Android is about advertising, not the enterprise

The first Android phone clearly indicates that the device was designed to help Google gain a foothold in the mobile advertising market.

Even though three companies hosted the launch event and the software is backed by a consortium, the introduction of the first Android phone made it very clear that Android is about one company: Google.

Android is Google's attempt to dominate the mobile advertising market, just as it has dominated the online PC advertising market, said Craig Wigginton, industry leader for Deloitte's telecommunications practice. "Their number-one driver for pushing this is the advertising model," he said.

But in order to grab a major share of the mobile advertising market, Google will have to convince a large number of people -- including business users -- to buy Android phones. That's a significant challenge in the increasingly crowded mobile phone market.

The G1, the first Android phone introduced by T-Mobile, Google and HTC on Tuesday, comes loaded with Google applications, including Gmail, Gtalk, Maps and YouTube. The home screen includes just one item: a Google search bar. Each of those applications is an opportunity for Google to deliver advertisements to users.

"Google is moving into the mobile devices market not to become yet another mobile phone manufacturer, but to enable a large addressable market for its services and applications," agreed Carolina Milanesi, an analyst at Gartner.

Around the world, there are 3.5 billion mobile-phone users. Just a fraction as many have computers. "Google has been very successful in the PC marketplace from an advertising perspective, so I think this can be a phenomenal source of revenue for them," Wigginton said.

Mobile advertising so far is a small market, but some analysts have high hopes for growth in the future. M:Metrics found that mobile display advertising was an approximately US$200 million industry last year, a figure analysts there expect to at least double this year. Analysts at Heavy Reading predict that the mobile advertising industry will exceed US$10 billion in annual revenue in 2013.

But Google faces a major challenge in trying to get the phones into hands of users, since it is up against some strong competitors, including the iPhone. Researchers at Strategy Analytics predict that 400,000 people will buy the G1 by the end of the year. That compares to 1 million people who recently bought the 3G iPhone on its opening weekend.

Google and T-Mobile appear to be mainly hoping that mass-market consumers will buy the phone, even though smartphones have traditionally appealed most to business users. The G1 lacks some features that business users might want. For example, it doesn't support Exchange mail, although it could if a developer builds the application.

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