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Cover Story

"The Android Paradox"
Dr. Johnny Ryan, Senior Researcher, Institute of International & European Affairs
Issue Date - 09/06/2011
Johnny Ryan is a Dublin-based expert in web technologies. Besides being an author, he is also a public speaker, having presented his views at forums like the United Nations, the OSCE, the European Commission, et al. A regular contributor to Fortune, Businessweek, Reuters, BBC and the Associated Press, he speaks to B&E on one of his latest favourite subjects – the Android OS.

B&E: Of late there has been some dissatisfaction shown by Google and Android developers over earnings from Android OS, despite the fact that consumers are activating 300,000 Android handsets each day. Do you see this “low” earnings from apps as a major reason for Google to make the very Android OS a “not free” platform – along the lines of the Apple iOS model?
Johnny Ryan (JR): No, and there are two reasons. First, I do not think that Google is like most other companies. I have a feeling that, especially now, under its new CEO, Larry Page, Google is driven at the top by “nerd norms”, a kind of engineers’ ethics. This may not apply across the company, on all decisions, but I think if the question were asked of the founders, “Do we want to close Android and make more money”, the answer would be – no! Second, while there may be tweaking at certain points to push mobile handset manufacturers to conform to minimum standards of devices, Google can not afford to exclude the low price market.

B&E: How about handset makers who have invested so much towards teh Android OS project. Will Google making Android a paid platform bring suffering onto these handset makers?
JR: Indeed. And that is another reason why Google will keep Android as it is.

B&E: There are also tablet makers – like Samsung, Sony & Dell – who rely on Android OS. Do you think Google’s intentions to increasingly monetise Android OS will hurt these players as well?
JR: No. Were Google to more aggressively pursue monetisation, it would be good news for Samsung, Sony & Dell because tablet manufacturers target the higher end of the market. These devices are the ones to compete with Apple et al, on an equal hardware footing, equipped with expensive hardware capable of accelerated games and other leisure activities. Users of these devices are far more likely to pay for apps and services than a new adopter of a low-cost smart phone.

B&E: Revenue from Android app store grew to $102 million in 2010. By comparison, the Apple App Store saw 131.9% growth y-o-y jumping to $1.7 billion. More surprisingly, the BlackBerry App World had revenues of $165 million, and the Nokia Ovi store saw revenue of $105 million – both larger than Android despite a much smaller selection of available apps. Will Google do something about this soon?
JR: There are two driving factors here: Google is, fundamentally, a search company. The more users of smart phones, even if they do not purchase apps or content via the Android Market, the better for Google. Android users in particular are likely to use Google search and GMail. However, this is not necessarily the case for App developers. The risk is that the Android Market is unable to support a sufficient number of app developers, and that the Android apps will be of low quality. I call this the “Android Paradox”. Google wants more people using Search, so it needs to keep the number of new smart phone adopters high, and must keep costs down. But at the same time, it is preferable that at least some of these new adopters pay for the apps that will keep the Android market attractive to App developers.

B&E: Not many have raised objections as to why Google does not make money by licensing out its OS. If it did at even $15 per device sold, it could possibly have made up to $1 billion in 2010 alone (67.23 million units of android devices sold around the world x $15/device) assuming people were willing to actually pay for it. Can Google try and correct its course in this regard?
JR: I do not think it would be easy. Neither would it be easy, nor would it prove desirable for Google.

B&E: The ‘Android paradox’ you mentioned. There must be a way that Google can capitalise on the fact that its app store can’t support high-quality apps?
JR: Were I be advising Google, I would counsel it to capitalise on the Android Paradox. Increase the spectrum between the highest and lowest specification of mobile handset. At the low end of the market, Google is capturing new arrivals to the smart phone by working with manufacturers who produce low and medium specification devices. It could even invade Apple’s space at the high end of the market by, working on handsets that offer the finest media/gaming experience at a very high price points. The high end of the market may be the secret to keeping the ecosystem attractive to developers, helping Google retain them.

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