Interesting announcement out of Google this week that points to a potential model that service providers might be able to replicate — ie, steal – in the advertising market.

At issue is Google’s Ad Manager, a new service that lets Web sites — mostly small and medium sites — manage their ad serving for free. To manage such ads on the Web, sites typically have to buy an ad server or pay an ad serving service or network. Google’s proposition is to offer ad serving technology for free in order to get sites on its ad serving platform. It then offers users the *option* of filling up unfilled inventory with Google AdSense ads for a split of the revenue. The ad platform even has some tools that will let sites know if they can make more money running Google ads then their own spots — a sly move thatfurther leverages the full platform effect.

The NYTimes story on the service called it a “trojan horse” and we agree. It could become even more of a Trojan horse now that Google’s acquisition of ad network/vendor DoubleClick is official. While Google is currently positioning DoubleClick as a premium (for-fee) service targeted at larger advertisers (with free Ad Manager serving the long tail), it’s not difficult to envision Google offering the same platform deal to these larger advertisers — free ad serving and probably even free customer service in exchange for letting Google get a shot at placing ads on their sites. It’s that type of potential market power that led regulators to look at the Google/DoubleClick deal in the first place.

It’s interesting to note that Google isn’t the first free ad serving tool. Venture backed open source company OpenX also offers free ad serving. A post on the OpenX blog breaks down the elements of Google’s ad server play, noting that Google is now an 1) ad network provider, 2) an ad server/analytics provider and 3) a publisher that itself makes money off from advertising.

While OpenX obviously touts the dangers of this approach, Google’s platform approach works it is able to subsidize elements of its strategy — free Ad Manager; free Google Analytics; revenue sharing AdWords/AdSense — to drive total ad impressions, Google’s real cash cow.

It also could make it a model worth copying.

Service Provider Take:

Carriers are eying the advertising market carefully (see: Advertising Chaos). But where will the revenues come from and are they big enough to really matter? Dan Taylor, Yankee Group analyst, sums it up well:

It continues to perplex me. Telcos talk about getting into the media business, and the two businesses they talk about are neither big nor as significant as their core business. Those two businesses are advertising, which for them is selling local spot ads — which was a $5.7 billion business last year — and selling personal subscriber data, which means they will be competing against 12 or so established companies that do nothing but external data today. Neither of these businesses approaches the volume of what telcos do today.

One approach to making advertising matter may be to copy the Google ad platform play, where making things easier and cheaper for advertisers becomes a trojan horse providing them with access to ever-larger pieces of the advertising pie.

It’s even more important to note that Ad Manager is only one part of Google’s larger platform play; each piece — search, email, advertising, office apps, cloud computing, etc — builds on and complements the other.

On the ad side, telcos have the data and tools — including location, identity and subscriber information and management, billing, fulfillment and CRM systems — to build a Google-killer platform in the advertising space. And while Google rules the Web (and is trying to enter a variety of other ad markets, from radio to print display and more), service providers are going to have the best, first-crack at key new ad markets, notably IPTV and mobile.

An even better play is to see this advertising platform as *just one* part of a larger telco services platform — including payment, fulfillment, customer data, billing, logistics and much more — all backed by the world’s most reliable and secure networks.

With such a world view in place, a surprising thing happens: Google/Doubleclick starts to look not only like a competitor (which it is), but a potential partner and customer for this telco platform as well.

How’s that for a trojan horse move?

One of my favorite bloggers in the mobile area is Russell Beattie, formerly of Yahoo’s mobile team among other endeavors and currently creator of Mowser, a mobile search engine/portal/transcoder.

Russell doesn’t suffer (particularly mobile) fools gladly, so he’s a good counterpoint to most conventional wisdom in the Web/mobile areas.

Today, his rant holds special import for service providers, as he lays out Google’s real path to success in the Web search market — and its plans to follow that blueprint in the mobile market.

Beattie seems at least in part inspired by Vic Gundotra, head of Google’s mobile operations, who at the Mobile World Congress this week implied service provider contracts are becoming less important, as mobile users increasingly wanted to browse beyond an operator’s own site:

“The world is changing. Users want an internet without fences. They know how to type in Google.com if they want to get to it. Two years ago the operators were still playing the role of gate­keepers but that is no longer the role for them.”

The idea that Google’s search growth happens serendipitously, either on the Web or on mobile phones, leads Beattie to lay it out plainly:

The greatest hoax ever played on the Internet is the idea that Google’s growth was somehow “natural” or “viral”, and that the strength of their search results alone is what propelled them to their insane 70% market share…. Google bought as much search space as they could from OEMs, portals, etc…the reason that Mozilla.org is a going concern and Opera is now free? Because of the search deals they made with Google.

For carriers, the other party in some of those search deals, this is nothing new. But Beattie follows the thread into the mobile area:

They’re doing it again in mobile, and no one seems to be noticing. The first thing I thought of when I read that Google is getting 50x more search traffic from the iPhone than any other phone is “Wow, that default iPhone search deal they made with Apple is really paying off.” Of course all the fanboys don’t bother noticing that and just assume somehow Google would be getting all that search traffic “naturally”. Google might still be seeing a huge percentage more iPhone traffic because of how nice the iPhone interface is than the rest (it is the best mobile browsing experience bar none) but that’s not the significant part. You don’t see Yahoo! or Microsoft or Ask making the same claims, do you? Google’s getting that huge increase in search traffic because they *paid* for it.

So while Google’s hard-ball 700 Mhz open access demands and its still-evolving Android strategy look like they’ll succeed in helping to “open” up the Web, don’t miss its deals that essentially “lock down” large portion of the search market — Web and now mobile — for itself.

Look no further than this week for more proof it its pay-for-play strategy in action as it managed to get the Google search engine embedded as part of Nokia’s search application.

For mobile operators, this means one thing (if it wasn’t already obvious). You have something Google — not to mention Microsoft and Yahoo, or Microsoft/Yahoo) — need, and need desperately.

Don’t get so distracted by the man screaming “OPEN!” behind the curtain that you give away the prize he is really looking for, prime mobile portal and search engine placement.

Be it large upfront fees or good terms on an ad share deal — make them pay.

UPDATED: Here’s some good additional info from Chris Sacca, who used to manage Google’s wireless business (ie–strategy and lobbying) but left recently to go the VC route. Sacca notes that browsing by searching on the iPhone is probably quicker than desktop-style URL entering given a) the hard-to-use iPhone keyboard interface and b) Google query box built into the iPhone “chrome.”

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Service Provider Bottom Line: Google is using its Web market power to extend its business in new directions, a tactic it is likely to leverage as Google eyes wireless, handsets/mobile OSes and VoIP. Read on…

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Earlier this year, Google took the (widely-noticed in some circles, under-the-radar in others) step of hosting Associated Press news content on their Web site. The move was at least in part to counter AP complaints about how Google *pointed* to their content.Regardless, it moved Google into the business of hosting content rather than just indexing it. And other sites that host AP content, most notably newspapers, found themselves competing with Google for traffic on those news stories.Google “hosts” other content as well, obviously, most notably YouTube videos but also if we broaden the definition of “hosting” email (via Gmail), documents (via Google apps) and more.Any business that relies on advertising thrives on page views — Google has the unique model that it benefits almost wherever those pages are found thanks to its AdWords and AdSense programs.

Today, Google started to move into another profitable content area — encyclopedic content — with a new beta program called Google Knol. From ReadWrite Web, a quick description:

Knols participants will write reference pages on any topic, using a Google content creation tool apparently in the works, and those pages will be highlighted in Google search results. Authors will choose whether they want ads to appear and will receive a “substantial revenue share.”

Competing Knols pages on the same topic will be judged by reader votes and the Google Search Quality process. There will be reader commenting, the ability to add additional information and more social features. It won’t be a walled garden but will live on the open web. Attribution will be substantial and Google is presumably working with high-profile topic specialists on the Knol project.

This isn’t a new idea. Wikipedia is the most obvious user generated content site, but upstarts like Mahalo and Squidoo have been creating user generated content stores as well. The screen shot above (courtesy of SearchEngineLand, which does a great job exploring this topic), gives a feel for what a Knol page will look like. Today, search on most any topic and a Wikipedia result will be near the top of the list. That may not change, but almost overnight (and apparently without the strict algorithmic approval other sites are required to meet) it will now be joined by a Google Knol entry as well. If high Google-ranking is the pixie dust for Web 2.0 businesses — and it is — than Google just sprinkled a little dust on its own already be-crowned head. Google says it won’t give Knol posts an unfair page rank advantage, but Udi Manber, Google vp of engineering in announcing the project, writes:

A knol on a particular topic is meant to be the first thing someone who searches for this topic for the first time will want to read.

That sure sounds like Knol’s will get to the top of the search heap fairly quickly. Bottom line, here’s what’s notable:

• Google is getting deeper yet again into the content business, competing with its customers and partners
• Google is using its market power to fend off upstarts by attempting to embrace and extend (a tactic typically attributed to Microsoft) winning business models
• As much as Google believes in the power of the machine (algorithmic search) the power of people (original, spot-lighted content, social networks) is coming to the fore as well
• Compete directly with Google, as Wikipedia is doing with its new search engine, and it may come back on you
• SEOers are going to have a field day with this — though it’s hard to imagine they’ll be successful gaming such a high-profile Google project

What markets will Google try to embrace and extend next? For service providers, it’s not a big logical jump to expect Google to use its Web market power to enter the wireless spectrum, handsets/mobile OSs and VoIP (particularly the Web-initiated VoIP market via integration into its Google Apps suite) areas.