Ads To Offset Cost of Unlocked Google Phone?

CWmike writes "Google isn't talking publicly about reported plans to sell a powerful Android-based smartphone called the Nexus One directly to consumers next year, but the idea is already raising eyebrows with analysts. The chief concern is that selling an unlocked phone directly to consumers, probably online, could be twice as expensive as buying one through a carrier. The unlocked approach has largely failed in the US, with the world's biggest phone manufacturer, Nokia, doing poorly with the concept. Nokia recently announced that its two direct-sales stores in Chicago and New York will close early next year, while online sales of unlocked devices will continue. Conceivably, Google could offer its phone at a price comparable to a subsidized phone from a carrier — as long as customers agree to receive mobile ads on the devices. Since advertising is central to Google's revenue model, that approach might make some sense, analysts said. 'Google doesn't want to be in the phone business or the mobile carrier business, so this must be about something else, and that's the advertising business, since Google is in the business of selling ads,' said Kevin Burden, an analyst at ABI Research. In one mobile advertising model being tested in Germany, users agree to receive a certain number of ads on their phones to reduce their monthly cellular and texting rates, although reducing the up-front cost of the actual device is relatively novel. Reinforcing the idea of using mobile advertising with direct sales of unlocked phones, Google bought AdMob in November."

Comments

Is there a niche for this?

[mlts]

As it stands in the US, there are two well entrenched market niches for smartphones. The first of which are the unlocked phones (or the phones one pays full retail price for from a provider.) This is about $400-$600. The second is the provider sponsored phone where one pays the cost of the phone via a contract. The price ceiling in the US is effectively set for this by Apple at around $200.

The ads wouldn't be welcomed in the unlocked phone arena. If I pay the premium price tag for an unlocked phone, I won't be buying one that slings ads at me. If the contract changes while I have the phone, I'll be rooting the device and yanking that "functionality" out, or not accepting the changes in my contract and will toss the phone in the garbage. Then I will go with a provider who wouldn't pull that on me.

If I were paying for a phone subsidized over 2 years, ads are not welcome here either. If my phone gets an OTA update to become an ad vomiter, that is a change in my contract that I do not have to accept, and I will trash the phone and change providers.

So, where would the ad-supported device model come to play? I see only one place, and that is the low end market, such as the prepaid phones one sees for sale for $15-$30, or the "free" phones that come with a 1-2 year contract. Maybe this market is what Google might be aiming for, where people would tolerate ads in return for a smartphone that costs $20.

We've trained it for them

[Just Some Guy]

All of us using GOOG-411 and Google Voice have done a splendid job training their voice recognition system. Within a year, I predict that you'll be seeing ads relevant to the conversation you're having while you're still having it. "It's been ages since I've had good sushi!" -> ad for nearby expensive sushi restaurants.