Google shares break $700 on reports of wireless talks

Google’s stock broke through the $700 mark on Wednesday, after press reports that the search engine giant is in advanced talks with U.S. wireless carriers over adoption of mobile phone software Google is reportedly developing.

On Tuesday evening, Reuters and The Wall Street Journal, quoting anonymous sources, reported that Google and Verizon Wireless are making progress in drafting a mobile partnership.

On Wednesday morning, The Journal expanded its story, reporting that Sprint Nextel is also at the negotiating table with Google.

Earlier on Tuesday, The Journal had reported that Google will soon announce details of its mobile phone platform, which, according to the paper’s sources, Google will deliver in mid-2008 and which will allow outside developers to create mobile applications.

At issue is Google’s need to make it easier to deliver online services such as Web search through cell phones and, consequently, extend its online ad reach to the mobile market. The market is tiny but is expected to grow quickly in coming years.

Google already provides services for mobile phones via different methods. For example, Google has created mobile versions of some of its Web sites, which can be accessed via mobile browsers. It also has some deals with carriers to integrate Google services into the menu of features these telecom companies offer to their mobile subscribers. Finally, Google has also developed mobile applications that people can manually download to their cell phones.

Rampant rumors and speculation about Google’s mobile phone strategy have been around for the past six months or so, and at one point included reports that Google would go as far as make actual handsets, something that it apparently has no plans to do.

The Kelsey Group recently forecast that mobile search and display advertising in the U.S. will hit $33.2 million this year and grow at a compound annual rate of 112 percent through 2012, when it will total $1.4 billion.

Kelsey Group also expects the number of mobile Internet users to grow at a 20 percent compound annual clip in the United States through 2012, when there will be almost 92 million people going online via their cell phones.

Worldwide, mobile ad spending is expected to reach $1.5 billion this year and grow to $11.3 billion by 2011, according to market researcher Informa Telecoms & Media.

Other Internet companies such as Yahoo, AOL, and Microsoft are also busy retooling their online services and applications so that they can be used on cell phones.

However, these Internet companies are finding that delivering online services and applications via mobile phones isn’t as straightforward as doing it via PCs.

In the mobile market, Google, Yahoo, AOL, and Microsoft have to play nice with a variety of gatekeepers, including mobile carriers, handset makers, mobile software developers, and last but not least, government regulators such as the U.S. Federal Communications Commission, which auctions off wireless spectrum and sets rules for its use.

In July, Google jumped headfirst into a regulatory melee in the United States when it very loudly urged the FCC to radically alter the rules of the game in the mobile market.

Google argued in favor of so-called open-access requirements for the winners in an upcoming auction of very valuable wireless spectrum, locking horns along the way with big wireless carriers such as its now reported potential partner Verizon.

The FCC later attached open-access requirements on a third of the spectrum to be auctioned, but stopped short of adopting another Google suggestion that winning bidders be required to resell the spectrum at wholesale rates to competitors.

Google, which has a dominant position in online advertising delivered via PCs, dwarfing with its massive success the performance of Internet giants such as Yahoo, AOL, and Microsoft, knows that the leadership in the mobile space is up for grabs.

Unsurprisingly, Google is displaying a clear sense of urgency about the wide open mobile field as well as signs of discomfort at the complexities inherent in the mobile market that have prevented it from acting with the liberty and speed it is accustomed to.

“The mobile space is very complicated,” acknowledged Marissa Mayer, Google’s vice president of Search Products & User Experience, in a recent interview with IDG News Service.

After nearing $705 in mid-morning, up by about $10 from Tuesday’s closing price, Google’s stock was trading closer to $700 in late morning Wednesday.