Global Economics

Nokia and Google Vie for Mobile Web Role


With the cell phone fast becoming an Internet entry point of choice, the handset maker is grappling with Google over the wireless Web

The battle for Internet turf is no longer just a figure of speech. Nokia (NOK) on Feb. 11 announced a quartet of new handsets designed to more closely link global positioning systems (GPS) with the mobile Internet, bringing the Finnish company into more direct competition with Google Maps and staking a bigger claim to the emerging market for so-called location-based services. The announcement came on the same day that Google (GOOG) encroached on Nokia territory by demonstrating a prototype of its Android operating system for mobile phones.

Both companies are betting that where people are located will become an important part of how they use the Net. Nokia is trying to claim that arena with handsets such as its new, top-of-the-line N96. The device allows owners to shoot videos, "geotag" them with info about where the images were taken, and upload to a Nokia Web site that sounds suspiciously like Google's YouTube.

Mobile Devices Take the Lead

Of course, the GPS-equipped phones also help people find their way around, using satellite signals as well as the cell-phone network to tell customers where they are and to provide travel directions. A new feature gives instructions designed specifically for pedestrians, in contrast to the systems that provide driving directions now prevalent on the market. Thanks to Nokia's planned acquisition of mapping software company Navteq (BusinessWeek.com, 10/1/07), the cell-phone giant is gearing up to compete with Google in mapping as well.

As a maker of devices rather than just software, Nokia thinks it has an advantage over Google as people increasingly access the Internet while they're mobile. Cell-phone keypads and software are less standardized than PCs, making it more difficult for companies to let their customers easily surf the Net. Like everybody in the industry, Google is still feeling its way in the nascent mobile search and ads business, as evidenced by the company's recent announcement (BusinessWeek.com, 1/24/08) of its partnership with Japanese cellular giant NTT DoCoMo (DCM).

Nokia has 40% of the global handset market and more than half of the smartphone market. That and its software prowess give the company great clout to determine the standards that will be used to access the Internet via handheld devices. "I don't know if we're in a position to decide," Anssi Vanjoki, Nokia executive vice-president for markets, told BusinessWeek. "But Nokia's power position will certainly influence the development of different interfaces."

Nokia's New Line of Handsets

Part of Nokia's power comes from its ability to develop a broader array of products than its competitors. That was on display in Barcelona, where much of the mobile industry was gathered for the 2008 Mobile World Congress (BusinessWeek.com, 2/8/08). The company introduced four handsets designed to extend the limits of what a mobile device can do as well as to make wireless Web and GPS functions more accessible to the masses.

At the high end, the $800 N96 is similar to the previous top-of-the-line N95, with features such as GPS and high-quality video recording, but it features a bigger screen and improved ability to play TV programs digitally broadcast over the air or streamed via mobile networks. The N96, due to hit stores sometime after midyear, includes a "kickstand" allowing it to be propped on a surface for watching video. It also has a 16 gigabyte memory so it can store whole movies.

One feature which may give Google pause lets users of the N96 as well as other Nokia handsets instantly upload photos and videos to a YouTube-like Web portal operated by Nokia, called share.ovi.com. "They're definitely competing with Google," says Neil Mawston, director of the global wireless practice at market-watcher Strategy Analytics. Mawston points out, though, that Nokia also is reacting to Google's attempts to invade the mobile handset space by developing Android. Nokia's strategy, Mawston says, "is partly offensive and partly defensive."

A Global Internet Powerhouse

At the lower end of the products introduced on Feb. 11, the 6220 classic offers features previously exclusive to high-end phones, including a 5.0 megapixel camera and GPS, for about $475. In markets where operators subsidize handsets, the price to consumers certainly will be much lower. Such phones expand the number of users with access to the mobile Internet—and give weight to Nokia's long-held assertion that most of the world will access the Net via their phones rather than via PCs.

That could be especially true in fast-growing emerging markets, where lack of broadband connections and reliable electricity restrict the spread of PCs. "The PC in India is the mobile phone," Manoj Kohli, CEO of Indian provider Bharti Airtel (BRTI.BO), said at a separate event in Barcelona.

Already, says Nokia's Vanjoki, the company's older N70 smartphone is available for around $150 and the price continues to fall. With some 1 billion Nokia handsets now in circulation, the Finns could well emerge as the dominant suppliers of Internet devices for much of the world. Estimates are that 5 billion people will have access to a mobile phone by 2015, bringing the Internet to people and places that have so far been excluded from electronic media and communications.

Consumer Backlash?

One risk for Nokia is that customers will begin to resent its commanding market power in the same way that some people resent Microsoft's (MSFT) dominance of operating systems or Google's dominance of search. The company's managers are certainly aware of the danger—and Vanjoki, for his part, is adamant that Nokia doesn't want to "own" the Internet. He notes, for instance, that the company's ovi service—its platform for Internet services such as photo sharing—will be open to other software developers as well as rival handset vendors.

A company's image among consumers, Vanjoki told BusinessWeek, "is completely dependant on behavior. There are responsible players and there are people who want to monopolize." Nokia intends to belong to the responsible group," he insists. "Consumers are demanding, and they penalize you if you don't behave."


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