By Michal Lev-Ram

Long before it unveiled its Android operating platform, Google had its eye on the mobile market, an industry that reaches an estimated three billion people worldwide. The company’s main strategy? Pushing search, maps and e-mail onto cell phones in the hope of becoming the leading source of information — and ads — on the tiny screen.

Now Google (GOOG) says its efforts to make mobile services faster and easier to use are paying off. On Wednesday the company released new numbers showing mobile Internet activity on select devices recently surged, following its release of a software “shortcut” that reduces the time it takes to conduct a search on a cell phone.

“We’ve long known that fast is better than slow,” says Matt Waddell, project manager for Google’s mobile division. “But when it comes to mobile fast is much better than slow.”

Google says users of its recently released shortcut — a small piece of downloadable software that installs a search box directly on a cell phone’s home screen — conduct 20% more mobile Web searches than previous users. The shortcut allows people to type a keyword right on their phone’s home screen to initiate a query, rather than having to first find and open their mobile browser and type in the URL of their preferred search engine.

The shortcut was made available to BlackBerry (RIMM) and Symbian devices in recent months, but Google says it will also work on Windows Mobile phones like Motorola’s (MOT) Q and the Touch by HTC starting Wednesday. The company also credits “time-saving fixes” for a recent uptake in Gmail use on the Apple (AAPL) iPhone.

According to research firm M:Metrics, the iPhone, which offers several of Google’s mobile services, is the most popular device for accessing news and information on the go. Nearly 50% of iPhone users accessed a social networking site in January, about twelve times the market average. And about 31% watched online TV on their device.

“This data indicates that the iPhone’s widgets [small applications accessible from the phone's home screen] are an effective means to drive mobile content consumption,” Mark Donovan, senior analyst at M:Metrics said in a statement. “Beyond a doubt, this device is compelling consumers to interact with the mobile Web, delivering off-the-charts usage from everything to text messaging to mobile video.”

But M:Metrics also found that iPhone users are more likely to earn more than $100,000 than the average mobile subscriber. That means that, despite Google and Apple’s efforts to make the mobile Web simpler and faster to use, it will likely take a long time for it to reach mass appeal with average consumers — those who earn far less than $100,000 a year. According to a recent Jupiter Research report, 25% of U.S. cell phone owners currently browse the Internet from their devices, while just 16% say they do so frequently.

By Michal Lev-Ram

Microsoft’s Silicon Valley shopping spree continues with its purchase Monday of Danger, a Palo-Alto based company that makes the technology behind the youth-centric Sidekick phone, popularized by Paris Hilton and other celebrities.

Like its bid to buy Yahoo (YHOO) — which turned down the tech giant’s $44.6 billion buyout offer Monday — acquiring Danger is yet another move to compete against Google (GOOG), which is making a big push in the mobile industry with its Android operating system for cell phones. Ironically, Danger was founded by Andy Rubin, who went on to launch a little startup called Android, which was later snapped up by Google. Rubin now heads up the search giant’s mobile division.

Robbie Bach, president of Microsoft’s (MSFT) entertainment and devices division, announced the deal for Danger at the Mobile World Congress in Barcelona on Monday. Financial terms of the acquisition were not disclosed. “The addition of Danger serves as a perfect complement to our existing software and services, and also strengthens our dedication to improving mobile experiences centered around individuals and what they like,” Bach said in a statement.

In addition to making the technology behind T-Mobile’s (DT) Sidekick phones, Danger develops mobile services, including a MySpace application for cell phones. Unlike Microsoft, Danger has a young, cult-like following and Redmond hopes the acquisition can help extend its reach in the consumer market.

Microsoft says it plans to combine Danger’s services with its consumer-focused products, including MSN, Xbox, Zune, Windows Live and Windows Mobile, the company’s own operating system for cell phones. But it’s not clear exactly how Danger will fit into this vision, and whether the smaller company’s platform, which competes with Windows Mobile, will disappear.

“It will be really interesting to see how Microsoft integrates the technology, business model, and overall device cachet to a culture more at home to selling to enterprise CIOs than it is to selling rock stars,” Jupiter Resarch analyst Michael Gartenberg wrote in his blog.

By Josh Quittner

Er, what recession? Online retail giant Amazon beat the Street Wednesday reporting $207 million in net profit for the fourth quarter. That’s a 112 percent increase over the $98 million the company hauled in during last year’s holiday season. Amazon (AMZN) also reported revenue of $5.67 billion beating estimates that were generally in the $5.4 billion range.

The company reported record sales, record operating profits and its fastest annual growth rate since 2000. That news wasn’t altogether surprising. Last month, the company also reported the busiest day ever at Amazon and even bested eBay (EBAY), for the first time, claiming a record number of visits to its site in December. Nor was it surprising that the stock took a pounding after hours: Yet again, Amazon’s gross margins were closer to 6% than the 10% analysts wanted to see.

What is surprising — if you haven’t been paying attention, that is — is that, on a day when the Fed cut prime by another 50 basis points, Amazon is genuinely upbeat about the future. The Grand Plan is working. Indeed, Amazon anticipates 31% to 38% sales growth in the current quarter — the meltdown in the economy notwithstanding.

So what gives?

Amazon is a hit with consumers for the same reason it sometimes disappoints investors. Jeff Bezos famously refuses to manage quarter to quarter. His time horizon is more decade to decade. He wants to build a business that lasts, and the only way you do that is by thrilling your customers. He’s sung the same song since Day One of his long march: “Our focus has always been to be extremely competitive and to give customers the best prices and be very sharp at that,” he told analysts yet again yesterday.

“Focusing on the customer experience” is a mantra Amazonians chant endlessly, to an almost annoying degree. When reporters on Wednesday asked CFO Tom Szkutak questions about the world’s dire economic outlook and how that will affect consumer spending in the months ahead, he characteristically answered: “We’re focused on what’s best for the customer and improving the customer experience.” And: “We’re all about making sure we offer a great value proposition for customers.” And so on and on and on. It was effective: The press conference lasted 15 minutes because it was clear that nothing new would be divulged here.

It’s not that Szkutak was dodging the questions, exactly. The thing is, questions about the future don’t really compute to these guys. Amazon’s long-term game has always been about three things: Selection, price, and convenience. And when Bezos was laying down big bets (over the howls of Wall Street) in the late 1990s, building hugely expensive distribution centers around the country (and then the world) it was to ensure that the most logical, cost-effective logistics system would be in place when the customers finally arrived in number. That’s hell on margins for a while. But it brings in customers. And that — if it works long term — creates what Bezos Wednesday described as a “flywheel effect:” More customers means more sales and more sales means that Amazon gets to enjoy greater pricing power over its suppliers. Lower sales means more customers and the cycle begins anew.

Said Bezos: “Lowering prices is easy. Being able to afford lower prices is what’s difficult. We’ve been working on that for many many years now — and expect to be working on that for our entire corporate existence.” Today’s numbers show that Amazon’s customers, at least, have figured that out.

By Michal Lev-Ram

LAS VEGAS — Google executive Andy Rubin attended the Consumer Electronics Show last year, but he certainly wasn’t talking to the press then as the Android mobile operating system he created was still in stealth mode. Fortune sat down with the longtime wireless innovator in his Four Seasons Hotel suite Tuesday to chat about CES, Android and the wireless industry.

So what are you doing here at CES?

It’s a great place to have everybody in one place and have very efficient meetings. When we had our booth in 2006 we realized that the audience for CES is mostly buyers of consumer electronics, and that’s not the type of company that we are. But still it’s a great place to meet people in the industry. That’s what we’re here to do.

Do you plan to have a bigger, more public presence at upcoming wireless shows like CTIA and Mobile World Congress?

Our public presence is on the Web. When you go to Google.com you get Google (GOOG). We don’t need to market ourselves in the traditional way. You have consumer electronics companies competing for the press’ attention or competing for consumers’ attention. We’re fortunate that we don’t have to do that. But we do look for partnership opportunities at these kind of trade shows.

I know phonemaker HTC has said they would bring out the first Android-running phones in mid-2008. But where does Android’s software development kit stand now?

Well I’m not sure if we said they would be first, but second half of 2008 is what we’re targeting for phones. On November 5th we announced what we’re doing and on November 12th we announced the availability of the SDK. The purpose of that was to actually bring developers up to speed while our platform was still in development. We chose kind of a more open way to do this — we call it innovating in the open. So as we develop the SDK and the platform we’re constantly making releases — probably every two to three weeks we make an SDK release. The purpose of that is to try things out with the developers and get their feedback. If they don’t like it they can tell us and we’ll fix it. And hopefully in the end we’ll have a better product because of that.

I heard some developers were complaining that the SDK was buggy? Is that something that Google is fixing?

The complaint I read in the press was not that it’s buggy — they understood that it’s buggy because it’s an early release — but that there was no mechanism to report bugs. Normally what you would have is a publicly accessible database where developers could submit bugs. We weren’t ready with that, but the intention is to supply that and we stepped up those efforts when it became a priority to the press. In a couple of weeks we’ll have an online mechanism. We thought it was more important to get the SDK out there in developers hands first.

Why did Google feel the need to develop a mobile operating system?

There are a couple of reasons — there’s the more community-oriented one and the self-serving reason. It has become easier to build PCs and cell phones, but the part that is a big deal and that is becoming more expensive and complex is the software. If you plot hardware going down and software going up and becoming more complex, it’s kind of unnatural for the manufacturers to be software companies - that’s not what they are. They have to introduce a series of new cell phones every six months and users are demanding new features constantly.

Software takes a lot of time to develop, and the software cost of a cell phone is about 20 percent. That is impacting consumers and making cell phones more expensive. The trickle-down effect is that it’s actually making data plans more expensive. By building a complete stack and having it be more open where there’s not a single vendor that’s selling it - we’re actually giving it away for free - we feel that it opens up the market in a way that benefits the consumers. It will make cell phones and data plans cheaper. And on the Google self-interest side, we want to make sure consumers have the ability to access mobile services. The way we make money is advertising.

What do you say to the argument that adding another operating system only adds to the fragmentation in the industry?

I’ll say something very strong - they probably don’t understand the economics of how standards are created. If we’re worried about not fragmenting and not creating anything new then we’d still be using tubes in our radios and you’d have to warm up the TV. That argument makes no sense to me. The important thing is not to confuse developers and that’s why we chose the Java programming language. From a developer’s perspective they don’t have to learn anything new.

Was it hard keeping Android a secret over the past few years?

Well, even as a startup we were in stealth mode. There was actually not much of a mental shift when we joined in that respect. When we were doing Android, we just said we’re building software for cell phones. We didn’t go into the details of an operating system.

Android aside, what excites you most in the wireless industry?

I think there’s a lot of opportunity that hasn’t been tapped yet. I think location [GPS-based services] is completely untapped. We’re just at the cusp of having innovative applications built in on top of that. I also think that we haven’t tapped media on the cell phone yet, like sharing things and mobile social networks. Mobile is such a big market compared to the PC — you carry your phone with you eight to 10 hours a day.