Google, Motorola and the Future of Location-Based Ads

Mobile advertising is an enormous growth area for Google, particularly with 1 million Android-based smartphones activated each day. One business, with much to gain, imagines that location-based advertising could be a smart next step for Google.

Google CEO Larry Page, in the opening words of a statement on the company€™s second-quarter earnings announcement July 19, said the quarter was special €œbecause Motorola is now part of the Google family, and we€™re excited about the potential to build great devices for users.€

During Google's earnings call, CFO Patrick Pichette told analysts, €œWe€™re totally excited about this opportunity that we have with Motorola,€ adding that Google€™s management team and new CEO Dennis Woodside have been there only a few weeks, €œresetting and retooling it.€

€œClearly,€ he continued, €œeverybody should expect some changes at Motorola that we have already talked about in the public domain. €¦ But we have nothing really to announce right now. I think we have to let them do their work. But I can tell you that was a probable excitement in MMI for not only all the employees, but also for the clients.€

In May, Google announced the completion of its $12.5 billion acquisition of Motorola Mobility Inc. (MMI), ostensibly equipping it with the triumvirate that has been key to Apple's success: control of an operating system, mobile hardware and a well-stocked app store€”in short, a complete mobile ecosystem.

Google has been insistent that Motorola will receive no favoritism on the Android front, but clearly it has plans for the business and its devices. But what kind of plans?

Marc Poirier, co-founder and chief marketing officer of Acquisio, has one idea.

Poirier notes that Google€™s mobile advertising business is €œpicking up speed.€ That is an important development for Acquisio, a leading media platform for some of the world€™s largest marketing and advertising agencies. Acquisio helps marketers and agencies buy ads on Google and Bing, among other places.

During the Google earnings call, Senior Vice President Nikesh Arora confirmed, €œWe have over 1 million advertisers working with us in mobile advertising, and it gets over 300,000 mobile apps. So I think it€™s a substantive number in terms of the number of advertisers that are involved in the mobile space.€

Poirier€™s thought is that Google€”to the delight of Acquisio€™s customers€”could use Motorola to take advantage of a tremendous opportunity: location-based advertising.

€œThey could make it part of Google AdWords,€ Poirier told eWEEK during a late-May interview. €œNow they have the ability to give advertisers a way to reach massive amounts of people.€

Poirier acknowledged that location-based advertising had been promised for years. The way it is supposed to work is that a person could walk past a Starbucks, say, and receive an alert to come inside and receive 20 percent off. However, the technology is still in its early stages and advertisers, Poirier said, have not had effective and reliable ways to implement location-based advertising.

With the hardware component in their control, he continued, Google gains an edge. €œIf you close the loop, you can enable something really powerful.€

People would have to opt-in, of course, and there would be challenges, such as privacy. But there€™s also great incentive for Google.

€œThere€™s two parts,€ said Poirier, €œdriving business but also measuring results. They€™d also be offering the ability for people to pay with their phones, so they€™d probably take something there€”it€™s new revenue.€

Technology Business Research analyst Ken Hyers believes Google will be "pushing heavily" into location-based advertising.

"Mobile ad sales are already very important to the company, and it collects quite a bit of location-relevant information about Android phone users. Location-based advertising is a natural direction for Google to go in and would increase the value of its mobile ad sales," Hyers told eWEEK.

He added, though, that he doesn't see Motorola, with its modest market share, contributing mightily to such an undertaking.

"Location-based advertising, for Google, is an Android play, not a Motorola play," said Hyers. "I really am finding it difficult to see where Motorola€™s hardware business fits, long-term, in Google€™s portfolio," aside from the benefit of its patents.

Charles King, principal analyst with Pund-IT, likewise sees the move to location-based ads as imminent but is less sold on Motorola as the vehicle.

"I think Poirier€™s comments are essentially on target. Android has provided Google a huge position in mobile devices that can be leveraged in numerous ways, including potential location-based advertising," King told eWEEK.

"I€™m not sure exactly how the Motorola deal will assist/complement that€”the company€™s patent portfolio is extremely large and complex€”but either providing required tools for location-based ads and/or necessary protection against litigation from competitors seems like reasonable assumptions," he added.

King also points out that two other critical pieces are required for location-based ads to succeed: the ability to manage highly complex back-end processes in the data center, and the ability to create user-friendly services that can blend or sync those processes and data across multiple platforms.

"Google has long proved itself a master of the first point, and the initial success of the Nexus 7 tablet suggests that it€™s well-positioned to deliver on the second," said King. "These points also cast light on the efforts of Google competitors, including Microsoft€™s moves in smartphones and the new Surface tablet, and Amazon€™s reported plans to broaden its Kindle Fire offerings and enter the smartphone market. Even Yahoo€™s hiring of Marissa Mayer, who managed Google€™s Maps and location-based offerings, could be interpreted as a play here."

Are Acquisio€™s customers ready to move forward to location-based ads?

€œThey€™re marketers, they€™re looking for new opportunities,€ said Poirier. €œIt€™s another way to take some of the money that€™s offline€”print, TV, money that is looking for a new place to go. This is very promising.€

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