Last Updated Jun 3, 2010 6:30 AM EDT
Why? Because mobile data caps will send users back to their desktop PCs for much of their media-heavy Web surfing, and that's good news for Google.
Before tiered data pricing, the average smartphone user was reaching more and more often for their phone to use the Internet. No wonder; smartphones can provide local context, integrate contacts, and go anywhere in a pocket. But tiered pricing makes data on the phone a scarce commodity. When it comes to consuming music and movies, listening to Internet radio or making VOIP calls, iPhone users may now revert back to their PC's broadband connection to save some scratch. And if Verizon (VZ) follows AT&T's lead, as some have predicted, the effect will be multiplied.
Mobile data traffic has been exploding, prompting the slow death of the PC. My colleague Erik Sherman has argued that Apple will eventually ditch the Mac; I've argued that smartphones will soon replace laptops.
But with tiered data pricing, that transition will happen slower. That's a reprieve for Google, which has been taken somewhat aback by the speed of the mobile revolution. I've argued that the rather hasty entry of Android and the AdMob acquisition are evidence that the search giant hasn't been taking the mobile market seriously for very long, and that Android is simply an insurance policy against the iPhone becoming a de facto standard. (Apple, by contrast, seems to have had its mobile roadmap in place for years before the 2007 introduction of its phone.)
As President Obama would say, let's be clear: Google presently makes no money on Android. Where Google does make money is on desktop Web use, and it will defend that golden egg to its death. Despite its credo, Google's interests are somewhat counter to its users -- it prefers we stay chained to our computers, where we rely more on search and less on apps. (It's easier, for example, to Google search the phrase "definition of feign" than it is to head to Dictionary.com and proceed from there. On a phone, by contrast, you'd merely reach for the Dictionary.com app without Googling anything.)
That's why Google has been working hard lately to make its desktop ecosystem more attractive, instead of plunging headlong into the mobile space, as Apple has. It wants to delay the attractiveness of the app-driven mobile economy while it figures out how to make money there.
Examples of Google's stalling abound. Sensing perhaps that users like the "personal" feel of navigating on their personal phone, Google has been personalizing its formerly-sterile bulwarks, Google.com, iGoogle, and Google Reader. It has also been pushing its cloud-based apps for personal and enterprise, because keeping data on the cloud necessitates a broadband connection, and being near broadband usually means having a computer handy. It's also why Google has been experimenting with building a free high-speed broadband network in some parts of the United States.
It's not that Google is anti-smartphone -- it simply needs more time to diversify its revenue stream. It's already very close. YouTube is rolling out more and more monetization strategies, just as Web video is becoming the majority of overall Internet traffic. And once the AdMob folks have settled it, the search giant can begin to convert some of its desktop ad prowess to the mobile market. Until then, it'll be happy to watch iPhone users put down their devices.
Image courtesy Reuters.