Google has said that it will pilot app promotions on the Play Store, essentially bringing advertising to a platform that it was only monetizing with paid transactions earlier.

Whether Search, YouTube or the Android business, Google businesses have always been about creating fragmentation in the market, and monetizing its aggregation. With the Android business, it was essentially monetizing earlier via paid transactions on the Play Store, and allowing the integration of AdMob within apps.

Ads more core to Google’s business than transactions

Paid search results is more core to Google’s traditional AdWords business, and while the company says it is merely piloting sponsored results, we believe it will have an immediate impact: developers are likely to be queuing up for it. On Google’s conference call last quarter, the company had said that it now views mobile as a part of a users behavior: “people are using screen interchangeably, simultaneously throughout the day. And we really think about the user and the context rather than a particular form factor or device.”

Google has the fragmentation in Apps business: the company says it reaches more than a billion people on Android devices in more than 190 countries, and paid over $7 billion to developers distributing apps and games on Google Play.

It’s not clear what kind of ad formats will be introduced, but with Google, you can expect ads to be of a contextual nature, and perhaps even retargeting. Google says that a pilot group of advertisers are already running Google search ads for their apps.

Impact on Facebook?

We wonder what kind of an impact this will have on Facebook’s mobile monetization, for whom driving app installs isa significant feature of its mobile monetization strategy: will some money shift from Facebook to the Play Store for a country like India, which is largely an Android country? In any case, with this, Google will be able to get a larger share of the app install pie, because someone searching on the Play Store already intends to download apps.

We will hopefully stop getting emails for which app topped the Play Store when, since topping the charts will be more about how long you kept the advertising tap open, instead of consumer preferences. It always was, but now it’s more explicit.

What Next?

Google is looking to launch a zero-rating business similar to, wherein app developers buy a certain amount of mobile data from telecom operators to offer their apps at zero data cost to consumers. This dangerous and violates Net Neutrality. As we have pointed out in the past, by selectively giving access to apps for free, companies essentially ensure that consumption for those apps increases versus others. It essentially allows deeper pockets to prevail and creates a situation where companies are essentially forced to buy data from Google and/or telecom operators in order to compete. This hasn’t been launched yet, but in anticipation, Google has joined the cellular operators association of India, a telecom lobby that has been lobbying against net neutrality.  It’s been over a month, but Google is yet to respond to the following questions we sent to them:

Question 1. Why has Google joined COAI? At a global level, Google isn’t a member of the GSMA, so why has it joined a telecom industry association in India? This is in context of Facebook being a member of both GSMA and COAI.
Question 2. What benefits does Google get by joining an industry association where its core membership is only available to telecom licensees?

Question 3. As a member of the COAI, what are Google’s views on the COAI’s lobbying efforts for establishing a regulatory arrangement via the TRAI for interconnection charges / revenue share arrangement between telecom operators and Internet companies like Google? Do you support such an arrangement. Why or why not?

Question 4. In 2010, Google had tied up with Airtel, for offering higher speeds for access to YouTube for the Indian Premier League. All users accessing YouTube for the IPL were upgraded to a 2 mbps connection. Does Google support increasing or reducing bandwidth speeds for users for specific sites?

Also, Google has previously tied up with telecom operators like Airtel for providing free data for app downloads along with the purchase of Android One phones. This reduction in price for Apps is, in principle, similar to Airtel increasing prices for VoIP, which the TRAI Chairman Rahul Khullar indicated is a violation of Net Neutrality. At the same time, App developers would benefit from data bundling. Three related questions:

Question 5. What are Google’s views on Net Neutrality in India, and does it support or oppose Airtel’s now-retracted plan to charge separately for VoIP in India?
Question 6. Does Google intend to continue tying up with telecom operators for free data for Google services?
Question 7. Does Google have any plans (whether in India or globally) to offer application developers the ability to bundle data purchased from telecom operators free with their app?