analysing Google's Mobile / GPhone Opportunity

Citi’s smart Google analyst Mark Mahaney lobs in a detailed analysis of Google’s mobile opportunity, which he considers one of the company’s two major future growth drivers (the other being video advertising. Mark has apparently not yet bought into Google founder Larry Page’s crazy vision of Google as an Internet search and Green-Power conglomerate. Neither have we.)

Key Points

  • Near-term Google mobile opportunity overrated. Crappy mobile experience, limited consumer use, etc. Hopefully (but not definitely) this changes with 3G/4G and iPhone-like phones…

  • Long-term Google mobile opportunity underrated. Mobile search could be major catalyst for local search, which has been a disappointment for a decade.
  • Mobile search market could eventually be as big as PC search market: Mark puts global PC Search Market at $21B in ’07, driven by 35 monthly searches per PC.  Just one monthly search per each 2010-estimated 4 billion mobile phones would generate mobile search revenue of $2.3B. Only 9 monthly searches per mobile device would create a market just as big as today’s PC Search.
  • Mobile especially important in international markets, where PC penetration is low.
  • Translation: Rapid adoption of mobile search could double Google’s revenue base in a few years.

Spectrum Auction / Plans: Near-term Risk for Stock

  • Winning the spectrum auction would cost Google an estimated $6.6 billion
  • Building a national network would cost an additional $5.5 billion to $7 billion
  • Together, these would consume all cash on balance sheet.
  • Results of spectrum auction won’t be known until March.
  • Fear that Google will go insane, spend all cash, and become capital-hog telco may scare bejesus out of investors until then. (No, Mark didn’t put it quite that way)

See Also:
GPhone Pics!: Open-Source Bug Can Run Android
Smart-Phone Sales Soar: iPhone Grabs 27% of Market
More GPhone Coverage

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