operator, though. Rather, he could see Google partnering with a mobile operator to bid for spectrum in the U.S. or other markets.

At the very least, calling the mobile industry's soothsayers about Google's mobile move has produced an entertaining list of sound bites (or clichés). Here's a choice few:

• "Google is trying to chuck a boulder into the pond of the mobile industry." — John Delaney, principal analyst, Ovum

• "This is Google pulling its chair up to the mobile dinner table and saying, 'Thank you, can I have my share now?' " — Shaun Collins, senior analyst, CCS Insight

• "This is a huge warning shot across the bows of everybody in the industry." — Collins, CCS Insight, again

• "We see a battle of giants." — Vincent Poulbere, principal analyst, Ovum

— Michelle Donegan, European Editor, Unstrung