Google looks to wireless play amid 11pc jump in Q1 ad sales
While its Project Fi service essentially offers consumers a lower-cost upgrade, Google?s first entry into the wireless industry is not expected to shake up the space. The launch provided a backdrop to the company?s posting of a 12 percent gain in first-quarter revenue, helped by an 11 percent increase in ad sales.
?While the market has long anticipated ? and operators have feared ? Google?s entry into the mobile operator business, its service offering just isn?t that innovative or disruptive today,? Rich Karpinski, senior analyst at Yankee Group, Boston, said in an interview prior to the release of Google?s financial results.
?The market has caught up and in some aspects passed the ideas it is forwarding today.
?The things that do push the envelope ? on-the-fly network switching between mobile operators and follow-me phone numbers ? are interesting but won?t fundamentally alter the market,? he said.
The service will work only on the company's Nexus 6 phones and be hosted through Sprint Corp and T-Mobile's networks. It will automatically switch between the two networks and more than one million open, free Wi-Fi spots, depending on which signal is strongest.
Google has said it is limiting the size of Project Fi, which it considers an experiment.
YouTube video ad promotion.
?We?re trying to see a gain from a user perspective and from a service perspective,? Patrick Pichette, Google?s outgoing CFO, said during the company?s earnings conference call. ?You?re always looking to make the Web faster, cheaper, more available and we wanted to try this new vision of fast and easy wireless service.
?This is about how we can use today?s platforms to drive more innovation.?
Many of the innovations Project Fi might have brought uniquely to the market a few years ago ? low prices, no contracts, online device sales, Wi-Fi calling ? are already a part of the mainstream mobile market today.
?By lowering costs of data usage, it is clear they are hoping to drive up adoption of devices powered by Android ? and everything that comes with it - to mitigate any barriers for consumers of advertising and Google digital products,? said Dave Ragals, global managing director for search at Ignition One.
?Simply put, more data equals more impressions, more downloads, and more purchases within their ecosystem. Partnering with carriers will help address one of the biggest challenges,? he said.
At a $20 price point, it could be hard for many consumers to justify subscribing to anything else.
?It is a remarkable offering with access to two major networks, availability in 120 plus countries, and the ability to control what you spend on data,? said Ken Wisnefski, founder/CEO of Webimax.
?It seems to compete with budget services like AT&T?s Cricket, but with the kind of connectivity Google is touting, the challenge could also be on T-Mobile and Sprint to make sure they aren?t cannibalizing their existing services.?
For the first time, Google?s post-earnings call contained a different explanation for the longstanding decline in the company?s cost per click rate.
Cost per click (CPC) ? the revenue that the company gets for clicks ? on Google Web sites fell 13 percent from a year ago and 3 percent from the fourth quarter. CPC on Google network members? sites rose 2 percent from a year ago but fell 11 percent from the fourth quarter.
Up to now, the generally accepted belief has been that the CPC decline is the result of the public?s migration to mobile, preventing Google from charging marketers as much for mobile ads as for PC-displayed ads.
Mr. Pichette, who is retiring this spring, attributed the sputtering CPC rate to the growing popularity of skippable TrueView video ads on YouTube, which he said monetize at a lower rate than ad clicks on Google.com.
"Excluding the impact of YouTube TrueView ads, growth in sites clicks would be lower, but still positive and CPCs would be healthy and growing year over year," Mr. Pichette said.
Aggregate cost per click fell 7 percent while aggregate paid clicks rose 13 percent.
Consolidated revenue rose to $17.26 billion from $15.42 billion a year earlier. Net income rose to $3.59 billion, or $5.20 per share, from $3.45 billion, or $5.04 per share.
Google?s challenges have the company looking over its shoulder as Facebook charges deeper into its territory as the go-to destination for everything.
Google's conference call on YouTube.
?Google needs to watch out for Facebook?s video ad growth,? said Jamie Hill, chairman-CEO of adMarketplace. ?Facebook users watch four billion videos a day, and this poses a major threat to Google?s YouTube revenue.?
Michael Barris is staff reporter on Mobile Marketer, New York