Google shares broke through the $700 mark on Wednesday, after reports that the search engine giant is talking to US wireless carriers over adoption of its mobile phone software.

On Tuesday evening, Reuters and The Wall Street Journal, quoting anonymous sources, reported that Google and Verizon Wireless are making progress in drafting a mobile partnership.

On Wednesday morning, the Journal expanded its story, reporting that Sprint Nextel is also at the negotiating table with Google.

Earlier on Tuesday, the Journal had reported that Google will soon announce details of its mobile phone platform, which, according to the paper's sources, Google will deliver in mid-2008 and which will allow outside developers to create mobile applications.

At issue is Google's need to make it easier to deliver online services such as web search through mobile phones, and, consequently, extend its online ad reach to the mobile market. The market is tiny but is expected to grow quickly in the coming years.

Google already provides different services for mobile phones: For example, Google has created mobile versions of some of its sites, which can be accessed via mobile browsers. It also has some deals with carriers to integrate Google services into the menu of features these telecom companies offer to their mobile subscribers. Finally, Google has also developed mobile applications that people can manually download to their phones.

Google news

Rampant rumours and speculation about Google's mobile phone strategy have been around for the past six months or so, and at one point included reports that Google would go as far as make actual handsets, something that it apparently has no plans to do.

The Kelsey Group recently forecast that mobile search and display advertising in the US will hit $33.2 million this year and grow at a compound annual rate of 112 per cent through 2012, when it will total $1.4 billion.

Kelsey Group also expects the number of mobile internet users to grow at a 20 per cent compound annual clip in the US through 2012, when there will be almost 92 million people going online via their phones.

Worldwide mobile ad spending is expected to reach $1.5 billion this year and grow to $11.3 billion by 2011, according to market researcher Informa Telecoms & Media.

Other companies such as Yahoo, AOL and Microsoft are also busy retooling their online services and applications so that they can be used on phones.

However, these companies are finding that delivering online services and applications via mobile phones isn't as straightforward as doing it via PCs.

In the mobile market, Google, Yahoo, AOL and Microsoft have to co-operate with a variety of gatekeepers, such as mobile carriers, handset makers, mobile software developers and, last but not least, government regulators such as the US Federal Communications Commission, which auctions off wireless spectrum and sets rules for its use.

Regulatory wrangle

In July, Google jumped headfirst into a regulatory melee in the US when it very loudly urged the FCC to radically alter the rules of the game in the mobile market.

Google argued in favour of so-called open-access requirements for the winners in an upcoming auction of very valuable wireless spectrum, locking horns along the way with big wireless carriers like its now reported potential partner Verizon.

The FCC later attached open-access requirements on a third of the spectrum to be auctioned, but stopped short of adopting another Google suggestion that winning bidders be required to resell the spectrum at wholesale rates to competitors.

Unsurprisingly, Google is displaying a clear sense of urgency about the wide open mobile field as well as signs of discomfort at the complexities inherent in the mobile market that have prevented it from acting with the liberty and speed it is accustomed to.

"The mobile space is very complicated," acknowledged Marissa Mayer, Google's vice president of Search Products & User Experience, in a recent interview.

After nearing $705 in mid-morning, up by about $10.00 from Tuesday's closing price, Google's stock was trading closer to $700 in late morning Wednesday.