A Closer Look at Google’s New Mobile Consortium

Google announced the beginnings of a consortium that includes 30-plus members to create an open source mobile operating system called Android. The operating system is built on the open Linux Kernel and uses the liberal Apache v2 open source license.

The liberal open source license means developers will be able to build applications for mobile services worldwide much like they do for the Internet today. Updates and new applications will be managed through a publicly accessible repository where each platform module is assigned an owner who validates developer contributions.

The consortium lacks some big names such as:

• Other Internet portals like Yahoo!, currently one of the leaders in the mobile space
• Microsoft, which likely views the open source consortium and, especially Google, as competitive to the company’s internal efforts
• AT&T and Verizon, two dominate carriers with the majority of U.S. mobile phone subscribers
• Nokia, now the owner of NAVTEQ, which provides Geographic Information Systems (GIS) data that powers the routing information for most Internet and mobile mapping applications
• Apple, which has deep relationships with both AT&T, via the company’s iPhone, and Google, where Eric Schmidt is a board member

So, What Does All This Mean?

First, we are reiterating our U.S. mobile forecast through 2012. The forecast breaks out usage and revenue into the three ad segments: Ad-Sponsored Voice Services, Mobile Search and Browse and Multi-Modal Applications. Today’s announcement gives further indication that this is indeed the correct lens through which to view this nascent ad market. Our U.S. forecast calls for these three segments to grow from $33.7 million to $1.42 billion, a 116 percent CAGR, through 2011. We should start to see mobile services via Android in 2008 in Europe, the U.S. and Pacific Rim.

Importantly, we were very adamant (much to the disappointment of many stakeholders with embedded applications and walled services) that the mobile market would evolve to become an extension of the Internet. Today’s conference call and announcement indicated that “Android will include a full browser experience and that no special development effort for mobile browsing will be required.” Again, in our mobile forecast we made note of the fact that existing advertiser networks and subsequently current Internet ad economics would play a crucial role (clients and those with our U.S. mobile forecast, please see slides 36, 38, 40 and 41, which outline Internet ad economics and compare our forecast assumptions).

Next Date to Watch: Nov. 12

On that day, the Software Development Kit (or SDK, if you like acronyms) will be released. This will give the first look into the state of interface and tool set that has been developed. “With devices built on the Android Platform, users will be able to fully tailor the phone to their interests. They can swap out the phone’s homescreen, the style of the dialer, or any of the applications.”

And of course, my personal favorite from the consortium Web site, “Applications are not set in stone, and differentiation is always possible. For example, if you want to include Hotmail instead of Gmail, it will not be an issue.” The person who added this line has a keen sense of humor.

The Lingering Questions …

On the conference call, Google sidestepped the rampant rumors of a Gphone prompting Jeff Graham of USA Today to compare Schmidt’s comments to a political campaign by asking, “What’s the deal?” Schmidt would only say that there would be thousands of Gphones and that Google does not preannounce any products. Net/net: Expect more speculation about the Gphone.

And Apple? Schmidt praised the iPhone, mentioning that he is in fact an iPhone user. Later, a Telegraph reporter mentioned that the Apple Runs LS 10 and comes out this week in Britain and probed for a connection. Andy Rubin, founder of Android and now the Director of Mobile Platforms for Google (the company acquired by Google and the namesake of the mobile effort), said to that question many companies will build on top of this platform.

Reading the Tea Leaves (Purely Speculation, for Fun)

Given:

• AT&T is the largest U.S. wireless carrier
• Apple’s partnership with AT&T
• The historic competition between Apple, Microsoft and Google
• Microsoft’s statements around the importance of the mobile ad market and the company’s computer operating system market share
• The SDK release next week, which, depending on how one reads into the release, may or may not include at least some touch screen application development tool kits

It sure looks like Apple sits in one of the most important positions in this nascent market.