Google working on own-brand handset to grab share of $11bn mobile adverts

Google is angling for a huge slice of the potential $11 billion (£5.4 billion) mobile advertising market with the launch of a “Google phone” especially tailored to its services.

The internet search giant is understood to be developing a handset that is customised to showcase its products, such as its search engine, e-mail and Google Maps.

The GPhone, about which the Californian group has already held talks with mobile operators, including Spain’s Telefónica, is aimed at helping it to secure a chunk of the rapidly growing mobile advertising market.

It hopes to replicate its runaway success with internet advertising by acting as “broker” for mobile advertisements.

The failure of 3G services on mobile phones and a lack of “web friendly” handsets has held back the market for mobile advertising.

However, with phones becoming ever more sophisticated and mobile network speeds faster – more than 20 per cent of UK mobile subscribers are expected to have access to the mobile internet at broadband speeds by the end of this year – mobile is now seen as the next battleground for advertisers.

Sir Martin Sorrell, the chief executive of WPP, the marketing group, recently highlighted the growing importance of mobile. Figures compiled by WPP suggested that mobile phones will account for a 5 per cent share of all advertising spending in Britain by 2010. Research by Informa Telecoms & Media forecasts that the market for advertising on mobile phones is set to be worth more than $11.3 billion annually in 2011.

A Google-branded phone could go head-to-head with Apple’s iPhone, which is set to be launched in the UK before Christmas.

Mobile is deemed so valuable in part because of the targeting that the devices allow. Eric Schmidt, the chief executive of Google, said recently that mobile phone ads are “twice as profitable or more than nonmobile phone ads because they are more personal”.

Google has already brokered deals with mobile phone companies, including Vodafone, the British operator.

Google’s search engine also comes preloaded on handsets made by companies including Samsung and LG.

However, some mobile companies are thought to have been reluctant to hand over too big a share of their revenues to Google.

This year some operators, including France Télécom, which owns Orange, held talks about creating a search engine to challenge the likes of Google and Yahoo!. Google is now hoping to create its own branded and designed handset and to develop more advanced services for phones.

Sources familar with Google said that any notion of a Google phone was “speculative”. A spokesman for Google in the UK said: “We are partnering with almost all the carriers and manufacturers to get Google search and other Google applications on to their devices and networks.”