Verizon's 'Droid' attack on the iPhone elevates Google in mobile air-wars

Competition in the mobile phone arena is about to get really real. Apple's iPhone -- available only on AT&T (T)-- has been the toast of the mobile world in recent years, but now Google (GOOG) is set to unleash a worthy challenger. Through its Android open-source mobile operating system and a pact with Verizon Wireless, the two companies have begun an all-out assault on the iPhone, starting with an in-your-face TV spot mocking the popular handset and introducing consumers to Droid.

Over the weekend, TV watchers got their first glimpse of Verizon's Droid, an upcoming device the mobile giant hopes will give it enough presence to challenge Apple (AAPL) and AT&T's iPhone as well as Canadian smartphone giant Research in Motion (RIMM), which recently released a series of new feature-rich BlackBerry devices.

Verizon Wireless' gambit is nothing if not bold: The mobile giant is trying to convince consumers that while iPhones may be kind of cool for geeks, if you want to be a badass, get a Droid. The mobile giant licensed the name from Star Wars creator George Lucas, and the phones are scheduled to arrive in November.

The commercial, with happy hipster-pop and white letters set against a black backdrop intended to mock Apple's own ad campaign, lists all the things the iPhone "can't" do -- like no keyboard, can't "customize," no widgets, etc. "IDon't allow open development," the spot jabs, in a reference to Apple's closed, proprietary software environment. Then the video signal cuts out, and the camera jerks around, as if to evoke some kind of disruption. "Everything iDon't, Droid Does," the spot intones.

Dennis Crowley, founder and CEO of Foursquare, the red-hot mobile networking service, which boasts both iPhone and Android apps, says teaming up with Verizon Wireless is "a huge win for Android."

"The big question for developers is whether it's going to be as easy to keep building for Android as it's been for the iPhone," Crowley told DailyFinance. "With the iPhone, it's been one phone and one screen size. Until now, Android has been easy because it's been on two to three devices with basically one screen size. But when you roll a new operating system out across a ton of different phones with different screen sizes," it becomes more difficult for developers, Crowley said.

With the arrival of the new phones next month, the market dynamics will be changed in a big way. If Apple set a new benchmark for device design, Google is trying to establish a new standard for open mobile software platforms. And that should mean more innovation and more competition.

"The biggest threat to Apple is that the market is opening up to Palm and Android, with Nokia (NOK) floating around in the background," Charlene Li, a founding partner at Altimeter Group, a Silicon Valley-based tech consultancy, told DailyFinance. "What happens when you have that rich diversity in the space is that it's no longer Apple versus Google, it's Apple versus everybody.

"This is going to force Apple and AT&T to innovate even faster," Li said. "They've been doing a good job with the iPhone, but there are serious compromises people have had to make, from the network, which has been spotty, especially in New York City where the system is really hard to get onto, to features like simultaneous apps that have been missing for two years.

"Apple will try very hard to match the new phones," Li said. "And that will be great for consumers."

Consumers are already benefiting from new upstarts in the market, most notably HTC -- which until recently barely had any brand recognition in the U.S. The company is beginning to win market share with a sleek touch-screen device called the Hero. But whereas the iPhone runs on Apple's proprietary OS, the Hero, as offered by Sprint Nextel (S), runs on Android.

As Verizon Wireless enters the fray with Android, Google is set to become a major player in the smartphone market -- which is exactly where CEO Eric Schmidt wants to be. On a recent conference call, the Google chief said: "Android adoption is literally about to explode." Schmidt noted that Android had gone from being offered by one carrier on one device in one country to 12 devices in 26 countries on 32 carriers in less than a year. Android currently has 10,000 applications available -- not Apple's 80,000, but not too shabby either.

An additional benefit for Google is access to the very fertile mobile web advertising market -- a so-far largely untapped revenue source that is expected to explode in coming years. "We can make more money on mobile than we do on the desktop, eventually," Schmidt said last year.

With heavyweight service providers like Verizon Wireless lining up behind it and next-generation-now devices like HTC's Hero, Google is well positioned to gobble up some mobile market share in 2010. No wonder Schmidt stepped down from Apple's board and Art Levinson stepped down from Google's board, amid FTC scrutiny of Google-Apple board ties. Things might have gotten pretty awkward pretty quickly now that Google and Apple are going head-to-head in a high-profile area of combat.

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