Recent news that Sprint is not going to work with Clearwire to build out a WiMAX network only added to the rumors I have been hearing about Google acquiring Sprint Nextel. On the surface it seems like this would be a bad move for Google but in reality the world’s leading search engine has become so much more than just a website to go to when you want to find a trinket of information… The company now needs a wireless network to allow it to grow in the mobile search and related spaces such as watching YouTube videos on the subway.
Let’s look at Google from a philosophical level. The company has built almost everything from scratch in its past and present. Computers, operating system, web server software and more. Google likes to have complete control. In a way this is not unlike Apple.
So one wonders if the mobile search market is so crucial to the company’s future, can it rely solely on the Open Handset Alliance to get into the mobile search market?
Look at it this way… When Google decided it was serious about the video space it launched a new tab titled video on its home page. At a certain point the company realized YouTube was too strong a competitor and Google threw in the towel and purchased the video competitor.
So one wonders if history may indeed repeat itself and Google will start with the OHA and decide soon they need an acquisition to boost their presence in the space.
Of course one problem with a Sprint Nextel purchase is that the company’s network isn’t GSM-based meaning devices will have to have multiple radios to be used around the world. But this is a minor problem; let’s look at the more serious issues such a transaction would pose.
1) Google gets into the messy business of telecommunications. I don’t mean to say Google’s day job is easy but the telecom market gets it involved with government agencies like the FCC on a more regular basis. Like many other large telcos the company will have to spend more and more money lobbying and technology differentiation may be less important than government regulations in ensuring future success.
2) Getting seriously into the telco business and having a corporate motto “Don’t be Evil,” may be tough to pull off.
3) Retail stores. Google’s investors love the fact that Google has a massively scaleable business model which can grow with the addition of servers. Imagine if Google had a slew of retail stores to deal with around the country (or world?). Google’s valuation would likely take a major hit.
4) Open Handset Alliance: One would imagine if Google owns its own network, other network operators would not be too happy to be part of the OHA. This could slow progress for Google getting on the handsets of other wireless service providers.
5) A purchase of Sprint Nextel would make Verizon and AT&T go crazy and they would make life even more difficult for the search leader. Could they make life any more difficult than they do today? Maybe.
But for a company that craves control as much as Google there may still be a way to acquire Sprint without destroying their relationship with other providers.
You see, Google doesn’t really need the messy wireless phone business. What they really need is platforms which will allow them to display ads embedded in their services such as maps, videos, etc.
Google could buy Sprint Nextel and in a complicated maneuver spin it back out as a different company (perhaps a nonprofit) which agrees to work more closely with Google to display ads and distribute its applications. This would allow Google to stay somewhat independent and work with other service providers worldwide.
Another more drastic move would be to buy the beleaguered wireless phone company and start giving all service away for free. In addition the company could reinitiate the ClearWire talks and work with this company and others to blanket the world with a free (or at least ad-subsidized) WiMax network.
This sort of move is logical from a local search perspective. Imagine Google being able to light up your phone with information relative to where you happen to be. Think about the phone as a virtual tour guide. When you get a phone call from someone, the phone could pull up a MySpace or orkut page before the phone even rings. If the caller ID is blocked when receiving a call, you could see the results of a web search of the phone number as the phone rings. When you are walking past a coffee shop a coupon for 10% off any drink with a European sounding name could be displayed on your phone.
It gets better… McDonalds could flash ads for $2-off any meal with more than 1,000 calories in total. Of course I am kind of kidding about this last point but we should all realize the web is beginning to have more of our preferences stored in it somewhere and Google could indeed ferret out our likes and dislikes and match them up with ads from relevant companies in a way we never thought imaginable.
I for one would be very excited to see what a Google phone might look like five years from now. Sure Apple is the reigning king of design but Google is the same in the world of information organization. I do wish someone would cross the chasm between my desires and my surroundings. I think Google with a cell phone provider under its wing can be the company to pull this off.
So do I think Google will make such an acquisition? Maybe. If the search leader is going to bid on wireless spectrum it may make more sense to just buy a service provider and rapidly accelerate their mobile initiatives. If they were to make this purchase, I would see them rapidly rolling out free service or at least heavily-subsidized service and making life extremely difficult for the likes of AT&T and Verizon Wireless.