Rumours surfaced last March that Google was working on a mobile phone. Now those rumours have come back with a vengeance, with the Wall Street Journal claiming that Google is courting mobile phone operators to provide an ad-supported mobile phone service to Google-customized handsets.

Furthermore, the article also claims that the company has already built Google phone hardware prototypes that are up and running in its labs.

Fuelling the rumours are reports that Google has been talking to mobile phone operators regarding handset specifications, and their recent proposal to offer the US Government $4.7 billion for wireless spectrum.

Suddenly, it seems, the Google phone rumours are starting to seem like more than just hot air.

More details of the Google phone after the jump.

Latest Google Phone Rumours

According to the Wall Street Journal,

"Google has invested hundreds of millions of dollars in the cellphone project, say people who have been briefed on it. It has developed prototype handsets, made overtures to operators such as T-Mobile USA and Verizon Wireless, and talked over technical specifications with phone manufacturers. It hopes multiple manufacturers will make devices based on its specs and multiple carriers will offer them."

Meanwhile, The Register speculates that the Google Phone would come with a camera, built-in WiFi, 3G and GPS capabilities. Nothing new there, but what would be new would be the tight integration with Google's existing search and other applications, a new Google mobile browser that the company could be working on, and the addition of mobile ads that would help keep the overall cost of the phone down to a fraction of its competitors'.

Google have told TechNewsWorld that "we're partnering with carriers, manufacturers, and content providers around the world to bring Google search and Google applications to mobile users everywhere."

Earlier this year, Google CEO Eric Schmidt was also quoted as saying that mobile ads are twice as profitable as PC-based ads, because the ads are more personal.

Google's plans in the mobile arena

Clearly, then, Google are working hard in the mobile arena. If mobile ads really are more lucrative than current Web-based ads, then there's a clear incentive for Google to work out a way of bringing them to a wide audience in the same way it has with its Web-based AdSense and AdWords programmes.

It's unclear exactly how they'd do this, as mobile ads can be more intrusive than Web-based ads. However, AdSense fundamentally transformed the online advertising industry, and replaced the bankrupt idea of banner ads that caused the original DotCom crash with a new model of contextual ads that made sense for publishers, advertisers, and, most important of all, users.

As such, if anyone can figure out a way of making mobile ads pay, you can bet it'll be Google.

Quite what form this will take, though, is anyone's guess, and whether it'll come in the form of a dedicated Google phone, or simply a partnership with existing phone manufacturers and mobile operators remains to be seen. Google have stated publicly that "we are partnering with almost all of the carriers and manufacturers to get Google search and other Google applications onto their devices and networks," but according to the Wall Street Journal, their mobile plans go "far beyond just adding Search and Google maps to mobile phones from other manufacturers".

Google, the mobile network operator?

Google has to be careful it doesn't alienate the mobile operators, as they have a lot of power in the mobile arena, and would be reluctant to give up any ad revenue that would be generated (particularly if it was of the scale of that generated by Google's Web-based advertising programmes).

However, if the company was to release its own mobile phone and its own mobile network, it would be in an extremely strong position. Effectively, it could do whatever it wanted to, keep all the existing mobile ad dollars, and use them to subsidise its phone in a way that would undercut its rivals' phones and services.

One thing's for sure - Google has the brains, the brand and the deep, deep pockets that would be required to bring mobile advertising to market in a way that could revolutionise both the way we use our phones, and their cost.

Interesting developments, and as always, we'll keep you informed of the latest news.

[The Register, TechNewsWorld, The Wall Street Journal]