…set pricing on content and provide access. Device makers select operating systems. And then you have service providers such as Google that offer applications.
So the entire ecosystem will have to figure out different ways to get mobile devices into users' hands. It won't be just mobile advertising. But the market is still nascent, so we don't know what it will be yet.
Google's success in mobile relies on the consumer's willingness to adopt and use the mobile internet. So far, relatively few people are surfing the net on their phones. Why do you think the mobile internet has been slow to catch on?
Growth of the mobile internet has been different in different parts of the world. And I think we can look at the differences in business models to understand why it's popular in some places and not in others.
For example, in Japan, data usage is very high compared to other places like the US. If you dig deeper, you find that the business models aren't as open in the US as in Japan. Phones in the US are still used primarily for voice calls. But I haven't seen voice minutes priced any higher here. I think the mobile operators understand this, and they are looking for new ways to encourage use.
What do the mobile operators and others in the mobile "ecosystem" need to do to spur adoption?
We need to define the real value of what we're offering consumers. Data services aren't just about getting the latest ring tone. That's entertainment and doesn't become a core part of a user's life. When I show friends and family the things you can do with Google Maps, such as live traffic updates, they are like, "Wow". We need to make sure more people have these "aha!" moments.
Do you think that pricing is affecting adoption of these services?
Price is something that always lingers in consumers' minds. There have been studies that show when data is offered for free as part of a trial, 50 percent to 80 percent of users stop using the service once they have to pay for it. But I think users pay for what they value.
For instance, I don't think you can get people in Western societies to pay for news headlines. On average, most people are within 30 to 40 minutes from some kind of technology that delivers the news for free. So you're going to be hard-pressed to get people to pay for it.
So I think service providers need to be smart about how they price content and services. You can't charge for every bit of content. But you can charge for things that provide a real value to consumers.
I agree with you on that point. But one of the reasons I'm not a big mobile internet user is because I don't really understand the operator's pricing method. And I'm nervous I'm going to be charged an arm and leg for just experimenting and trying new services. Do you think that's also pretty common?
Yes, I do. There are two hurdles operators must overcome. First they have to make consumers understand the value of the service, so they're willing to pay a fee for using it. And then they also have to provide transparency in pricing. This is a distinction that not many people understand.
Most consumers understand they are being charged for the use of a data service. But they don't really know how much. Mobile operators are starting to recognise this, and they are coming up with more simplified pricing structures.
Google has announced partnerships with several mobile operators. But all of Google's mobile applications can also be accessed directly from the mobile internet. Has that created tension between Google and mobile operators, who are reluctant to give up control over what applications their subscribers are using?
In general, I think whenever a new service comes onto the market and a new way of doing business emerges, mobile operators question how it will play out. We've experienced a lot of good will among mobile operators we've worked with. But I admit some of the discussions were difficult at first. But at the end of the day, the operators are smart people. And they know which way the market is going. They have to look at us as a partner to enable these new services and a wave of new innovation.
So what's next for Google in the mobile market?
I can't share specific details with you about products we haven't announced. But I think if you look at our strategy, several obvious things fall out. For example, I think you'll see us do more with location-based services, like developing more locally flavoured products.
Will 2007 be the year of mobile for Google?
I think that 2006 has already been year of mobile. We really started investing in mobile in the latter part of 2005. And we're already seeing the fruits of some of that labour. In 2007, we really hope to keep innovation chugging along and provide some great new products.
