<Google Overload>

Google held its annual shareholders meeting yesterday and discussed lots of topics. Here are the Pilgrim’s CliffsNotes:

Yahoo: "Excited to be working with them…They were under a hostile attack and we wanted to make sure they had as many options as possible."

YouTube: New ad products in development that are neither pre-roll or post-roll.

Microsoft: "Microsoft is a very large competitor across all facets of Google for many reasons. Applications. Search. Advertising, display. Microsoft is well-funded, clever, smart, and they have a lot of advantages nobody else has."

Microsoft/Yahoo Deal: "Obviously we’re happy it didn’t happen..Had the merger gone through, we would actually have had to have a meeting about it… have a campaign against the merger."

Clearwire/WiMax Investment: "Having more competition in that space is good. And having more end-user services that need high-speed."

Economy: "There’s been no change in the impact of the economy on our business."

Finding New CFO: "…usually takes a year…we’re picky."

Shareholder Proposals: voted down regarding censorship on the Internet and human-rights issues in countries that Google does business in. Co-founder Sergey Brin abstained from voting on the proposals, saying he agreed with their spirit. "Directionally, the two proposals are correct," Brin told 200 shareholders in the audience.

</Google Overload>

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Firms that measure Internet traffic agree: these days, Google owns two-thirds of the US search market. Yahoo sits in a distant second place spot, with Microsoft and the rest of the search world trailing far behind.

The struggle for search supremacy probably ended once Google scaled to reach peak performance for queries, however many years ago that happened. Google is a verb, much to the dismay of the search advertising company’s marketers and brand experts.

Some may wonder why we call Google a search ad company instead of a search engine. Google defines itself this way, in its SEC filings. Their contextual ad business pumps nearly all the revenue into their coffers, billions of it each year. Search ads are the business, which they do well.

And yet, even Google witnessed a slight cooling of profitable clicks on ads. All part of the strategy, as CEO Eric Schmidt would aver; Google wants fewer clicks, wants them to be quality clicks for robust keyword bid rates, wants people to perceive value at every landing page where a click leads them.

That’s a good thing, but not enough of one, not when an entire frontier of millions upon millions of potential ad clickers wander around every day with wireless, web-capable devices. The Internet on mobile devices is ok, if you’re into text.

Add in images, maybe some video, and the typical person will need a side order of patience while waiting for the content to arrive. People put up with slow on wireless because it’s the same everywhere, at least until the big dogs Verizon and AT&T roll out their 4G networks.

Google wouldn’t mind being in front of those two. As they explained on the official Google blog, their investment in Clearwire, which is absorbing Sprint’s WiMax initiative, represents an investment in the future.

"We believe that the new network will provide wireless consumers with real choices for the software applications, content and handsets that they desire," Larry Alder wrote at Google.

As a frontrunner with one of the world’s top brands, Google poses the most likely choice for people hitting Clearwire’s network. Google did some groundwork already, gaining a deal with Sprint to be the portal for Xohm, the WiMax effort Clearwire will absorb.

The big G will be a presence on WiMax, without question. Put aside the talk of openness and Android for the moment. Remember where Google gets about 99 percent of its revenue.

If a low cost entry into a high-speed Clearwire-operated WiMax network is going to happen, it will be with Google providing some of the cushion. Google can afford to help its Southeast Asia hardware developers make Android-powered devices less expensive; Google can’t afford not to do so.

Reaching people with a connection, content, and ads means providing the way to stay connected. The investment in Clearwire by Google shows the next step toward doing that. Who knows? If it works, Google could be on the way back to those $700 per share days they enjoyed not too long ago.

If that happens, it will come not just from having ads in people’s pockets. WiMax’s range provides a broadband option that should reach areas currently underserved by existing cable or other broadband providers.

See, WiMax may open up a lot of customers to using the Internet more often. Faster access leads to greater demand, which we have seen over the past decade. Imagine a whole new market of customers gaining regular high-speed access for a minimal cost, and the opportunity that presents to advertisers.

That should excite hard-working business owners. The next economic recovery could come on a wave of expansion, with Google providing some of the rush as they help WiMax expand to its audience.

Once the accountants and lawyers have their way with the process, the merged entity should be a $12 billion venture building the WiMax network that Sprint promised in 2007. WiMax offers 10Mbit connections over its range, according to Wikipedia, with faster speeds available at shorter distances.

The Wall Street Journal listed several firms backing Sprint’s efforts. Google and Intel on the tech side, and Comcast and Time Warner from the cable world, will pump $3.2 billion into the combined Clearwire business.

Google signed on to Sprint’s plans last year. The search advertising company inked a deal to provide the central portal Sprint customers will land on when signing in to Xohm. Google’s aspirations in the mobile market also include the software side of wireless devices, as the company pushes its Android platform for those developers.

“The deal finally gives Sprint the outside cash they needed, and gives Time Warner Cable, Comcast and Brighthouse Networks the ability to resell 4G wireless broadband,” said BroadbandReports. “The deal was supposed to be announced in April, but the complicated negotiation process took longer than expected.”

Om Malik suggested a little bit of panic motivated this deal. “The cable companies, Google and Sprint are all playing from a position of fear,” he said, and also noted the Xohm name would vanish in favor of Clearwire’s brand.

The competition from wireless giants AT&T and Verizon probably provided that fear. Both companies want to expand what they offer customers as they too ready next-generation high-speed wireless services. Sprint may be rushing to stake out ground first and grab some market share ahead of them.

Though at one point thought to be in jeopardy as Sprint’s upper management undertook changes, the high-speed WiMax network for wireless data regained a place in the company’s strategy. As of the CTIA show in Las Vegas this week, Xohm appears on track.

Sprint touted picking up a Frost & Sullivan United States Technology Leadership Award for its efforts with WiMax, an occasion that looked unlikely last fall when Gary Forsee got knocked out of the CEO post. Forsee had been a big WiMax booster, despite a price tag estimated for it in the neighborhood of $5 billion.

However, Sprint announced a handful of WiMax-oriented initiatives, aimed at getting the network up and sprinting (ha ha) forward:

• A XOHM Application Developer Program anticipated for May 2008 to provide the global WiMAX developer community with the tools and process required to create and introduce innovative products for XOHM’s customer base. The program features an open environment, thorough documentation and requisite tools.
• The Nokia N810 WiMAX Edition will be available during the first half of 2008 for use in XOHM service areas.
• Samsung announced at CTIA the mid-year availability of the Samsung E100 PC Card, and the availability in the fall of the Samsung Q1 Ultra Premium Mobile PC. The devices will operate exclusively on Sprint’s XOHM mobile broadband Internet network.
• Brightpoint and Nokia Siemens both announced support initiatives for various back-end processes of the Xohm network

Sprint said deploying Xohm over its 2.5GHz spectrum will allow it to bring WiMax to 75 percent of households in the top 100 US markets. That’s much more optimistic than the apparent shutdown Xohm faced back in October 2007.

Listen carefully to Comcast and Time Warner Cable, and you can hear The Fear. More on that in a few paragraphs.

Big money may be lining up behind WiMax and a network rollout across the country to support it. Sprint and Clearwire fumbled around with this for months, like a teen couple on prom night in the back of a Honda Fit. As in uncomfortably.

However, the Wall Street Journal says Comcast and Time Warner discovered a newfound interest in backing WiMax. Comcast could kick in up to a billion dollars, while Time Warner would scrape $500 million together.

Since phone companies started competing with cable to offer television, it seems the cable companies want to fight back. Sprint needs to solidify its business, as it has fallen behind Verizon and AT&T in subscribers. The timing seems perfect to give WiMax a kick in the rear and get it moving.

Intel and Google received mentions as supporters of WiMax. GigaOM reports Intel could be in for a billion, while Google’s contribution would be in the hundreds of millions. Another cable operator, Bright House Networks, could put up $100-$200 million.

Now we can get back to this Fear thing we mentioned earlier. WiMax offers a blisteringly fast way of delivering wireless broadband, and being able to do so even to rural areas where cable companies turn up their noses at servicing.

Yesterday we mentioned Google’s rumblings about wireless connectivity in the white spaces existing in the 700MHz spectrum. Conceivably, Google and its Wireless Innovation Alliance pals could deliver what cable wants to do with WiMax.

What if Google gets to wireless high-speed access via white spaces first, and offers it at a price point that would likely undercut what Sprint and its new friends would charge for WiMax? Hello commoditization of wireless access on Google’s Android platform, goodbye mega-monthly charges from the cable-backed WiMax option.

If that scenario entered the WiMax discussion, the newfound sense of urgency could propel WiMax to a faster rollout. Google should profit there as well, as Sprint tapped Google last July to be the provider of the customer portal on the WiMax service.

While both companies plan to continue building WiMax solutions separately, news of Sprint pushing Clearwire aside raises more questions about WiMax deployment than it answers.

An AP report said the partnership would have Sprint’s WiMax service complementing the smaller Clearwire’s offering. The end of the pairing may give Clearwire founder Craig McCaw headaches to complement his sleepless night instead.

"The termination of the agreement certainly dramatically impacts the longer-term financial pressures on Clearwire and its aggressive build-out strategy," analyst Christopher King of Stifel Nicolaus said in the report.

Though the rollout of Xohm, Sprint’s WiMax service, appeared in doubt a month ago, later news about Xohm indicated it would continue, despite WiMax booster Gary Forsee being pushed out of Sprint’s CEO position.

Few should be surprised at the name mentioned as a possible partner for Clearwire now that Sprint has left the picture. Yes, CNNMoney has invoked the Google name, as Clearwire could handle the deployment and the service while Google does its content and ad serving thing.

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The best news about Sprint offering WiMax suggests that the project will launch. Recently a Sprint executive told a conference audience the service would come and tear down the walls to high speed wireless access.

How Xohm will be structured to do so from a corporate viewpoint could change. Sprint’s current search for a new CEO, coupled with a rough third quarter that saw subscribers and net income plunge, may require Xohm to zoom out of Sprint.

The Wall Street Journal said Xohm could be spun out as a separate unit. Clearwire, a wireless startup shepherded by Craig McCaw, has been mentioned as a possible partner for Xohm.

The promise of WiMax for Internet users, particularly those in rural areas, makes it a compelling technology. It has a far greater range than WiFi, and offers practical connections of 2 to 10 Mbits/s.

Google has been associated with Sprint for the Xohm project by taking a role in building a portal for Xohm users. It has been reported that the work between Google and Sprint could extend to Google’s mobile software appearing on phones offered by Sprint for its subscribers.

CNet said investors are blanching at the prospect of a $5 billion price tag for a service that could extend mobile and Internet access at speeds better than 3G networks to 100 million people by the end of 2008.

A Sprint spokesperson cited in the report held out a glimmer of hope the next CEO won’t stroll in and kill WiMAX:

“I can’t speculate about what a new CEO will do,” said Leigh Horner, spokeswoman for the company. “But for now, we are continuing to build out the WiMax network. We expect a soft launch of the service by the end of this year and a commercial launch in April of next year.”

If it comes to pass that new Sprint leadership dumps the Xohm project, it becomes difficult to see where the promise of real high-speed mobile access will come from, especially if an existing telecom walks away with the 700MHz spectrum auction next year.

According to a press release, the two companies will “work together in bringing important web-based services to Airtel’s community of broadband internet customers.”  Or, in other words, Google Search, Gmail, Google Talk, and Google Docs and Spreadsheets (among other things) will be bundled together and offered to almost 45 million people.  Not bad, right?

“We are delighted to work with Airtel to promote the use of Google services amongst its broadband users,” said Shailesh Rao, Managing Director of Google India.  Of course, Rao doesn’t think Google is the only one that’s benefiting from this arrangement.  “Today’s alliance will provide an ideal platform for Airtel users to enjoy the best possible online experience with customized access to Google’s evolving suite of innovative products,” he continued.

Speaking of “evolving products” – Google’s been showing a lot of interest in the mobile market lately, which might be most obvious in its WiMAX agreement with Sprint.  And all of this has revived rumors of the Google Phone.  The Airtel development isn’t likely to discourage any of that chatter because, as reported by the Business Standard, “The Airtel and Google alliance also plans to extend its services and suites to . . . mobile phones in times to come.”

Big happenings in a populous country.

Google Phone Speculation Runs Wild

Even if a Google phone emerges soon, we aren’t inclined to think that it will be the end result of the company’s development efforts. Ever since they purchased mobile software firm Android in 2005, we have wondered how Google might use the technology.

A Computerworld report cited some of the shortcomings of efforts by other companies, and Google, with regards to privately-branded phones and networks. They noted Disney’s multiple failures with its ESPN Mobile service and its sparsely populated Disney Mobile devices.

Analyst Jeff Kagan described the performance of ad-supported wireless networks over the past ten years as "not successful." This is where people may be reading too much into the idea of Google debuting a prototype ad-supported phone right now.

It’s simply too soon to judge a device Google produced in-house unless, and this is a big caveat, they had help from the world’s most prominent technology design house, a company where Google CEO Eric Schmidt just happens to sit on the board of directors.

That would be Apple. Of course, Apple just debuted its iPhone in June. It’s a high-end device in price and capabilities. Google isn’t going to kick the legs out from under Steve Jobs. Not because they don’t want to, but mostly because they can’t yet.

Google has been talking with wireless providers about adding its services to existing networks, with mixed success. Companies like Verizon don’t like the revenue split Google proposed.

Like every gambler knows, the best money to play with is house money. For Google to play with house money, they need to own the house.

That’s why Google’s experimentation with Sprint on building a portal for Sprint’s future WiMAX wireless users strikes us as more important than rumblings about hardware right now. Google will use the Sprint WiMAX portal as a place to refine their services as delivered by that high-speed wireless option, and draw customer feedback.

After that, we expect the next step to happen with Google putting all of the ‘dark fiber’ it has purchased to work. Once they light that up and plug it into WiMAX antenna backed with portable datacenters strategically placed to enable faster access to wireless services, like videos and video advertising, that will be when the real Google Phone arrives.