Free phone service from Google?

Google recently announced a Web program aimed at advertisers who have created sites for display on cell phones and other handheld devices. Like its online ad network, Google's AdSense for Mobile delivers ads relevant to the advertiser's mobile audience.

"The sheer volume of users across the globe makes mobile the next channel for information," says Dilip Venkatachari, the director of product management for Google's mobile team.

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Why stop there? The core of Google's online ad strategy has always been to help advertisers target their ads so they fit like spandex tights with user interests. Employing technologies that figure out where callers are and where they're headed boosts advertising prices by 50%, according to studies by RelevantC Business.

A number of existing strategies by smaller companies offer a glimpse into how Google might play its wireless hand, once all the cards have been dealt.

Play the games, earn minutes

Blyk, a wireless startup that made its debut in Britain on Sept. 24, offers free mobile phone calls and text messages for people 16 to 24 who agree to let companies such as L'Oréal, McDonald's (MCD, news, msgs) and Coca-Cola (KO, news, msgs) send text ads to their handsets.

Blyk leases space on European carrier Orange's network in Britain, but it operates its own billing and marketing system. That lets it retain full control of valuable customer information and avoid sharing ad revenue with the carrier. Users fill out detailed information about their lifestyles, areas of interest and brand preferences. Those who agree to receive tailored ads get 43 minutes per month of free mobile voice service and 217 free text messages.

In the United States, a service from Virgin Mobile called Sugar Mama offers subscribers a chance to earn free minutes if they agree to view tailored ads. As of August, more than 425,000 people had signed up. They can choose to have text ads in the form of quizzes and games sent to a phone a couple of times a week; play the games and you earn minutes.

The big-time carriers already have banner ads from companies such as Avis or the Discovery Channel on the pages of their mobile Web portals. But don't expect the phone giants to change their business models if they don't have to. A Verizon spokesman says the incremental dollar value of advertising pales next to the cost of losing customers who don't like ads. Says AT&T Mobility's Mark Collins, the vice president for consumer data: "We don't believe in a world where you have to give everything away for free." AT&T and T-Mobile have no interest in giving up their fat subscription fees.

That's precisely what Google represents.

Even without a network, Google's Venkatachari says, the company plans to connect mobile advertisers with users based on information from its search engine, maps and other software, just as it has done on the desktop.

Via Google search, for example, an advertiser learns a user is at the corner bakery in downtown Chicago. And it learns the person has a taste for sweets. Wireless carriers have customer information as well, but "they are not a data warehouse the way Google is," explains Richard Siber of SiberConsulting.

If Google decides to spend the $4.6 billion that may be needed to win the spectrum auction, analysts speculate that it could continue its broadband expansion or perhaps buy a wireless carrier, such as beleaguered Sprint Nextel (S, news, msgs). Then it could launch the first ad-supported, and free, nationwide phone service.

"Google is the first gambler sitting down with as big a bankroll as the carriers have," says John du Pre Gauntt, a wireless-industry analyst for researcher eMarketer. "By playing in wireless, they have caused people to look at the industry in a different way."

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