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A Purchase That Will Change The Wireless World: G Day, 2010

By Wilson Kerr of Location Based Strategy, LLC

The speed that wild Google wireless rumors transform into fact is astounding. After just a few days of frenzy caused by leaked information about Google employees all getting FREE Google phones to test, a front page Wall Street Journal article (yesterday) announced the “confirmed” impending arrival of the Google Phone. Not a phone powered by Google’s Android operating system sold by a carrier for a subsidized price, but an actual Google device sold by Google directly to consumers, subsidized by Google, that could be used with any carrier network.

Remember that carriers create the profits that allow the real cost of a phone to be masked. While most new smart phones on the market today costs a few hundred bucks, it only takes a few months to surpass this one-time cost in subscriber fees to the Carriers. They apply some of this profit backwards and use it to subsidize the real cost of the device.

By linking the phone to the carrier, the carrier essentially works with the device manufacturer to lure the consumer via artificially low phone prices. The carriers battle with multi-million dollar advertising campaigns over coverage and partner with manufacturers to offer slick new phones to obtain that crucial new subscriber win. Of course, there is little pressure to drop the rate plan fees, since a few giants dominate and most cool phones offer no choice in carrier. If you have an iPhone, note how much you paid for it and what you have paid AT&T since that day..

Google has been watching from the wings while preparing methods for extracting more value from the actual use of the phone via the infusion of alternate value-add than can be collected in fees for traditional voice or data plans. I have written about the many programs Google has in-place for changing wireless advertising and generally targeting the point of sale in the real world, after a consumer has (literally) navigated to a store location where an advertised product or service can be purchased. Since the Google phone is not linked to any carrier, how will they be able to subsidize the price of the device and avoid coming into the US market with a $600 phone?

Google is setting the stage for a radical move that will change how the wireless world thinks about charging for phone usage. It will happen sooner than expected and I am not sure how many will see the significance when it does. On this day I will call “G Day, 2010”, a Google phone will be used to buy something. Not order something online, but to make a real purchase.

The location of the store will be displayed via Google Maps and the buyer will only have to deviate slightly from their daily routine of travel. The consumer will scan the 2-D Google Favorite code on the door and a special offer will be displayed. The point of discovery will be known to be a personalized, time-sensitive Google coupon unique to that specific store, and displayed at that exact moment. The duration of the visit to the store and any other products searched-for while in the store will be captured. A litany of other facts will be melded together in the Google cloud to make the phone that made the purchase more-intuitive, so the owner of the phone appreciates it even more and saves money in the process.

I suspect this first landmark purchase on G Day, 2010 will occur through the use of a pilot program Google Checkout system that leverages NFC (Near Field Communication) technology built onto the phone and a connected Google reader provided to the participating business at no charge. No cash will change hands, the merchandise sold will be automatically removed from the store’s inventory and the consumer’s pre-loaded Google account charged. The final stage of the transaction will be that the Google advertising account of the store will be charged not for the display of the ad that caused the consumer to discover the special, but for a % of the purchase made when the consumer acted upon the offer.

Why is this important regarding carriers and Google’s push to launch a Google phone while the industry shakes its head and wonders just what they are thinking? Because the carriers will have to compete to be the one selected by consumers to allow the phone to function. Usage plan prices should (thankfully) plunge and Google will be in a very good position to rewrite the book regarding how average revenue per user (ARPU) is arrived at. If they can generate enough in advertising fees as a % of tracked incremental transactions, perhaps they can even pay the carrier for the service, and give the already-subsidized and activated phones away. The first carrier to do this will be in a very good position to join forces with Google, the others might perish, since they will not be able to compete with the power of alternate value add machine that Google has built, while watching from the wings. Watch for this sale that will mark G Day to happen sometime this year.

Then again, perhaps, in some small shop owned by a Google employee near Mountain View, CA, it has already happened..


Wilson Kerr is the founder and principal at Location Based Strategy, LLC, a consulting company dedicated to helping brands, content owners, and retailers understand the LBS opportunity and create strategic initiatives to tap its potential.


Boston iPhone: 303-249-2083

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