Comment Unlikely (Score 4, Interesting) 161
I think it unlikely that Google would use on-device ads to help phone costs: their traditional strategy has been to use ads to monetize core offerings, not ancillary ones. Ancillary offerings bring you back to the core offerings, where ads are effectively placed.
There's so much speculation right now on the market, but I think that it's clear that Google could do something really interesting without the use of on-device monetization right now, e.g. the $199 unlocked super-phone that's being discussed in the more rumor-mill-ish blogs right now. If they could be cash-neutral doing that, and simultaneously disintermediate wireless carriers (a side-goal they've had for some time now), AND double Android's market share in the US, the mobile device group will be getting large bonuses, mark my words.
A totally new business model which likely reduces the amount of uptake from consumers: not so likely right now; Google has lots of cash and wants lots of market share. It's not a time to futz around with stuff like this: consumers would generally LOVE an iphone-a-like which costs $30 a month for unlimited calling and only costs $199. If Google can get that out the door, they'll have done plenty already in the last eighteen months.