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There has been a lot of speculation lately about Google building their own mobile device, also covered by Babar on his blog.

These rumors were also confirmed and downplayed by Google Execs.

Today I want to analyze this rumor from many angles, including business incentives, brand, executive hints and so on.

Before that though, frankly, these rumors have puzzled me - cellphone are massive investments with ver low margins and short product lifecycles. Given Google’s philosophy of being super-cost-effective and scalable in their technology investments, on first look it made little sense that Google would venture into this area.

But then, a lot of large ventures undertaken by Google have made little business sense uptil this point - MetroFI access, YouTube, and others.

I think the Google phone could be key to linking and making sense of all of these investments.

Let’s dive into the analysis after the link:

The Purpose of the device
This one is simple — the purpose of investing in this device would be to augment and strengthen Google’s core business - advertisements.

In other words, the device has to be a channel to make you see more Adwords, or Video ads, or CPM ads, etc with incentives to make you click through and explore the products.

Basic Features
Given the above, some of the features that could be a given are

1- conversation-style SMS / voicemail management. The conversation style gives the spider more text, and thus can give you more accurate “suggestions” for restaurants or products below the conversation.

2- Redesigned calendar and phonebook — maybe product suggestions on birthdays etc.

3- Browser and Google Maps integrations — well these are obvious.

The Product Search angle
I think the Google phone will have a separate “Product Search” browser — this makes sense because a proprietary device gives Google complete control over the user experience. As such, a dedicated “adwords browser” which doesn’t just show words but also product shots, short descriptions, and comparitive price points makes sense.

This is inline with a recent renaming of the service, which nows the product search one more component of the larger Google engine (that would be enabled by the device).

The Voice Search Angle
A phone device — and complete control over it — gives Google the opportunity of perfecting the user experience.

From a business angle, it is perhaps the only best way for Google to compete with the Microsoft + Tellme stack.

Give people a button on the side of the phone and a GPS module in it. They are traveling through Texas and want to know where the nearest McDonalds is — they press a button, say “mcdonalds”, and the phone zaps into Google Maps with the nearest locations.

Press a location and you get detailed driving directions.

The Wifi Angle
Google last year implemented a metropolitan wifi network in Mountain View, CA. The initial guess was so that Google could become the front-page for all internet users in key silicon valley areas.

The other way to look at this is that perhaps Google had plans to (or still does) make the Google Phone a wifi-only device, thus disrupting the telecom market like people had expected Apple to.

If Google had had better success with metroFI implementation it may have chosen to rollout these networks enmasse.

Even without huge success there, having a MetroFi network certainly puts Google in a position to negotiate better deals with carriers.

The YouTube Angle

YouTube’s acquisition made sense not only to capture the market share of online video, but also for the potential of running ads on them, say in a way similar to Revver or AdBrite InVideo.

1- Youtube has the ideal demographic for advertisers
2- Most wouldn’t mind looking at pre-roll or post-roll ads
3- Pay-per-view advertising models can make a lot more money.

The incentive to keep YouTube run as a business is to ensure that fresh, spontaneous video content can be added to the site regularly. The problem is with the experience of actually putting videos up on YouTube — it is still taxing enough to keep out a portion of the potential active users.

But what if Google used a product on a cellphone, similar to PixSense, to automatically route all the videos to YouTube? That will change the dynamics of how people make youtube videos and interact with each other.

Pixsense, maybe you should prepare for an acquisition.

Brand
Google has one of the biggest brands in the world, and certainly the most cost-effective one.

The Google brand symbolizes ease of use, simplicity and very high performance. What happens when they are trying to create a mobile device — devices that have been notorious for being clunky, slow, and difficult to use?

The Dark Fibre Angle

The answer is perhaps in their acquisitions for the past two years on Dark Fibre. With a new mobile device in an individual persons hand (as opposed to a computer for a family), running instant voice searches or recording and sending video instantly to YouTube, you need very large pipes to provide the backbone between the carriers and Google’s application servers.

Other Speculation: The Executive Remarks

I thought I would throw this in — with a Google executive confirming the Google Phone as an “R&D” project, she mentions that the cellphone was designed to make its way to developing countries.

This isn’t half bad either — Google has accessed most of the world’s information, but developing countries remain notoriously closed to the big Google spider hungry for new information to index.

The trouble with information from developing countries seems to be infrastructures that support the penetration of the internet.

Disrupting those barriers can be a small PDA-type of computing device (Goophone) that can let people store their info and route that over the cellular infrastructure rather than the internet infrastructure.

Conclusions
Whether it is developing countries or a first-rate phone for the US market, a Google Phone in my view can be the one channel that binds and makes sense out of some of their large confusing investments.