Google Patent Triggers Mobile Rumors

Call it the story that just won’t die. The idea of Google creating its own smart phone, to compete with the likes of Apple and more conventional companies in the industry, keeps growing under its own steam. A patent filing by Google, which was made public only recently, has been adding fuel to the fire.

The patent was filed at the end of February 2006, and published just recently. Google engineer Ramy Dodin has his name on the patent. It describes “a computer-implemented method of effectuating a payment, comprising: receiving at a computer server system a text message from a payor containing a payment request comprising a payment amount sent by a payor device operating independently of the computer server system; debiting a payor account for an amount corresponding to the amount of the payment request; and crediting a payee account that is independent of the computer server system.” If you enjoy reading this sort of thing, here’s the full text of the patent.

So what does that mean in plain English? Say you want to make a purchase from a vending machine, or pay for your dinner at Red Lobster. You use your cell phone to send a text message to “GPay,” as it was called in illustrations accompanying the patent. The message goes to the particular Google servers in charge of such things. The system then debits your account and credits the merchant’s account. You’d have to keep a balance with GPay to do this, but the merchant would not need to since payments are made externally to GPay’s system.

Everybody is wondering why Google filed this application. Some observers have all but stated that the search engine giant is ready to roll this out as a product. Never mind that a Google spokesman said “We file patent applications on a variety of ideas that our employees come up with. Some of those ideas later mature into real products or services, some don’t.” He might as well have been talking to the air for all he managed to slow down anyone’s fevered imagination.

{mospagebreak title=But Text Message Payment Already Exists}

This kind of payment is not common in the US. But if it sounds very familiar to you, you’re not alone. There are a number of countries which boast companies that already offer this kind of service to their subscribers.

Let’s start with the Philippines. Their population may be only a third the size of ours, but they’re way ahead of us in the text message payment department. Two companies based in that island nation support it: Globe Telecom and Smart Communications. The former offers Globe GCash, a service that “enables any Globe or TM subscriber to send and receive money and make payments just through text/SMS.” The latter offers Smart Padala, which it bills as “the first cash remittance service via text.” Judging from the description, however, it seems to be designed for people who are sending money on a regular basis to a specific person or beneficiary based in the Philippines.

One poster to a version of the story about Google’s patent noted that “It seems more like a profane copy of the mobile payment services that are available in Estonia for several years now.” Another poster to that same forum observed that the same system has been operational in Croatia since at least 2002.

The folks across the pond are way ahead of the US here as well. Benjamin Cohen, writing for the Channel 4 news site, stated that “Here in Britain, mobile users have been able to purchase ring tones and mobile content via shortcode text messages for some time…all parking meters in the City of Westminster in London now only accept payment by either text message and phone call…[and] the five major mobile operators came together to launch Payforit, a universal payment system that will eventually turn a mobile phone into a digital wallet.

Even here in the US, though, Google would have some competition. Secure Wireless Transfer Corporation (SWT), founded in 2005, offers a service called KushCash. It comes in several versions, including one that works on compatible mobile phones. Obopay offers a similar service, and even pays users to sign up. Verizon started offering this service to its subscribers in June, a move that may have helped privately-held Obopay close a round of venture funding worth $29 million.

And then there’s PayPal. Google is already in a battle with the online payment company thanks to its less-popular service, Google Checkout. But PayPal is innovating on its core business. In 2006 it introduced as service that enables cell phone users to buy DVDs and other products by sending text messages. This year, it added the ability to pay online merchants via the mobile web.

{mospagebreak title=What’s Google’s Larger Plan?}

A number of observers have pointed out that if Google really is working on a mobile phone headset, it would be wise to include some kind of killer app. Surfing the Web, even with the Google search engine, isn’t enough. Tom Spring, writing for PC World, explained that “surfing the Web on your cell phone is less…enjoyable than it could be,” and blames it on carriers who serve users “walled gardens” of content without a full range of online applications and services. Even the browsers for mobile phones are less than robust. Of course, the small screen should shoulder part of the blame as well.

The killer app for a Google phone could be text message payment. But what evidence do we have that Google is working on a cell phone? Well, there are a lot of tantalizing hints. Rumors about a Google phone actually date back to December 2004, as this timeline illustrates. There’s a lot more than just rumors going on here, though.

Let’s look at the search engine giant’s actions. The fact that it already runs an online payment system makes developing a mobile version at least an arguably good idea. Google also has GTalk, a Voice over Internet Protocol (VoIP) system, which lets users make free or cheap calls over the web. And the company has been making many of its most popular applications, including Gmail and Google Maps, available on mobile phones.

If Google really wants to build a mobile phone and the corresponding service, it would need to develop an operating system. In 2005, Google bought Android, a startup software company that specialized in mobile software. The people behind Android also worked on T-Mobile’s wildly popular Sidekick handset.

Of course the most tantalizing clue to Google’s future plans came when it announced its intention to spend a minimum of $4.6 billion to bid in the upcoming auction for the 700 MHz wireless spectrum. Google could roll out a whole bunch of wireless services, use the spectrum to build its own cellular network or work with another company to create the network.

{mospagebreak title=Why Would Google Make a Cell Phone?}

What would Google get out of having its own cell phone? If the system were ad-supported, as many of the rumors imply it would be, the search engine giant could gain quite a lot of money. Some analysts expect the mobile advertising market to hit $11 billion by 2011. That’s a lot of money, even though it’s only worth $450 million today.

Google has already been cutting deals with mobile phone companies to put its applications on phones. It is known to have deals with Vodafone, Samsung and LG. And in July, it partnered with Sprint Nextel to provide users of that network with web services that include email, chat, and social networking tools. That may not be enough, however.

Google’s two search rivals actually have more on the ball when it comes to mobile devices. Yahoo has been working on the mobile marketplace for a long time. Its OneSearch mobile search engine even replaced Google on the mobile version of the Opera browser. As for Microsoft, its software is shipping on 20 million mobile devices this year alone, and it is reportedly thinking about making its own mobile phone, which would of course feature the Windows Mobile OS.

Mobile surfing has a lot of room for growth. Jupiter Research estimates that only 15 percent of mobile phone users have browsed the Internet from their phones. If Google could build a phone that would actually make it fun to surf the web, the product might catch on. If it can find a way to cut the costs, it would really have something. Smart phones that do awesome things aren’t cheap, and when you factor in the phone bills – which usually include charges for roaming and surfing the Internet – you have a continuing headache, as many iPhone owners have found out to their dismay.

In any case, looking at the GPay system by itself, it’s the sort of thing that benefits from scale – or, to put it almost oxymoronically, a lot of people won’t use it until they see that a lot of people are using it. Some may be concerned about its safety and security, while others will simply shrug and decide that it’s faster to pay by credit card or cash. Combine it with the still-mythical GPhone, however, and you potentially have a revenue stream coming in from a source other than advertising – something that Google has needed for a long time.

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