Staying off-topic: More Google-Moto-Apple
- August 15, 2011
- 0 Comments
So no sooner had I written about Google’s unnecessary surfeit of enemies than Google goes out and acquires Moto, likely creating a few more difficulties in the marketplace. On the surface it seems to:
- confirm how weak Android’s patent position really was
- validate what Apple’s execs and fans have been saying about the value of integrated over fragmented (“open”) at least in the mobile space.
- calls into question the whole android venture.
Maybe #1 and #2 are obvious and don’t need further explanation. But for #3, Horace Dediu of Asymco asks the question I’ve been asking: “Is Android profitable? The debit column just increased by $12 billion. Good luck with those ads.”
Seriously. Google has been saying Android is profitable. But I think you have to measure the credit part of the ledger as revenues accrued by Android that would not have otherwise been accrued:
- Ads on Android that arguably would not have otherwise been sold on another platform
- Licensing fees (I don’t think there are any)
Horace Dediu goes on to give a better explanation than I did as to the perils Google has entertained:
The lesson (and warning) was that a licensor that is also a licensee makes other licensees uncomfortable. The supplier is also a competitor. This is classic channel conflict and never ends well.
Apple and Microsoft have to be pleased that their patent strategy just caused Google to spend $12B. Android is certainly no longer free to Google – whether it is free to handset OEMs or not.
John Gruber’s Daring Fireball really digs into all the details, and if we’re wondering whether there was a real cost to Google for taking the path of aggressively pursuing Android:
Look at Google’s financial results. They reported $8.5 billion in net income this year, and $6.5 billion last year. That’s for all of Google. They’re offering $12.5 billion for Motorola. So Google just spent almost two years of its profits to buy a second-rate phone maker that itself is unprofitable,1 almost went bankrupt, and is arguably only the third-best maker of Android devices, behind HTC and Samsung.
That definitely puts $12B into perspective. Nearly 2 years of profit. I’m not sure that Google wouldn’t have been better off, financially, just partnering with Apple and other OEMs and taking a more passive approach to Android. Still, acquiring Moto may be the right thing to do given where Google finds itself today – the best path forward may be to double down on the Android investment. But an alternate path would be to make Android more open – by opening up the development process and assets and scaling back Google’s own financial commitment to it while letting the community drive (making Android a bit more like Linux in the process).