Android Will Tighten Google's Grasp on Internet Advertising

Reports trickled in over the weekend that Monday was to be the day that the long awaited "gPhone" announcement would come. Google (GOOG) complied with those rumors and held a conference call announcing an Open Mobile Platform rooted in a Linux based Operating System.

This system, dubbed Android, was announced by Google and several of its partners in the Open Handset Alliance, which includes Qualcomm, T-Mobile, HTC, Sprint and Motorola, over 30 partners in all for the Internet search giant, all committed to producing the technology to make a powerful, Open Operating System for cell phones a reality. Google will provide the backbone programming for the Linux-based OS and will release a SDK(Software Development Kit) so that developers of all shapes and sizes will be able to create applications for a multitude of devices.

By the second half of next year, the first of these devices is expected to be available, which have as its main feature a complete full scale Web Browser, much like Apple's Safari on the iPhone or the Opera Mini browser available for certain other smart-phones. Thus far details about Android are scarce and not well-known, but next week's sneak peak at the SDK should give several more clues.

This open initiative by Google comes right after the announcement of Open Social, an open development platform for Social Network sites, with which Google has signed up several partners including MySpace, LinkedIn, Salesforce.com and its own Orkut network.

Google has its sights squarely on the power of the mobile Internet and the advertising platform it could bring. The world has billions of cell phone users, and over a billion handsets are sold each year, which represents a fantastic opportunity for localized and personalized advertising. It just so happens that Google has become a virtual expert at both of those flavors of ad-serving. Analysts and economists are throwing around estimates for growth in the mobile ad space and their particular 'Billions of $$$ by Year X' don't matter just yet. What does is the resounding emphasis that it is the next great internet growth sector.

The Android platform will provide Google a foundation to port its Internet software on a multitude of devices, and as CEO Eric Schmidt pointed out during the call: "This is not an announcement for gPhone, we hope to see thousands of gPhones"

Google's reasoning is why make the hardware when so many others already do? Create a platform that will excite partners, can cater to everyone's needs, and everyone succeeds. Google doesn't make the computers that sit at your desk do they? No! But they provide an expansive software platform and a multitude of services that arguably are simpler and better than competitive services.

With powerful phone hardware and screens that can somewhat do justice to the "Complete Internet," Google can follow the same model with cell phones that they have used to dominate in the Internet space for Personal Computers. Not to mention innovation can be exist more freely on an open software platform like Android. Google's planning to be there every step of the way and innovate as quickly as they can in this space.

Google shares have risen tremendously since August lows at around $500/share, and hit a new all time high of $730 on Monday, closing at $725. The hype built around a mobile push by Google stemmed some profit-taking, but the potential that this will be a major platform and will revamp mobile industry thinking is too hard to pass up for investors. The sentiment that phone carriers lock in consumers and halt innovation, both on the hardware and software side, can die a quick and painful death if an open software platform for mobile devices in embraced. Google knows this as do its partners, and most importantly customers are starting to take notice as well.

The mobile space, especially for advertising, is still wide open and Google is trying to out- innovate its major competitors Yahoo (YHOO) and Microsoft (MSFT). Both companies are of course missing from Google's partner list on this project. The simple fact in the mobile industry is that cell phones are turning more and more into little powerful computers capable of handling much more than phone calls and this is no different with the Internet. Consumers will see internet on their phones much more prominently over the coming months and years and will expect a complete and encompassing experience.

Once that experience becomes reality, Google will quickly grow into a mobile advertising conglomerate. Today's technology consumer is much more mobile than in years past and the thinking is, and I completely agree, that these mobile users will have many more opportunities to use Google products such and Search, Gmail and Maps on the go. With more usage comes more advertising placement opportunities when it will really matter. Getting advertisements for local restaurants when you're at home is one thing but getting localized and personalized ads for local restaurants when you're hungry and on the town is something completely different. And for this to work well, Android must become the platform of choice.