GOOG 2010 Outlook

Part II of the outlook on GOOG should be up later today or tomorrow, but in the meantime, you should peruse this article featuring quotes from Google’s VP of Product Research. Great quote lifted from the article below:

“What we’re trying to do with telephony is give people a seamless experience that frees up their telephony communication from the silos where it’s lived for the last decade. Voicemail, my contacts, all of those things have been segregated from the rest of my Web experience. We have big plans to do a better job.”

A lot of analysts appear to be skeptical of the success of Google entering the telephony sector. In a Forbes article from April 2009 (apologies for the long block quote), the author identifies four reasons to tread cautiously when it came to Google and phones:

First, it’s not clear that the VoIP industry is a particularly attractive industry to enter, or that incumbents are doing at all well. Since its “most successful IPO in years” in 2006, Vonage stock has done nothing but decline (from above $12 a share to less than 50 cents a share). Skype, on the other hand, is a fairly popular way to make free computer-to-computer video calls and has certainly done a fine job accumulating and pleasing users, but as a revenue generator for eBay it’s been very disappointing, and persistent rumors of a sale have been floating around for more than a year.

Second, VoIP’s woes aside, Google Voice’s Internet-based calling features don’t seem to be particularly attractive and seem designed to supplement, not replace, existing phones. Sure, you can initiate calls through the Web site, but unlike Skype, Google Voice routes those calls through your cellphone or land line, so you’re still basically using your old phone company and won’t save any minutes (although it’s worth noting thatinternational calls are quite cheap if begun through Google Voice). Unlike Vonage, Google Voice can’t actually replace your phones; it just makes them easier to use.

Third, Google Voice’s success will depend on consumers’ willingness to adopt it–and the fact that Google is demanding consumers change their telephonic habits may impede that adoption. Google Voice would shift the experiences of checking voicemail, sending text messages, and even making calls from the phone itself to the computer, and unless consumers see a substantial benefit, they will not be motivated to make that change. On the other hand, many of us have demonstrated our willingness to make big changes to our communications habits (certainly, carrying phones around with us everywhere was a big change), so this obstacle may not be so problematic.

Fourth, I worry that the specific value proposition that Google Voice offers consumers–making your many phones easier to manage and coordinate–might simply become less relevant as we move away from the multi-line communications morass. Google Voice is great if I have a cellphone (or two), a land line at home, a land line at work, and maybe even more numbers at which I can be reached, but that scenario may be becoming less common. Home land-line phone use, for instance, is steadily declining as more and more people rely entirely on cell phones, which themselves are becoming more capable of providing some of Google Voice’s services (or at least “good enough” substitutes). I rely solely on my iPhone, for instance, for calls, voicemails, e-mails and text messages, so routing them through Google Voice probably wouldn’t add much value for me.

With the benefit of 8 months of new information, we now know that Google will be able to conquer many of these obstacles through use of their own Nexus One smartphone.

Answer to Skeptical Point #1: Google will derive revenue off Google Voice on the smartphone the same way they derive revenue off of all of their other products – advertising.

Answer to Skeptical Point #2: Google’s introduction of the Nexus One certainly still relies on a phone carrier…for now. Yet another quote from the first article linked:

Google Voice users must have a phone carrier to use the service. However, that will change in 2010.

Google in November acquired Gizmo5, a maker of so-called softphone software that will enable Google Voice to operate like Skype by letting users place calls via the Web from one PC to another or from a PC to a landline or mobile phone.

Smartphones are already acting like mini-PCs – what is stopping the Nexus One from turning Google Voice into a mobile tool?

Answer to Skeptical Point #3:  See the answer above. As our smartphones get more and more powerful, we are going to start seeing “PC” activities become mobile activities in addition. This can only benefit services like Google Voice.

Answer to Skeptical Point #4: I think this is actually the most cogent point in the piece, except that Google Voice isn’t JUST trying to bring together multiple phone lines to make telephone management easier. It also is trying to bring the entirety of telephony to the internet.

Anyway, just some food for thought (likely to be re-featured in Part III of the GOOG analysis) on an otherwise slow Wednesday.


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