Google's Nexus One strategy: It's the advertising, stupid

Google's Nexus One is certainly a nifty device, and has generated more than its share of hype. But ultimately, Google's mobile strategy isn't about flashy hardware --- it's all about generating money from advertising, just like in the traditional Internet.

Google's multi-billion dollar empire is built on something rather humble --- those simple text ads you see whenever you do a Google search. Google's move into mobile with Android and Nexus One isn't being done primarily to generate profits from hardware or software. Instead, it's to make sure that Google search and services dominates the mobile Internet in the same way it dominates the Internet now --- and displaying ads on the mobile platform.

An excellent New York Times article, Google Moves to Keep Its Lead as Web Goes Mobile, points out that mobile devices represent a threat to Google, because people who use them may not use Google or view ads on their devices in the same way they do when seated in front of their computers. The articles notes:

As people increasingly rely on powerful mobile phones instead of PCs to access the Web, their surfing habits are bound to change. What's more, online advertising could lose its role as the Web's primary economic engine, putting Google's leadership role into question.

Google was smart enough to recognize this several years ago, and so it has been preparing well for the mobile future. It has been doing everything it can to ensure that it's easy to get to Google sites, and that Google provides additional services for mobile users, notably geographic services. And it wants to make sure that it dominates mobile advertising as well.

The article points to a long line of acquisitions that are key elements of Google's mobile strategy, including buying the AdMob advertising network for mobile applications. And it says that Google has spent more money than its rivals in various technologies tied to location. Location-based services are not only useful to users, but they open the door to being able to premium ad rates.

The Times sums up Google's strategy neatly when it says:

"[Vic Gundotra, a vice president of engineering at Google] said all of Google's mobile moves were driven by one objective: pushing the industry to open up in an attempt to replicate on mobile phones the environment that has allowed the PC-driven Web to grow at explosive rates.

"Before the mobile Web really started to take off, there were many barriers to consumers," he said. "Sometimes it was limited choice about what you could do with your phone," he said, adding that in some cases, it could take as many as 19 clicks for a user to get to Google's site.

You can be sure that it won't take 19 clicks to get to a Google site on Android or Nexus One. Nexus One and Android will be an expressway to many Google services, including search, maps, mail, and a variety of location-based services.

All this is one more reason why Microsoft is falling behind Google in mobile. The point isn't really what operating system powers a phone; the point is whether those phones use Google Internet services or Microsoft Internet services. Right now, it looks like the answer is Google. Microsoft would do well to emulate its strategy.

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