The Art Of The Nudge: Why Google Wants To Be A Wireless Carrier

From my Forbes blog:

Confirming rumors circulating for some time, Google today said it will indeed launch its own wireless Internet service later this year. But the Internet giant said it plans to do so on a small scale, to prove there’s a better way to combine free WiFi-based phone and data services with cellular networks.

Sundar Pichai, Google’s senior vice president of products, told an audience at the Mobile World Congress conference in Barcelona that Google will announce more details of its plan to become a Mobile Virtual Network Operator, or MVNO, offering service for smartphones under its own brand. Recent reports said Google will work with T-Mobile and Sprint to provide cellular network coverage in cases when WiFi isn’t available, even to the extent of resuming a call on those networks if it gets dropped.

It’s yet another in a long line of moves by Google to push often recalcitrant industry players along. That includes its Android mobile software (which arguably has become a profit center of sorts if you count some $10 billion in gross app revenues), its Nexus phones and tablets (which surely don’t bring in much if any profit), its fiber broadband service in several cities (probably the closest analog), all the way back to its 2008 bid for radio spectrum (which it lost, perhaps purposely, to get Verizon and others to buy it and eventually expand wireless Internet access).

While Google at times in the past has been more cagey about its intentions when it introduces products and services outside its core, this time it was quite clear about why it’s doing this. It isn’t trying to become a large-scale wireless operator, Sundar Pichai, Google’s senior vice president of products, told attendees:

“We don’t intend to be a network operator at scale. We are working with carrier partners. You’ll see our answer in coming months. Our goal is to drive a set of innovations we think should arrive, but do it a smaller scale, like Nexus devices, so people will see what we’re doing.”

In other words, it’s the latest example of how Google has become a master of the nudge. All of those moves are intended to push software developers, hardware partners, carriers, and competitors to improve their products and services, because the better the hardware, software, and Internet access they provide, the better Google’s advertising business does.

Read the rest of the post.

Facebook’s New Gift Service: Nice, But Not Yet An E-Commerce Game Changer

From my blog The New Persuaders:

Just in time for prime gift-giving holidays like Friday’s World Rabies Day (or if you prefer, Ask A Stupid Question Day), Facebook today launched a social gift service. It’s rolling out to only a select few for now.

I must be one of them, because I was able to send something to my wife to try it out. But in its current form, I doubt I’m going to use it much.

This isn’t the 2.0 version of the Facebook Gifts virtual-gift service that the company shut down two years ago, by the way. In fact, the new Gifts is built upon, and run by, the folks at Karma, the gift-giving service Facebook acquired in May.

It actually looks pretty good. And while I have ordered precisely one gift that obviously has not yet been delivered, so I can’t judge the entire gift-giving process, it worked quite smoothly. I clicked on my wife’s Timeline, clicked the gift button, and off I went to order her some caramels. She can even pick her own flavor–that’s pretty cool.

In this case, I obviously know her address, so one advantage of Facebook Gifts–not having to know or ask for someone’s address–is moot in my case. What’s more, I didn’t get an automatic reminder I might get if it were her birthday, so that bit of friction elimination wasn’t a factor for me either. But it’s fast and easy to send gifts to friends, and that’s great–not just for consumers, but for Facebook, which can use a service that brings in revenues not dependent upon its brand of advertising that many large marketers are still doubtful about.

So what isn’t great, at least for me?

* A lot of the most prominent gifts are pretty vanilla–teddy bears, spa appointments, flowers, cupcakes. Maybe they’re fine products. Maybe they’re the sort of thing most people give their friends. But for a service with a tagline “real friends, real gifts,” too many of these products seem just too impersonal. Products, especially gifts, are not necessarily fungible, and all the less so for close friends for whom you’re supposed to be getting something special. And if they’re not close friends–and let’s be honest, most people don’t have several hundred close friends–I probably won’t be sending them many gifts, from Facebook or anywhere else. …

Read the complete post at The New Persuaders.

Five Reasons Apple May Not Dare To Sue Google

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(Photo credit: Wikipedia)

From my blog The New Persuaders:

Now that Apple has scored a decisive win over Samsung in its smartphone patent trial, the big question is whether the maker of the iPhone and the iPad will go after the real enemy: Google. The search company is the maker of the Android software underlying Samsung’s and many other companies’ mobile devices, after all.

But a direct shot at Google looks unlikely at this point for a variety of reasons:

* Apple’s schoolyard bully strategy of going after the legal weaklings like Samsung worked like a charm, so it’s likely to continue going after hardware firms such as HTC and the now Google-owned Motorola Mobility, rather than Google directly. There are many other cases involving those companies, as well as Samsung, around the world–plenty to keep Apple busy, especially now that it has such a clear victory to build upon.

Indeed, patent expert Florian Mueller of FOSS Patents, a persistent Google critic, thinks Apple is more likely to go after first. As Mueller told Fortune’s Philip Elmer-DeWitt: “If I were in Apple’s shoes the next company I would sue is not Google, but Amazon, which has an even weaker patent portfolio than Google and sells large volumes of Android-based devices with a subsidies-centric revenue model, which is even more of a threat to Apple’s margins than Google’s advertising-based model.”

* Other hardware makers may now decide to settle with Apple, ratcheting down the need for Apple to go after Google. Analyst after analyst notes that with the clear loss for Samsung, the leader among Android device makers, other firms may decide it’s not worth continuing a fight they now seem more likely to lose.

* Apple looks less likely to win a patent infringement case versus Google. For one, Google itself mostly makes only software, and although its Nexus S device co-branded with manufacturer Samsung was identified by the jury as infringing Apple’s patents, it’s the only one and it’s not clear whether a single device provides a strong case for a separate suit. (It’s also not on Apple’s list of Samsung products it wants banned from sale.)

What’s more, Google doesn’t charge hardware companies for using Android, relying instead on ad revenues derived from Android device use, so there may not be much for Apple to sue about. Finally, let’s not forget that Android existed well before the iPhone came out–in fact, Google bought the company that made it in 2005, two years before the first iPhone. That doesn’t guarantee that whatever Google has done with Android since then is on firm patent ground, but it doesn’t seem a stretch to cast doubt in a jury’s collective mind that Android is simply copying iOS when Android the company clearly predates the iPhone.

Not least, Google has pockets deep enough to counter whatever legal threats Apple throws at it. Indeed, this ruling could well galvanize Google’s mostly passive efforts so far to protect Android hardware licensees. Apple may get all it wants from going after hardware producers, given that Apple makes most of its money from hardware itself.

* Apple has already gotten what it wanted from Google with this ruling: the likelihood that Google will have to change aspects of Android to avoid infringement, potentially reducing the competitiveness of Android devices. As Needham & Co.’s Charles Wolf writes: “Google will be forced to design workarounds of the violated software patents, which was the intent of Apple’s lawsuit, not the monetary award. These workarounds are likely to materially degrade the Android user experience relative to the user experience on Apple’s iOS operating system.”

* Google itself may start talking with Apple about some kind of way to avoid litigation. Wells Fargo Securities’ Maynard Um told investors in a note today that the $250 million or more that Apple could get in licensing fees from Samsung–not to mention additional fees from other device makers that may settle or lose in court as well–would be significant enough for Apple to be worthwhile. Add Google in there, and it may be a cash flow Apple can’t resist. After all, it apparently already offered a royalty deal to Samsung, whose rejection led to Apple’s suit.

One might wonder why Apple would feel the need to deal. …

Read the complete post at The New Persuaders.

Questions About the Google-AdMob Deal–and How the FTC Answered Them

Today the Federal Trade Commission decided not to oppose Google’s proposed purchase of leading mobile ad firm AdMob, clearing the way for the $750 million deal to be closed. Given recent hints that the FTC’s staff might recommend the commission block the deal, the decision was something of a surprise. But as the FTC itself explained, “although the combination of the two leading mobile advertising networks raised serious antitrust issues,” there is in fact ample competition in what is after all still a nascent market.

The investigation raised several questions about not only the mobile ad market but the FTC’s stance on such deals in the Obama era. Here are some of those questions, and the apparent answers:

* Would the deal allow Google to dominate the mobile ad market?

Not at this time, the FTC said, but noted that that was a danger:

Google’s proposed $750 million acquisition of AdMob necessitated close scrutiny because the transaction appeared likely to lead to a substantial lessening of competition in violation of Section 7 of the Clayton Act. Those companies generate the most revenue among mobile advertising networks, and both companies are particularly strong in one segment of the market, namely performance ad networks. The Commission’s six-month investigation yielded evidence that each of the merging parties viewed the other as its primary competitor, and that each firm made business decisions in direct response to this perceived competitive threat.

* Are mobile ads a separate market from other online ads?

I’m not sure why mobile ads, which after all are simply ads that happen to appear on mobile device screens, are really a market separate from other online ads. Marketers, after all, usually view them as potential additions or substitutes to display ads or even search ads, and they can in fact be either of those. And if they view them as separate markets now, it’s likely they won’t stay that way as ad technology firms increasingly offer them as a package to marketers. But it’s clear from the FTC press release that FTC considers the mobile ad market distinct–and furthermore that it doesn’t matter how new it is:

The Commission stressed that mergers in fast-growing new markets like mobile advertising should get the same level of antitrust scrutiny as those in other markets. The statement goes on to note that, “Though we have determined not to take action today, the Commission will continue to monitor the mobile marketplace to ensure a competitive environment and to protect the interests of consumers.”

Mobile ad networks, such as those provided by Google and AdMob, sell advertising space for mobile publishers, who create applications and content for websites configured for mobile devices, primarily Apple’s iPhone and devices that run Google’s Android operating system. By “monetizing” mobile publishers’ content through the sale of advertising space, mobile ad networks play a vital role in fueling the rapid expansion of mobile applications and Internet content.

* Did Apple help Google clear the deal?

Um, clearly. According to the commission’s statement:

The agency’s concerns [about the Google-AdMob deal] ultimately were overshadowed by recent developments in the market, most notably a move by Apple Computer Inc. – the maker of the iPhone – to launch its own, competing mobile ad network. … As a result of Apple’s entry (into the market), AdMob’s success to date on the iPhone platform is unlikely to be an accurate predictor of AdMob’s competitive significance going forward, whether AdMob is owned by Google or not.

* Should Apple be afraid of the FTC?

Very afraid. Or at least it should expect intense scrutiny, if the rather detailed description of Apple’s role in this market is any indication:

These concerns, however, were outweighed by recent evidence that Apple is poised to become a strong competitor in the mobile advertising market, the FTC’s statement says. Apple recently acquired Quattro Wireless and used it to launch its own iAd service. In addition, Apple can leverage its close relationships with application developers and users, its access to a large amount of proprietary user data, and its ownership of iPhone software development tools and control over the iPhone developers’ license agreement.

* Is Google off the regulatory hook now?

Not by a long shot. As the commission said:

Though we have determined not to take action today, the Commission will continue to monitor the mobile marketplace to ensure a competitive environment and to protect the interests of consumers.

Indeed, few experts believe that this decision will have much if any impact on other regulatory concerns about Google’s strength in search ads, its moves into other areas such as display ads, or the privacy implications of its vast data collection.