August 23, 2008

Google and Verizon search partnership - a win-win for all

According to The Wall Street Journal, Google and Verizon are partnering on a comprehensive search deal that will make Google the default search engine for all mobile subscribers of Verizon, the #2 carrier in the U.S. by subscribers (68M subs). This is a win-win deal for all stakeholders - Google, Verizon and its subscribers - and has the potential of supercharging mobile search in the U.S. It should also be a big boost for data revenue, which would be the main revenue driver for wireless carriers, as discussed earlier.

Google created a whole new industry by developing an innovative advertising-based business model around Web search. The Verizon deal may allow Google to do the same with mobile search, which thus far has been sadly lagging its true potential. According to comScore M:Metrics, 93% of mobile subscribers do not use search on their phones today. Carriers have been trying their organic efforts and/or partnerships with smaller technology startups in order to have a lockdown on the economics and the user. The fear of the Web search giants taking a big piece of the lucrative mobile search revenue prevailed. Carriers' own efforts have failed because they haven't got either the product or the user experience right. Using search on a cell phone today requires booting up a mobile Web browser, finding your way to the search site/function, and then entering a search. The Verizon/Google deal envisions placement of a Google search bar on the screens of all Verizon handsets - a smart move. Users will be the winner from the convenience of an integrated search engine and with both the parties focusing on their individual strengths - Verizon striving to provide subscribers the best wireless network/coverage and customer service, and Google providing the best search experience and monetization potential through its vast network of advertisers, especially local advertisers which are more relevant for mobile search.

Mobile advertising in the U.S. is expected to explode by 28x over the next four years - from $244M in 2008 (per eMarketer) to $7 billion in 2012. As Web search has played a big role in online advertising, mobile search, an untapped potential today, is expected to be a major component of mobile advertising revenue.

No wonder Web search companies have been locking in carriers with exclusive deals during early days of mobile search when users are likely to use the default search engine on their phones. Google has a similar partnership with Sprint, and Yahoo has locked in AT&T. Google is also the default search engine on Apple's iPhone. Yahoo! is working with OEMs too, signing up Nokia to put the Yahoo! oneSearch shortcut on the home screen of Nokia series 60 phones. As user behavior evolves and phones open up over time, users are expected to pick up their search engine of choice as they do today on their PCs.

Google, the dominant Web search engine on the PCs, has also managed to take an early lead in mobile Web search. According to comScore M:Metrics, around 16.7M people in the U.S. use mobile search today. Of these, 63% use Google, 34% use Yahoo, and only 25% use carriers' search product. This does not add to 100% because some users are using multiple products. Google's early lead, without help from carriers, indicates that most users (me included) are simply typing into their mobile Web browser to get to the search engine. The above carrier partnerships should help Google to further extend its lead.

The Google/Verizon partnership seems more extensive compared to other similar deals. Google would be able to distribute other products through its search bar on the phone screens (Google Maps, Gmail, etc), as well as extend its search product on Verizon's Web portal and its FiOS TV service.

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