How Nokia's Symbian Move Helps Google

The cell-phone maker's choice to eventually give away its smartphone software will mean more mobile Web use—and more Google search ads

by Olga Kharif

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Nokia (NOK) rocked the wireless industry June 24 with news it would purchase the portion of Symbian, a maker of mobile-phone software, that it didn't already own—and then give away the software for nothing.

The prospect of free software would surely lure users away from competing cell-phone software makers (BusinessWeek.com, 6/24/08) including Google (GOOG), which in the past year threw its hat into the cell-phone software ring by spearheading the creation of Android, an operating system for wireless devices. Or so the argument runs.

But Nokia's move may play right into Google's hands, by helping to nurture a blossoming of the mobile Web and spur demand for all manner of cell-phone applications—and most important, the ads sold by Google. "There's nothing to say that this isn't what Google's plan was all along," says Kevin Burden, research director, mobile devices at consultancy ABI Research. "They might have wanted a more open device environment anyway. This might have been Google's end game."

Opening the Airwaves

Google, which makes money from ads placed on Web pages and alongside search results, stands to benefit from anything that helps spread the use of the Web—be it on computers or the advanced cell phones known as smartphones that run Symbian software. With the desktop search market showing signs of slowing, the company needs to ramp up usage of its applications from mobile devices. U.S. mobile search ad sales are expected to rise to $1.4 billion in 2012 from $33.2 million in 2007, according to consulting firm Kelsey Group.

But in the U.S. market, Google has long been hampered in getting its applications onto cell phones for a variety of reasons. To now, Web search on phones has been too slow or awkward, mobile data plans and smartphones are often expensive, and carriers and cell-phone makers place restrictions on which applications run on their calling plans and devices.

Google has tried to turn the tide in part by lobbying regulators to make wireless airwaves open to a wider range of applications. It's also been pushing the Federal Communications Commission to make some airwaves available for free public broadband use.

The creation of the Open Handset Alliance, a consortium of more than 30 companies developing Android, is another part of this multipronged effort to remove some costs currently inhibiting handset makers from making cheaper phones able to access the Web. The hope is that by keeping Android free, more people would be able to afford smartphones and log onto the mobile Web—and ultimately use Google applications. After all, 82% of Apple (AAPL) iPhone owners use the Internet through the smartphone—five times the average consumer's usage, according to Nielsen Mobile.

Google's Win-Win

Nokia may be able to accomplish a lot of that groundwork, much more easily. Android lacks scale, and as a startup effort it's been prone to glitches and delays. It would take months for Android to start to significantly impact smartphone sales. Symbian is already the world's most popular smartphone operating system, with 56% of the market.

With Symbian free and open, Burden of ABI Research expects to bump his smartphone sales projections for 2009 by a "single-digit percentage." While smartphones account for 10% of the total handset market today, they could reach up to 25% of the total in three to four years, thanks in part to the Nokia announcement, says Jack Gold, president of consultancy J. Gold Associates.