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Cover Story
 
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Is Android a Double-Disaster for Google ?

Issue Date - 09/06/2011
 
First, it Sucks-in Huge Dollars and Time. Then, it Blesses The Maker (and Partners) with Patent Infringement Lawsuits and mere Crumbs in the name of Revenues. The Android Project has Proven a Double-Trouble in Google land. The OS’ free Platform Delivery model and its Over-Dependence on Apps, has clearly turned out a case of “Wasted Potential”. Will Google stop Playing Santa, and prove a Lost-Case-Won? Or will Obstinacy get The Better of Logic?

ash” is a four-letter word which companies love to swear by. “Free” too, is another four-letter word. Only this, consumers love and companies hate. And this admixture of the two four-letter words is what makes for a shotgun wedding across corporate boardrooms and R&D labs. Google Inc’s Android project is the biggest example of such a marriage. Android OS, which has helped many handset and tablet makers live to see the present (like HTC, Motorola and Dell), has earned global fame (read 67.23 million handsets sold in 2010, as per Gartner, accounting for a 22.7% market share). In the process, the OS platform has become powerful. As Gartner estimates, the platform will become the #1 mobile OS by the time this very year ends, with a 38.7% market share. Volumes, yes. But it is turning out to be a “much fame, no gain” recital for Google. Trouble is, Google has little to earn from Android – its “free” and open-source form proving to be a failed Parthian shot for the Mountain View giant. Over $1.5 billion has been burnt in the labs to develop the OS (with millions more being added to developmental costs every year), and the net earnings, six years post-acquisition of the OS maker, don’t seem to be justifying the dollars and the half-a-decade of lab work. Some even argue that Google’s mobile advertising revenue which stood at $1 billion annually (as per an October 2010 report by CNN), makes the Android a cash-cow already. Wrong. During the past 2 years, the Android platform has been able to generate just $243 million for Google. Out of this, only $130 million have been made as Internet ad-revenues (the company’s breadwinner which accounted for 97% of its topline in 2010). In short, Google’s Android OS, despite being the OS platform present on one of every four handsets sold in the world during the past year, accounted for only 6.5% of the total ad-revenues that Google earned through mobility devices. Translation – 93.5% of the earnings from mobile Internet ad-clicks for Google came from non-Android phones. This is a big cause of concern.

It was an obituary which tagged Alfred Nobel a “Merchant of death” that persuaded him to work for peace. Google at the moment, is in need of such a mind-changing note, which can force it to relinquish its suicidal Android pricing & sales strategy. So, with no cynicism about the obsession with which the company has forked out billions to make Android a success amongst handset & tablet-makers who love what is “free”, question is – will we see a price tag on the platform soon? Many doubt it. Problem is, if it does not happen soon, the overwhelming fired-up start story will only lead to a thin (and insufficient) stream to support investments to nurture Google’s mobile dreams.

 
That Google is turning on the heat comes as a relief. In the past couple of months, it has communicated to major carriers and handset makers that it will not allow any more tweaking of the Android platform without permission. This will help put an end to all forms of fragmentation on the Android platform. It will also solve the problem of many apps on the Android Market Place not being compatible on all Android devices. Though this comes as a shocker to many who were initially both happy and impressed by Google’s benevolence to allow royalty-free usage and fragmentation of the platform, this may just be a warning flare that Google is over and done with the idea of saving others (read HTC, Motorola, Acer and others) billions in R&D costs (that the others would have had to otherwise spend to create their own OS) and be happy with the dimes themselves. Till date, every time Google plans a release of a version of Android (six such versions have been released so far), it shares the initial secret platform with only a particular handset maker and chipmaker first, who then tweak the platform accordingly (Google chose HTC & Qaulcomm for its inaugural Cupcake version, and Nvidia & Motorola for its latest Honeycomb format). This makes it impossible for any handset maker to prepare a platform where all the apps prepare by developers for Android can work hassle-free. This way, it has been estimated that of the 294,738 apps that are available in the market place (as on May 1, 2011), at best 30% can be run hassle-free in all Android handsets. In other words, its very Open Source nature which led to the initial Android wildfire may prove too damaging for its sustained growth due to fragmentation, perhaps even crushing Google’s hopes to make it big in the mobile OS category after the hardware fiasco called Nexus One phone.

Issue is: if you are giving “exclusive rights” to handset makers, why do social service for all the bells and whistles that third party handsets can flaunt? A minimum royalty will not disturb the price elasticity. You make HTC a brand again, and you charge nothing for the very product it is selling. You give Motorola and Acer shots at mobiles & tablets, and you do so ex-gratia. We ask – what moral obligation got Google to give-in to the temptation? Shareholders surely deserve a greater show of capitalism.

          

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