Feb. 28 was a busy day for Google (GOOG). A few utterances from Finance Chief George Reyes at an analyst conference about slowing growth and the need for new ways to "monetize" the business sent the company's stock into a tailspin. Google's PR machine issued a statement to clarify remarks that were reported and dissected around the globe, while analysts dispatched reports saying the comments were taken out of context (see BW Online, 3/1/06, "Google Tries to Make Nice").
Amid the Reyes ruckus, it was easy to overlook other announcements Google issued the same day. The search giant highlighted one of the areas it hopes will generate new growth: mobile services. It's "extremely strategic" for the company, says Deep Nishar, Google's director of product management who also heads the company's wireless efforts worldwide.
On Feb. 28, Google said handset maker Sony Ericsson will offer its search and blogging features on several phone models this year, and it unveiled Google News for mobile devices, a service that lets users get headlines and search for articles. Those follow earlier announcements that Motorola (MOT) plans to place a Google icon on its phones, and Vodafone (VOD) will collaborate with Google on mobile search.
So what's behind Google's mobile strategy, and can it make money from the effort? Nishar fielded those and other questions from BusinessWeek Online reporter Olga Kharif on March 1. Edited excerpts of their conversation follow.
You just announced you'll provide blogging and search tools on Sony Ericsson phones. How will your tools be better than similar applications already out there?
Google will become integrated into the phones. Users will be able to access Google search with just one click. Mobile blogging will be a very integrated experience as well: When people take a picture, they will have an option to blog it -- essentially, to post it online -- with one click.
Google has been making a lot of mobile-related introductions recently. Why are we seeing all of these now?
We are finding that mobile users are getting more sophisticated by the day. They are searching not just for the standard categories like weather and stock quotes, but they are also looking for more content. That symbolizes a certain maturity of the market. So we want to take advantage of that.
Google News for mobile devices, for example, is pretty unique in the mobile world. [It] only provides sources that were created specifically with your phone in mind. These are all sites that we have crawled and indexed that have been especially formulated for the phone or personal digital assistant [PDA]. When you click on something, the story [will be] formatted to fit on your phone.
Obviously, the goal is to make money off of these mobile efforts by offering mobile-search advertising. How much potential do you see there?
Mobile search is definitely a fairly large opportunity. As we examine the volume of mobile and SMS [short-text messaging] search, we find that day-over-day volume is growing nicely. There's quite a bit of appetite among users. We also believe that the recent announcements that we've made -- for example, the agreement with Vodafone -- shows that operators are seeing similar demand from their user base, also.
How do you monetize mobile search? Do you expect to derive revenue only from ads, or also from revenue sharing with carriers?
In general, mobile data services are not even close to their peak. It's too early to talk about heavy monetization. But we are looking at different options. We've recently conducted a trial in Japan of using mobile text ads on search pages. When people do a search on Google.com on their mobile device, they see one or two text ads that are clickable.
Did a lot of people click on those?
These mobile search ads did very, very well. But you have to remember that Japan is a very advanced market when it comes to mobile users. Roughly 25% of Internet usage happens on mobile devices there. It may or may not work as well in other parts of the world. The products and services that we offer in different parts of the world will be different. And even the monetization model could end up being different in different parts of the world.
How important strategically is the mobile business to Google?
For Google, it's extremely strategic. Our mission is, take the world's information and make it universally available and useful for our users. And we don't believe all the users will use PCs to access content. Especially in emerging markets where cell phone penetration is deeper than PC penetration, cell phones might become -- or, in some cases, have already become -- the primary means of accessing data.
What's your overarching mobile strategy?
The phone is not the PC. It's about creating the right experience for the mobile user, so they can find exactly what they want, quickly and efficiently. People search differently on mobile phones; they don't browse as much, as PC users do, for example.
We also focus on personalization. The phone is a very personal device you don't share with your spouse or your children like you do the PC at home. How can we make this interaction even more personal? Well, we launched the Google Personalized Home page, that's also now available on the phone.
Finally, our strategy is really about globalization and how our mobile services and offerings need to be different around the world. I spend 30% to 40% of my time outside [the U.S.], talking to users about various services and how they are using them. In India, people love using wireless data services with interactive voice response. People actually pay extra to use that service. Not so in the U.S. In China, SMS is very, very big. So our goal is to tailor our products and services to these various markets.
This global strategy is going to take a lot of resources. Can you give me some idea of how much Google is putting into it?
The resources are very significant. I have teams in five locations around the world, and many of them work on local problems. The staff is fairly substantial.
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