We’ve talked quite a lot here on Google-Phone about potential revenue schemes by which non-traditional carriers might monetise subscribers, and yesterday Google used YouTube - which they acquired last year - to trial what analysts are calling the first major sign that the search company intends targeted advertising to fund the gPhone. The adverts, which are contextually themed to each video and overlaid relatively discretely at the bottom of the frame, disappear after a few seconds if not clicked on, and so far occur only sporadically through viewing rather than affecting every clip.

The belief is that this, coupled with Google’s ongoing trials of ad-revenue supported mobile service, could potentially be the answer to the issue of how best to serve adverts neither too intrusive nor avoidable; analysts are saying that cellphone screens could display such advertising when users are dialling or surfing the net:

“It showcases the fact that you can do ads that are unobtrusive in at least one format with video. It very well could be that you could use a derivative of this to handle cellphones. It does look like Google is getting closer to bringing out that property” Rob Enderle, Technology Consultant

Such a strategy could be leveraged no matter whether Google operated the network itself or leased out sections of it, wholesale, to niche companies; as the hugely successful AdWords system shows, Google is well placed to - and has a history of - discretely packaging itself along with others’ content. Much of the strength of AdWords is its ability to tailor suggested links according to the rest of the page being viewed. Eric Schmidt pointed out the potential Google is cashing in on at a conference back in May:

“What’s interesting about the ads in the mobile phone is that they are twice as profitable or more than the non-mobile ads because they’re more personal” Eric Schmidt, Google CEO

Personally, I doubt Google will set up their own 700MHz network, and instead will portion out sections of the spectrum to interested third-parties. Then they’ll supplement that income by overlaying contextually-based advertising that is device-independent, in much the same way that the current online AdWords program is compatible with any browser and any connection. Viewed as a dual-income prospect, the $4.6bn initial investment - while undoubtedly huge - seems more reasonable.

[image via theage.com.au]