Google's Mobile Honey Pot

The rumor mill around a possible Google (GOOG - commentary - Cramer's Take) phone debuting in the first half of 2008 kicked into high gear this week. There are two intriguing features the possible Gphone may have -- strong, well-integrated voice-over-Internet protocol (VoIP) applications and a new mobile ad-revenue model.

Several operator sources think that it is likely Google will aim an upcoming phone at a surprisingly low price point, offering low-cost messaging and community-building features and throwing in a hefty dose of mobile ad innovation. The larger question is whether operators will cede Google enough control to meddle with their entire revenue model in a fundamental way?

There are three major themes in mobile telephony that have not yet really broken through in the mass market that will probably have an effect on Google's role in the telecom world.

Cheap Text Messaging

First, IP-based mobile messaging would be an order of magnitude cheaper than regular text-messaging -- and VoIP application could cut the monthly mobile voice bill drastically. So, it is easy to see how IP-based apps would be extremely appealing to consumers. There are several start-up companies trying to break out mobile applications on these themes all across the world.

The problem has been that consumers are reluctant to download IP-messaging applications into their phones -- and operators have been busy undermining mobile VoIP solutions by making VoIP use as difficult as possible -- Apple's (AAPL - commentary - Cramer's Take) iPhone and Nokia's (NOK - commentary - Cramer's Take) N-95 being recent examples.

Ad-Based Phone Service

Second, and at the same time, various mobile advertising models are arriving to the global market on an almost weekly basis -- but nothing has yet broken out in a big way. In Europe, one of the most closely watched new mobile start-ups is a firm called Blyk. It will launch a new service this autumn offering free calls for 16- to 24-year-old consumers in exchange for enduring targeted ads in their mobile phones.

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At time of publication, Kuittinen had no positions in the stocks mentioned, although holdings can change at any time.

Tero Kuittinen is managing director and senior analyst for Avian Securities, a brokerage firm specializing in technology companies. Although Kuittinen is an employee of Avian Securities the statements above are being made in Kuittinen's personal capacity and are in no way are the statements of Avian Securities, nor attributable to the company. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Kuittinen appreciates your feedback; click here to send an email.