It’s Google Vs. the Carriers

December 8, 2007

This past week at the VPF Winter event in Manhattan on a panel dedicated to the intersection of the internet, media and telecom I made the prediction that the company with the biggest advertising network will win the media and telecom war. My comments went unchallenged for a while the audience asked questions relating to fiber capacity and the like. Thankfully, Hunter Newby was sitting to my left and the rest of my esteemed panelists handled optical questions while I wondered silently why no one said anything about comments. Did the whole room agree with my thoughts I wondered?

And then suddenly, someone in the audience asked if anyone wanted to challenge my assumptions and then all hell broke loose as questions started to pour in regarding Google’s ability to be a serious telecom threat.

Here are some points made by both sides:

Google is giving away many services for free and they are ad supported.
Many of these services don’t make money.
How can Google be a threat to telecom if none of their new services seem to be successful?
It doesn’t matter because the mere threat of Google in many industries is enough to make VCs wet themselves and scamper away like hurt children. This in turn means less competition.
The global ad market is dwarfed by the global telecom spend.
This does not mean online advertising spending will not increase.
For example, advertisers will pay more for targeted advertising.
An advertiser will pay more to target individuals based on their specific purchasing habits and demographics than they do to target people in an age group or who like a genre of music.
The auction model Google has ensures advertising will cost as much as the market will allow.
Google will not want to spend the money to roll out a network… The costs are prohibitive.
Google could partner with others to get the benefits of network ownership without the pain of building the network themselves.
Google is in real trouble is the last mile service providers cut them off or force them to pay extra to get to customers.
Isnt this why Google is bidding on 700 MHz spectrum in the first place?
Won’t customers flee from a service provider who cuts of Google.
After all it is my broadband service, not the service of the last mile provider. I am paying
Then again there is a broadband duopoly – what if cable and DSL providers decide to cut Google off?

At one point someone asked how the story of the fight against the service providers and Google will end. To that I answered, no one is sure but that is why people come to read my blog and TMCnet. smile

It is abundantly clear that many service providers aren’t exactly sure where to put Google – in the friend ore enemy camp. On the one hand consumers are apt to upgrade their internet service level to take advantage of advanced services companies like Google will provide. On the other, it seems Google is taking money the service providers somehow think is rightfully theirs.

In reality, if service providers are to team with Google they may be able to share in greater revenue for a period of time. No one knows what the future will hold and whether Google will become a dominant service provider themselves or not but it is going to be very intriguing to see how this chess game plays out and who wins and loses.