Google's $500M WiMax Bet

By Clint Boulton  |  Posted 2008-05-12 Print this article Print

The search giant looks to Clearwire to help build out its search, ad and Android platforms in an increasingly wireless world.

Analysts are bullish on Google's $500 million investment in and agreement to become a key search, ad and applications provider for both Sprint and Clearwire, which opened a new beachhead May 7 on the elusive island of speedy Internet known as WiMax.

WiMax, which pipes data at up to 70M bps to an area that covers up to 30 miles, has been praised as a technology but has struggled to find widespread traction. Clearwire, with backing of Sprint Nextel, Google and others, plans to change that.

Google will become the default search provider and preferred application provider for Clearwire's new retail product and the default provider of Web and local search for mobile phones from Sprint, which will preload Google Maps for Mobile, Gmail and YouTube.

Moreover, Google's Android mobile operating system could get a bump from the deal, with Clearwire offering Android on its voice and data devices down the road.

The possible Android tie suggests that Google may finally have a fine launching point for its mobile operating system, which has weathered criticism and doubt by skeptics who argued that the world doesn't need another mobile platform, even if it is open source. Yet analysts have said the search, ad and application ties are what make this deal hum for Google.

"Google's interest is much more about being the primary search (and, likely, advertising) provider on this network. Android will only make up a small portion of the devices on the network," Forrester Research analyst Charles Golvin told eWEEK.

Google in the WiMax driver's seat

IDC analyst Caroline Dangson wrote in a May 9 research note that the pact puts Google in a position to own the majority of Internet searches from WiMax-enabled mobile devices in the United States.

Consider that one third of U.S. Internet users are already using their mobile phones to access the Internet, with a quarter of these users conducting Internet searches through Yahoo, Google, MSN or another search engine.

While reigns in desktop search, the company is second to Yahoo in mobile search, with 25 percent of U.S. mobile Internet users accessing Google versus 29 percent accessing Yahoo, according to IDC.

"The WiMax deal could change this by 2010 when the Clearwire WiMax network is expected to cover 120 million to 140 million people in the United States," Dangson wrote. Moreover, with Internet search advertising accounting for 98 percent or so of Google's sales, Google will gain access to millions of mobile WiMax users as the default search engine for Clearwire.

This will lead to millions in mobile Internet advertising dollars, which IDC estimated was $50 million in 2007 and should grow to more than $500 million in 2011, she wrote.

Pair these stats with Google's existing paid search links and new mobile brand display ads and Google should see the return of the $500 million it invested in the Sprint-Clearwire WiMax deal within the next five years, Dangson said.

Perhaps, but Google is also banking on Clearwire, which, although it has the complete backing of Sprint Nextel, will have its hands full in a wireless market that includes Verizon, AT&T and other service providers. Google's investment, along with capital from Intel, Time Warner Cable and others, will aid but not guarantee success.


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