I have a growing suspicion that the very savvy Sheryl Sandberg and the exceedingly wise Mark Zuckerberg read my work. From the beginning of this site I have argued that the smartphone is a completely new and transformational shift in personal computing, not a supplement.

The smartphone is the computer. The mobile web is the web.

This portends many changes in how we connect, learn, work, play and empower. It also reveals that what worked, even what worked very well, may not work at all in this new world.

Google Adwords, for example.

As I've documented, long before the bloggers and pundits clued in, wtih such posts as:

• The biggest question facing Google and its future: are mobile ad revenues supplemental?
• How much value does Android contribute to Google ($GOOG)?
• Google to the left of me Facebook to the right here I am stuck with no money again
• How does Facebook make money on mobile?
• No Facebook Phone? Okay, Facebook, show me the money.
• Facebook's future is mobile? Does that mean it's a future with no money?

…and many more...

There is no guarantee that even the sainted search-advertising-content presentation-display advertising model that has made Google one of the richest, most profitable companies in the world can deliver equivalent revenues, even when we have 5 billion smartphone users rather than the paltry 1 billion PC users.

Just late last year, in "Is Android bad for Google?" I stated:

Are we at Peak Google?

Google has spent billions on Android. With their planned purchase of Motorola Mobility, I estimate the costs of Android to Google to be approaching $20 billion.

Where is the return?

While Android quickly became the most popular smartphone platform in the world, thanks to Google's commitment to using its monopoly search profits to buy market share, actual revenues have been minimal.

What if they *always* will be? 

More frightening, for Google and others, but no less unlikely: what if mobile advertising revenues are always minimal *and* are not merely incremental? That is, as hundreds of millions and soon billions of users have smartphones, which we take with us all the time, everywhere, it is reasonable to expect that the smartphone becomes the *primary* platform for advertising. Rather than search for (often static) information on our PCs, at our desks, we instead use our smartphones for real-time, location-aware information that we can take advantage of at that moment at the point of presence. 

In such a world, which I find to be an extremely likely scenario of our very near future, advertising quickly evaporates on the PC and is shifted to the smartphone. Which may mean: Google is screwed. At least, Google as it exists today.

All Google's actions with respect to Android, the mounting costs of Android, their depressing, duplicitous statements re "managed" traffic instead of net neutrality, and their perversion of terms like "open" and "standards" all make sense when you realize that Google views the smartphone as I do. That is, as the future of the web and (nearly) all our web-based activities.

Except, there is simply no guarantee that advertising revenues on the smartphone are incremental. I believe that within only a few short years, smartphone 'search' and advertising will *replace* the bulk of search and advertising generated from the PC.

In Q3 2011, Google's quarterly revenues were nearly $10 billion. When providing its revenue numbers, Google noted that, at that time, (officially sanctioned) Android was already at about 200 million activations and that *annual* "mobile" (not Android) revenues were nearing $2.5 billion.

Facebook, apparently, understands what Google may not. From their S1 filing (via Business Insider):

Growth in use of Facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results.

Mobile use of Facebook is growing faster than stationary/desktop use. Facebook claims over 400 million active mobile users. These users are spread over multiple platforms, such as iOs and Android, that could -- theoretically -- block or limit Facebook.

Yet the company focuses not on that potentially limiting factor but on monetization of mobile:

Although the substantial majority of our mobile users also access and engage with Facebook on personal computers where we display advertising, our users could decide to increasingly access our products primarily through mobile devices.

We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven. Accordingly, if users continue to increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, our revenue and financial results may be negatively affected.

Second to Google, and possibly second to no one, no company knows more about us than Facebook. And no service is more regularly used by more people around the world, across mobile platforms, than Facebook. 

Yet their ability to effectively monetize this information, in a manner that will earn them enough monies to justify their $100 billion valuation, or even a $50 billion valuation, is highly, and now formally, suspect. 

And, no, it is not because they are unable to build an ad platform just like Google's. Remember, Google isn't making money off mobile advertising either. 

The smartphone is not simply destroying old businesses and industries, it is destroying old business models. Google makes a fortune by having what is -- to date -- the world's most profitable business model. 

That is going away.

The entire *mobile advertising* industry is expected to generate about $2.5 billion in revenues this year. This is less than one quarter of Google's Q4 2011 revenues. 

This is not to suggest that the smartphone won't generate unimaginable sums of cash. Rather, despite the 1 billion and soon to be 5 billion smartphones in use -- these sums are likely to come from new sources and new economic models. Why do you think Google is spending tens of billions on Android, Google+, media subscriptions and other services, applications and platforms? 

Because they have no idea.

This is what makes the smartphone wars so fascinating -- and so deadly. This is also why I think Facebook has a legitimate shot of surpassing Google in both revenues and profits this decade. Not simply because lucrative PC-based/stationary web search is, I believe, not likely to survive this decade. Rather, it's that Facebook's "social platform" has, in my view, a greater potential to offer more valuable information, feedback and services than Google. Plus, unlike Google, Facebook is not wedded to a 20th century business model. 

Whereas nearly all Google's revenues (still) come from advertising, only 85% of Facebook's revenues do. Moreover, this percentage has been dropping each of the past 3 years. 

Additionally, even with Android and Gmail, Google Search and Google Maps and Google+ and GoogleOther, it's very possible, maybe likely, that more people will use Facebook more often than all Google properties combined and also be more *engaged* with Facebook. Already, the company has 845 "monthly active users" including 425 million mobile monthly active users. 

That is power, and power always generates wealth. Will it generate $100 billion of wealth we cannot say, not yet. 

Along with the filing, CEO Mark Zuckerberg wrote:

By helping people form these connections, we hope to rewire the way people spread and consume information. We think the world’s information infrastructure should resemble the social graph — a network built from the bottom up or peer-to-peer, rather than the monolithic, top-down structure that has existed to date.

We also believe that giving people control over what they share is a fundamental principle of this rewiring. We have already helped more than 800 million people map out more than 100 billion connections so far, and our goal is to help this rewiring accelerate.

That, dear reader, represents a fundamental remaking not just of the web but of personal connectivity on a hyperglobal scale. Facebook is already well on its way to achieving -- and capitalizing -- on this vision. Yet to date, that capitalization has generated less than $4 billion in revenue. 

What this reveals, then, is that the killer business model of our new social, mobile, always-connected world has not yet been discovered. True, the odds are that the leaders in mobile, those companies with the most aggressive strategies, the most users, the most cash, the best talent, are likely to discover it first and possibly exclusively.

Google and Facebook are the leaders, possibly also Twitter. 

Still, their odds can't be considered great, nor even good. Think of all the portals and search engines that existed prior to Google stumbling upon Adwords, for example. Or how many mobile phones were in use and generating revenues for Nokia, Sony and others when Apple introduced the iPhone. 

Money -- big money -- from the mobile web remains an undiscovered country. Keep searching. 

A useful analysis of why Facebook's advertising platform can sometimes prove superior to Google's, and why Facebook will not kill Google but will limit Google's potential advertising revenues grab:

For while Google allows you to narrow down the geographic territory in which your ad will appear, Facebook allows you to pick the type of person who will see your ad. And that is why I think of Facebook as the Cable TV of the Internet.

But the magic of Facebook’s targeting doesn’t stop with countries or education.  If I wanted to, I could advertise to all 10,141,480 Facebook users with birthdays that happen in a week or less.

 Think about that.

 And if you really want your head to spin, think about this: according to a friend in retailing, the average Facebook woman updates her relationship status to “Engaged” within two hours of the guy actually proposing…so Facebook sells that relationship status information to retailers who have bridal registries.

 As my pal told me, “We’ve been looking for this for fifty years.”

Advertising on the Internet pretty much sucks hairy donkey balls (far as I know). It's almost always ugly, intrusive and of little value. For all the times we are told that the web has led to a "revolution" in advertising and intelligence and metrics, us users know the truth: it's pretty much a hit-or-miss game, with emphasis on the miss.

A friend recently mentioned to me that I should get kettlebells. Since these are a product I first went to Amazon.com and typed in kettlebells, which was helpful though not complete. Which kind should I buy? What weights? How do I best use them?

For this, I went to Bing.

A day later and now it seems as if every website I visit has a huge BUY KETTLEBELLS! banner at the top of the page and another one to the right.

Of course, I have already moved on. The ads are irrelevant.

One of the reasons that Google has become one of the most profitable, powerful companies on the planet is because the ads they serve are so often directly connected with a specific, timely search. I'm not sure this will be enough in the era of the smartphone.

After all, the screen -- even those big Android screens we are being told (by Android) that we should prefer -- are still not quite big enough to effectively display an ad. One that we will view, at least. Likewise, even if one were to search Google, there is barely room for the 'right' 2 or 3 search links, let alone paid links from advertisers.

Fact is, smartphones have quickly become a trillion-dollar-plus industry, while smartphone advertising remains at the starting gates. It is not an industry that Google, for example, is guaranteed to win. Even if they do have a built-in lead.

One of the reasons Google refuses to provide any real cost and revenue data in their earnings statements re Android is because, as an advertising company, they simply don't make much advertising revenue at all. Right now, Android is all costs and nothing but costs.

Apple is re-tooling iAd, which has to date been a failure.

I read this morning that Millennial Media, the *second* largest mobile advertising company in the US is preparing its IPO.

For an embarrassingly tiny $75 million! Google just dropped twice that amount to buy Zagat restaurant reviews. $75 million aint shit.

If the stationary web permanently changed advertising then I can assure you that the mobile web will change it once again. Advertising in the mobile web will be unlike advertising in the stationary web. The race is on.

The dream of mobile advertising, if we can call it that, is that the smartphone provides real-time, hyperlocal data that should provide a more powerful understanding of the user's specific needs. Thus, advertising will be better. No more needless Kettelbell banners, for example. All the data about our location, our activities, what we are doing, who we are with, what is near us, who is near us, should all lend itself to something that is less an advertisement and more, say, a welcome appeal.

That's the dream, at least. My fear, of course, is that the knowledge -- the data -- that is effectively locked inside our smartphones won't be fully accessed nor fully understood on a powerful, personal level for many more years. Meaning, we have years and years of being bombarded with noise desperately trying to get us to spend our money on stuff we don't want, don't need.

Can this possibly be true? Microsoft will drop $200 million in marketing and sales incentives for Windows Phone. In 2012. In the United States:

In this most crucial of markets, Microsoft has one goal and one goal only: Convince consumers to purchase millions of Windows Phone handsets in the first half of 2012. Doing so will require a new set of phones—as I exclusively detailed previously in Microsoft's LTE Plans for Windows Phone—as well as stepping up engagement with tech enthusiasts, increasing retail-worker recommendation rates through training ands sales incentives, and other means.

According to the internal Microsoft documentation I've viewed, the total cost of this marketing tsunami is in the neighborhood of $200 million, not $100 million. And again, that's just for the United States. And on AT&T at least, Nokia is outspending Microsoft 2-to-1.

Included in the plan are sales incentives for retail workers, aimed at getting them to finally start recommending Windows Phone as an alternative to Android and iPhone. The amount of payments are $10 to $15 per handset sold, depending on the number sold, for some handset models.

Consider the following:

Verizon Wireless, the largest U.S. mobile carrier, sold 4.2 million Apple Inc. (AAPL) iPhones in the fourth quarter, more than doubling from the third quarter, said Fran Shammo, finance chief of the company’s parent.

The iPhone sales will narrow gross margins at the wireless business by 500 to 600 basis points, Shammo, chief financial officer of Verizon Communications Inc. (VZ), said today at a Citigroup Inc. event in San Francisco. U.S. carriers sell smartphones such as the iPhone to subscribers at a loss to get them to sign up for contracts that typically run for two years.

The demand suggests Verizon Wireless is winning an increasing share of new iPhone users, after gaining rights to offer the handset to its subscribers last year. In the third quarter, Verizon added 2 million customers for the device, trailing the 2.7 million iPhone activations at AT&T Inc. (T), which has offered the handset since 2007.

In this recent quarter. Verizon sold 4.2 million iPhones. Just Verizon. One quarter.

Dear Steve Ballmer, I bet you don't sell 4.2 million Windows Phones in the US in all of 2012.

Care to take me up on this?

Forget the $200 million marketing. Forget the sales incentives. You are in charge of Microsoft and yet somehow missed the *largest personal computing market* ever: the smartphone.

I have doubts you can ever catch up. But, I will tell you that the Windows Phone, as presently conceived, will continue to underperform even Blackberry.

You allowed iPhone and Android to own the market. To establish robust, virtuous, global ecosystems. And allowed the planet time to embrace the app as the mode of accessing the full range of what the mobile web has to offer and the app to leverage the full power of the smartphone while insisting upon a Windows Phone OS that repeatedly tells people it is not an app phone.

Tiles vs apps? Really?

That will never work.

For al that Microsoft has and for all that Microsoft can do, as we enter 2012, Microsoft has yet to establish a *single* reason why a smartphone user should choose Windows Phone. $200 million in marketing will not change this reality.

When you pay attention to the man behind the curtain, you learn real quick -- in case you needed learning -- that Google views you not as a person, interested in things like search and smartphones and connecting via social media.

Rather, you are a conglomeration of identity and habit, location and interest, weaknesses and desires.

To be sold to.

Sooner you understand this, the sooner you accept that Android is open and for the benefit of users and free and standards are all just still more marketing words from Google.

They are not values. They are not strategies. They are buzzwords.

Google is an advertising company.

And with identity services such as Google+ and real-time location-based platforms realized through Android, Google gets better at knowing what advertising appeals work best on you.

Sometimes, I just have to chuckle at the small brains that proclaim APPLE IS A MARKETING COMPANY! That's how they sell those expensive devices! Through marketing and reality distortion!

No, dear child. Google is a marketing company. The most profitable one in the world. 

And they are marketing you. Every moment of every day.

A few datapoints for those of you still clinging to the view that Google is an Internet company. Or search engine.

At Google, we call this online decision-making moment the Zero Moment of Truth -- or simply ZMOT.

Winning the Zero Moment of Truth is a powerful new eBook by Jim Lecinski, Google's Managing Director of US Sales & Service and Chief ZMOT Evangelist. Jim shares how to get ahead at this critical new marketing moment, supported by exclusive market research, personal stories, and insights from C-level executives at global leaders like General Electric, Johnson & Johnson, and VivaKi.

If you're a marketer, a CEO, a sales rep, or an aspiring entrepreneur, this eBook on marketing strategies and the ZMOT will help you understand this shift in the marketing landscape and show you the strategies it takes to win.

It even works for presidential campaigns!

This election cycle, the usual flurry of activity has only just begun — even as the race has seen unprecedented volatility, with six different candidates having led Iowa polls at some point. The final result on January 3 remains difficult to predict, but the presidential primary so far has made it apparent that traditional political campaigns are being transformed by forces that can be explained through a framework that is redefining consumer marketing campaigns: Google’s “Zero Moment of Truth” concept.

The Zero Moment of Truth builds on the long-held marketing idea that the “First Moment of Truth” occurs at the store when a shopper selects a product and the “Second Moment of Truth” occurs at home when the shopper experiences that product. The Zero Moment of Truth is the decision-point after a stimulus leads a consumer to seek more information but before he arrives at the store — or in politics, before a voter solidifies his choice.

The Zero Moment of Truth is whenever technology informs an impending decision, whether buying a car, going on a date, or supporting a political candidate. A study conducted by Google and market research firm Shoppers Sciences this spring found that the number of sources used by a person for the average purchase has doubled, from 5.2 to 10.4, and shoppers use each source almost twice as heavily as in the past. In politics, the Internet provides voters with vastly more resources to follow campaign developments and view candidate speeches, debates, interviews, and political analysis than ever before.

This election cycle, “primetime” is not watching live television at 8:00 p.m., but viewing YouTube videos at lunch. Campaigns and Elections reported that a survey by Public Opinion Strategies and SEA Polling found close to one-third of likely voters nationwide said they had not watched live TV in the past week and 45 percent said live TV isn’t their primary mode of consuming video. Traditional voter contact methods like direct mail and phone calls are stimuli that drive voters to conduct further research — and the Internet provides an infinite resource to validate or refute campaign messages. Candidates this year have surged in the polls, only to face that Zero Moment of Truth for voters and then see their standing fizzle.

Hate on Apple all you want. 

Just know that if you do, it's probably because you've been marketed to think that.

[Thanks to reader, James for the presidential link!]

Any idea why Google is spending investor's money on cool driverless cars?

Yeah, well me neither -- except that what better way of getting commuters to have still more time to be exposed to your advertising?

With Google, for all the talk of mission and vision and open and standards and aggregating the world's knowledge, they are first and mostly most, a highly successful extremely profitable...advertising company.

Everything they do comes back to advertising. Everything.

But in a world of always-on connectivity, of billions of smartphone users (soon), of hyperlocal interaction with global digital platforms and the complete integration of the physical with the virtual, advertising will change profoundly.

Google, perhaps more than anyone, is set to capitalize on this change.

But -- and this is important -- all their money comes from static PCs over wired connections. All of their money. There is simply no guarantee, no matter how well they do, no matter how quickly they move, that Google can replicate their PC margins/revenues in this new world.

This new world will be one of context, social conectivity, real-time response and recommendation engines that have a thorough grasp on our needs and wants.

There is another factor, one possibly more important than all these, however: interface.

As Kevin Fitchard of GigaOm notes, how we interact with the planetary web, is critically important, especially for those, like Google, seeking to sell us something -- or sell us to someone. This is a long race, no doubt, and Google is well -positioned. That said, Apple's Siri has taken an early lead in offering up a new user interface that is leading many to bypass existing forms of information presentation and retrieval -- which is Google's bread and butter:

Siri is just the beginning of a new wave of user interfaces (UIs) that will gradually shift our attention away from our phones’ screens, allowing us to interact with our devices in ways that don’t involve tapping keys and staring at pixels.

The most oft-cited example is “Siri, call me a cab.” Rather than perform the usual local search, displaying a list of taxi companies and word ads on a screen, Siri does all of the dirty work in the background, automatically placing a call to what its AI feels is the most relevant dispatcher. That bypass of the search portal is changing the way that cab companies present themselves on the Web, spawning a new type of SEO: ‘Siri’ engine optimization. Being in the top three listings of a local Google search or depending on AdWords to push your website to the top of sponsored results is no longer good enough, if Siri is doing the searching instead of the consumer.

But if Google and Bing are delivering direct results, rather than a list of links, what of their keyword advertising based business models? And what of the websites themselves that find their information hijacked by a multimodal UI without even an ad impression in compensation? 

Yet another (very well done) Apple advertisment, once again actually showing the product, showing it being used, without the use of robots; no hotties, no, er, androids, no mocking of others or other's customers. Straight up, not like all the bullshit *marketing* you get from other companies.

Yes, I'm mostly talking to you Motorola and Samsung.

Though a few words of advice for Apple: you advertise the shit out of Siri. I understand it's new and "beta". That's not an escape hatch.

Search. Gmail. Maps. Turn-by-turn directions. Youtube, free voice, free video.

How is it that Google can give me all this good stuff, for free, no strings attached, and I can still feel such animosity toward them?

Cause they're strings attached. Lots and lots of strings. Which they proudly tell, no to their end users, but their customers.

"All of you should aspire to be direct marketers."

"Tracking individual customers."

"We're starting to understand what to listen for."
"Target with more precision."
"Channels." "Verticals." "Brand." "Figuring out where they're going."
Google is not on your side. That's all you need to know. "Zero moment of truth," indeed.