Google, Verizon Close to Mobile Search Deal

Google is nearing a wide-ranging partnership with Verizon Communications that would make it the default search provider for all the company’s devices, The Wall Street Journal has reported, citing people familiar with the matter.

The deal would see Verizon (NYSE: VZ) replace its homegrown mobile search engine with Google’s, creating an all-in-one service that would allow users to access the Web and applications such as ringtones through the same interface, with the companies sharing ad revenue.

The Journal reported that the companies have yet to agree on how much information about users’ searches Google (NASDAQ: GOOG) would be able to access. Detailed search histories would help Google better target its ads, but carriers like to keep their subscriber data in house.

Mobile search ads remain a nascent market. Research firm eMarketer estimates spending on mobile search ads to hit $102.3 million this year, though it expects that figure to jump to $1.4 billion by 2012.

For years, analysts have been heralding the imminent explosion of mobile ads, though the breakthrough has yet to arrive, due in part to slow connection speeds, poor interfaces and carriers’ reluctance to open access to their networks to content and service providers.

That last condition has been the root of some friction between Google and Verizon. When the Federal Communications Commission was crafting rules for the 700 MHz wireless spectrum auction last year, Verizon Wireless, a joint venture of Verizon Communications and Vodafone (NYSE: VOD), took to the courts to nullify a condition requiring the winning bidder to open its network to all types of software and devices.

The FCC held its ground, and the open-access rule remained in place for the auction, provided that the bidding for that portion of the spectrum reached a minimum price. Thanks in part to Google’s participation in the auction, that floor price was reached, so the open-access requirement will force Verizon, which won about half of the spectrum available, to open its network to all comers.

Google (NASDAQ: GOOG) has maintained that it was prepared to take home a slice of the airwaves if it won, though the company admitted that the main reason for its participation was to trigger the open-access requirement.

Verizon has indicated that it would begin opening up its networks to third-party devices and applications on its own, and even said it would support Google’s forthcoming Android platform, but following the spectrum auction, Google filed a petition (PDF) asking the FCC to ensure that Verizon honored the open-access requirements.

With a forthcoming ad partnership, much of that bad blood could be behind them.

For Google, which did not immediately respond to requests for comment for this story, the deal would give it a major inroad into a market that it expects to be huge. By subscribers, Verizon is the second-largest mobile provider in the country, and the rumored deal earned some early praise from Wall Street.

“We think such a relationship would potentially be a material positive for Google, as it pursues market share and growth in a category that Chairman and CEO Eric Schmidt recently described as possibly a bigger opportunity than the more traditional Internet, due largely to the number of mobile handset and devices worldwide,” Standard & Poor’s analyst Scott Kessler wrote in a research note.

The largest carrier, AT&T (NYSE: T), has an extensive partnership with Yahoo, which also has ambitious designs on the mobile market.

Verizon is interested in eventually placing the Google search bar on its home screen, and could seek to extend the partnership to Verizon’s Web properties and its FiOS TV service, the Journal reported.

Citing company policy, a spokesman said “Verizon is not commenting on rumors and speculation.”

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