Google Seriously Looks to the Mobile Space

gPhone? That's the moniker that's been plastered over the headlines since the Wall Street Journal article (Link) that cited Google (GOOG) as having "invested hundreds of millions" into cellular phone development. Reports are that this project goes far and beyond current incarnations of Google products on today's mobile handsets.

So what exactly is Google up to? Are they in fact developing hardware to show to carriers and manufacturers? This in effect could be a Google Phone or gPhone if you so desire to call it. So to break down Google's strategy, I think we need to look at their current and past offerings. Google's made major leaps into the mobile space of late as it expands Google Search, Gmail and Maps onto any and every phone. I expect this strategy to seriously continue, the problem is however, that carriers bog down their cell phones with all kinds of proprietary software. Why do you think Google fought so hard to win open access for the 700Mhz band in the FCC auction. By making that area of the network open, it means that any and all devices would in essence have to work with any and all types of software. It also happens that this band is ideal for longer distance broadband Internet, a space Google desperately wants to be and excel in.

The Wall Street Journal also quoted figures saying that the mobile ad market could be worth $14Billion in 2011, up from about $1.5Billion currently, now that's sizable growth for a business. While Google already makes its billions from Internet advertising; attempts at print, radio, video and mobile ads show the company is intent to broaden itself from a Search company to an Ad firm. The mobile space is that next wave of advertising. Phones with full Internet capability are here and more are on the horizon, none more publicized than Apple's (AAPL) iPhone, which features a majority of full-fledged browser features in its Safari application. Not surprisingly, Google's products (GMail, Maps, YouTube) are available as standalone applications on this product.

If Google is indeed pushing multi-millions into R&D in the cellular space I would think the money is used currently to provide a framework for openness within mobile devices rather than the development of a Google Uberphone. When iPhone was announced it was labelled the "Jesus Phone" so any product that Google may or may not be working on would have the grave distinction of falling under the category of "Yeah, it is pretty cool but it's no iPhone".

With Google's CEO on Apple's board of directors it would be an odd step for the company to try to push itself with a new product into this competitive space, given that Google has no experience creating hardware, except for its servers and mini appliances. A more realistic approach is that Google may in fact be using some R&D resources to create mock-up or engineering versions of cellular device concepts that it shows to manufacturers and carriers in order to try to get everyone on the same page as to what the next generation of technology could and should be. Both from the hardware perspective and the software perspective. For an innovative software company this seems like the logical course of action, however Google is anything but conventional. For all we know, during the Google's Engineering 20% personal time someone had the bright idea for make a "simple Internet phone" and here we are today.

What this all leads to is Google's attempt to place itself within the mobile space in a very meaningful way. Reports go on to say that Google's device would offer free subscriptions to customers and support the costs with advertising. Now that is certainly the ambitious undertaking and one that has the potential to turn the industry on its ear. However, the idea of advertising before, after or during phone calls or regular phone use is certainly a tough sell. If Google can get the message across that devices should be open and function equally well with all types of software, then the innovative nature of Google's products would be at the forefront for millions of cellular users. A new wave of Internet enabled handsets are much more likely to prominently feature Google services, ad supported of course, if the company is deeply involved during the development phase.

No one at this point who is speculating can say for certain what Google's plans are, but the facts of the matter are clear. Google making a push into the hardware space would be by far its toughest challenge yet and the carriers would certainly have high demands of their own. On the software side expect to see the G inside more devices as Internet capabilities of cellular phones improve and users become accustomed to using their mobile phones the same way they use the Internet at home. Google's shown that a broad base of users click aplenty on targeted advertising and if the same Net experience can be found while on the go, I would, and certainly Google hopes for strikingly similar advertising results.

Disclosure: Author is long GOOG, AAPL