1. Its not going to make a phone.
2. Their revenue will be via advertising through the phone software.
3. The handset manufacturers who have teamed up in the so-called Open Handset Alliance (OHA) already have 'rival' software running on their phones.
The only potential advantage that I can forsee is if the handsets running gPhone run on 3G for fast net speeds over cellular networks. Lack of 3G is one of the major gripes about the Apple iPhone. One of the reasons why the iPhone is not 3G is because using 3G is a drain on battery and 3G is not yet available in all areas in the US. However, Apple is not stupid and it can fairly easily add in a 3G chip in the iPhone if pushed.
When Steve Jobs introduced the iPhone to a drooling crowd in Jan 2007, the multi-touch interface and rich graphical features of Mac OS X that were introduced where never implemented in a cellphone before. Each of these technologies existed in isolation and Apple brought them together in a shiny, thin object. Thus the hype started and to some extent, the product lived up to the hype.
The idea that I will be bombarded with ads on my cellphone is far from appealing no matter how slick the interface might be. Google needs to do some serious innovation to come out of this one. Otherwise the inevitable dip in its share prices might be a good opportunity to buy google stock.
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