Thursday, October 4, 2007

Google vs. AT&T and Verizon

"We don't believe in a world where you have to give everything away for free." AT&T (T) Mobility's Mark Collins, vice-president for consumer data. Thus is the reason a Google (GOOG) phone, if it ever happens, will crush the competition.

Unlike Apple's (APPL) iPhone that set people back an hefty penny, a Google phone that is either free or placed on a network for peanuts will have user flock to it. While many people did not make the shift to AT$T following the iPhone launch due to carrier cancellation charges, a free service would eliminate that consideration as the fee would be saved after only a month or two of service.

While the big carriers (AT&T, Verizon (VZ) and Sprint (S)) may not believe in giving anything away, that's precisely what Google believes and is wildly successful doing. Even without a network, Google can connect mobile advertisers with users based on information from its search engine and maps just as it has done on the desktop. From a customer using Google search, for example, an advertiser learns they are at the corner bakery in the center of town and it learns the person has a taste for sweets. Wireless carriers have customer information as well, but they are not a data warehouse, and do not use it the way Google does.

Google has been rumored to be bidding the $4.6 billion that may be needed to win a spectrum auction. If it does and wins, there are a few option options: continue its broadband expansion, or perhaps buy a wireless carrier, such as the listless Sprint (S). A purchase of Sprint would allow it to launch the first free ad supported nationwide phone service.

Going this route would be very expensive but Google has the pockets to absorb the initial revenue disruption transferring the revenue structure. Long term, it would be a winner as the flood of new subscribers would eventually more than compensate for the early losses that would be inevitable. How long would the program take to start? How about immediately. On Sept. 17, Google announced a Web program aimed at advertisers who have created sites for display on cell phones. Like its online ad network, Google's AdSense for Mobile delivers ads relevant to the advertiser's mobile audience.

I love my blackberry, hate my carrier (Sprint) and personally would do a dance were Google to purchase them. Google has still kept it's soul (unlike Apple) and like everything else they have done, the Google Sprint combo would end up being great.

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