Summary: in his keynote address at Mobile World Congress, Dr. Eric Schmidt, Google's CEO, told the telecoms industry exactly which parts of their lunch Google will eat, while simultaneously appeared to offer peace. Our analysis of what he said and didn't say.
Dr. Eric Schmidt, Google's CEO, bedazzled the 2010 GSMA Mobile Word Congress in Barcelona. In his keynote address he told the industry exactly which parts of their lunch that Google will eat, simultaneously appeared to offer peace, showcased mesmerising new technologies, effortlessly took 45 minutes of questions from the floor, and then disappeared to widespread applause.
(Image Source: EON News)
Don't get us wrong - we were impressed too. It was a great speech and a great show. Dr. Schmidt is a very, very capable and inspiring person, and there is no doubt that Google is brimming with ideas, vision, and ability to make things happen. We've published a Telco 2.0 perspective in our report 'Google: where to cooperate? Where to compete?' and are presenting two sessions specifically on 'Living with Google' at Telco 2.0 Best Practice Live, 28-30 June 2010,the first FREE carefully curated, online, video-based, interactive knowledge bank of cutting-edge ‘Telco 2.0’ services, business models and solutions from around the world.
In our view, some of the most important information was not just in what he said but what he said quietly or didn't say at all.
Like a great magician, Dr. Schmidt used the conjurer's gentle art of misdirection coupled with a mastery of performance to pull off his notification of Google's intended heist without appearing to alert or offend the hosts.
Dr. Schmidt said he was 'shocked' to learn that the US might get LTE before or at least at the same time as Europe. The audience were amazed primarily by the sight of an American CEO appearing to grasp irony, and possibly also because none of them knew that anyone has signed up to a mass LTE deployment either. LTE was a great thing he said, just build it and the money will follow, but he didn't say where from. Hang on, the still barely functioning conscious brain began to ask, wasn't the last time we remember that being the business case for a new investment when the 3G spectrum came up for auction? In fairness though, this isn't really Google's business problem. His point was that Google love anything that makes the internet stronger (of which more below).
Moving smoothly on, Dr. Schmidt's big message was that Google is putting 'mobile first' in all development efforts from here on in. Sounds great, doesn't it? But please note, he didn't actually say that Google are putting mobile operators and vendors first, but rather that they are putting an increasing emphasis on what they consider to be ultimately the mass market form of consumption of the internet - the mobile phone.
He said, as did we, that Google wants to put a bit of Google between the user and the internet in every possible transaction. Android, and Google's accelerating investment in developers, symbolised by the production of a magical shower of free Nexus One phones at the show's developer forum, are an important component of this part of the plan. Before the audience had time to recognise or reflect on the prospect of disintermediation from their customers, he swiftly produced a series of stunning visual magic tricks.
Various effortlessly shining Google acolytes joined the stage to produce apparently live demonstrations of Goggles image search, voice translation both to text and to other languages, and Optical Character Recognition (OCR) on a phone across the internet.
Arthur C. Clarke said that 'any sufficiently advanced technology is indistinguishable from magic', and unlike the traditional 'rabbits from the hat' and 'flowers from the sleeve' tricks, these demos truly showed a little bit of magic in this sense. So befuddled were the audience that Mr Schmidt had to prompt them to go 'wow' at first, though luckily there was at least one American in the audience who started whooping, so it didn't take long before the majority of the audience also fell under the spell.
And to be frank, it was pretty impressive.
Perhaps equally impressive as a lesson in business model innovation is the way Google has leveraged the assets of its web search processes and algorithms to the various searching, matching and translation tasks across voice, images and text.
Google is also showing real vision in terms of how the cloud network really should work as a resource - a place to perform complicated computing tasks (such as accurate speech recognition) on a relatively small bit of data really quickly and return a useful individual answer to the end-user.
Dr. Schmidt has been rightly praised for taking 45 minutes worth of questions, even if some were of the simpering 'Google rocks!' and 'can I have a job please' variety. He dealt with a variety of challenges cleverly, never once retreating from his relaxed 'I have nothing to hide but my brilliance' stance beside the podium. One infamous industry commentator tried to bluster through a 'you just want us to be dumb pipes' question. Like Zorro responding to the suicidal challenge from the latest brave but doomed local guard, Dr. Schmidt first confused his opponent by asking 'is that a question or an assertion?' The audience immediately on his side, he then mocked his opponent 'I like assertions, shall we deal with that first?' Then he appeared to deal with the question 'no, I don't think that at all' and finally seemed to show pity for his downed opponent 'it was not me that asked them to take the microphone away from you'.
More sophisticated challenges produced slightly more nuanced answers. He said that Google wanted telcos to deliver networks with the service quality and security needed to produce a great end-user experience (of Google). This is presumably his interpretation of the 'happy pipe' scenario for telcos. On the issue of 'net neutrality' he sounded conciliatory saying that operators have every right to distinguish amongst categories of content (video from browsing etc.), and that Google supported that right so long as there was no discrimination between providers within any given category. This was greeted by many nods of approval from the audience, but what he didn't say was that he means that non discrimination within categories should apply to operator-run services too, and that's where Google comes head-to-head with operators on net neutrality.
On voice, he rebuffed suggestions that Google were 'stealing telco's minutes' through Google Voice. He asserted that equally, text messages stole telcos minutes, though omitted to recognise that text messages were at least in some cases revenue creating services provided by Telcos as opposed to a free service provided by Google.
Perhaps most significantly, in a brief and almost off-hand comment, he said in five years Google and the telcos would both still be in the market 'together', but customers would have given Google more of their data. No pretence, no fuss, no fireworks - this was masterful sleight of hand, quietly telling the audience what would disappear before the show is over without them realising that this is the big trick, so that at the end they would say 'oh my goodness, he even told us what he was going to do and we still didn't work it out!'.
That he remained unchallenged on this point seems proof yet again that many in telcoland just don't seem to understand the value of the asset they hold in their customer data (see here and here). This is what Google will gradually build up and use to its own ends, just like it did with location data - that originally unique asset of the mobile industry.
Perhaps this anticipation of value is also the great art and secret of Google's magic - they simply get there first. Before another industry even sniffs the value in a given area, before the newspapers are writing about the 'next big thing', like the great investors they've already hoovered up the assets for a snip. The logic is simple: it is possible to take a leading position in advance of the market, but much harder to when the whole market is after a given space. This is the real challenge for the operators now - have they recognised the opportunity, and are they really doing enough to play for it? Google have recognised it, have told everyone about it, and will move forward rapidly.
Effusing distracting and temporarily disarming modesty, Dr. Schmidt was at pains to say that Google is not perfect, and not strong as mobile operators in some key areas - a theme we've explored before, e.g. in Google Vs Telcos: The Tale of The Tape. Neither does Google have unlimited resources, capabilities, or commercial ambitions. Dr. Schmidt said Google has no desire to compete in billing and payments, in which he said Telcos were 'far and away the most efficient processors'. He didn't mention that Google have just recruited eBay's US GM to be their VP Commerce, so perhaps we should add 'for now' at least, and not mention the financial services companies.
He also said that Google has no ambitions in fibre to the home where their activities are intended as a test to prove the concept that data rates over 100Mb/s are possible. When questioned on growth ambitions, he said that it is simply a CEO's prerogative to always want more revenue, and that advertising is (for now at least) the biggest single pie that Google want a piece of. He said of the c.$1 trillion advertising market, less than 10% was online, and Google's priority is to accelerate the transition from offline to online and capture as big a piece of it as possible, particularly in mobile. Again, much as we said in our Google report.
Dr. Schmidt's appearance and performance at the 2010 GSMA Mobile World Congress marks an inflexion point in the telecoms industry. It was significant just that he was there, and there was much in the content and the style of the presentation that signals some of the possible future paths that the industry may take.
Intelligent, visionary, and unapologetic that Google will pursue its own agenda, for those with any remaining doubt Dr. Schmidt announced that Google is in mobile seriously and to stay. He didn't say 'I don't care what you think, we are going to win all the bits we want' but he might as well have done. And why not? Google isn't perfect or saintly, but it earns its place and its money by winning customer trust and usage by being a little bit magical - and to date at least by being smarter and better than everything else around it. Google does not owe the Telcos a living, though it would like them to provide it with useful services.
The important question is: what will the telecoms industry do about it? Will it continue to appear beguiled and flattered, rolling over to be tickled like the enchanted Congress audience? Will it get insular and defensive and threaten regulation as Vittorio Colao, Vodafone CEO appeared to suggest in his keynote? Or will it get on and take the opportunities that it has within its own grasp - including the opportunities to both work with and compete against the big innovators like Google? No doubt a bit of 'all of the above' will apply.
In our view though, it is critical for the telecoms industry to recognise the fundamental reshaping of the commercial and technical infrastructure that is happening right now, collaborate on initiatives to create the business models required in the new information economy, and continue to compete like hell on the existing business.
So overall then it was an honest and skilful performance by Google's Chief Magician, even if some of the most important pieces of information were in what was quietly spoken or not said at all. It could only have been improved if the intelligence of the presentation were matched by the skill of the facilitation and interaction with the other brains in the building. To this end we'd love Dr. Schmidt to join us at the 'Living with Google' session at Telco 2.0 Best Practice Live, 28-30 June 2010, the first FREE carefully curated, online, video-based, interactive knowledge bank of cutting-edge ‘Telco 2.0’ services, business models and solutions from around the world. where we will offer just that.