In my last post I talked about Google’s business model of trying to simply open up any system that dominates eyeballs: search, content, social networking, productivity applications, and mobile. While Google is having no problem opening up capabilities with all Internet-connected personal computer-based applications, it’s not going to be so easy in the mobile environment. Some of the issues at play:
The mobile phone market is too big to ignore – Google has an audience of about 1.5 billion that see their ads on personal computers. That number is dwarfed by the estimated 3 billion mobile phones in circulation. I don’t want to mislead you with those numbers. Even if mobile phone penetration is twice that of PC penetration, it won’t translate into double the revenue. Given screen real estate and amount of Internet usage, mobile devices will never be able to serve the same number of ads a personal computer can.
Mobile application development’s number one stumbling block is the accounting department – Google likes to describe its new Android environment as opening up new capabilities on the mobile phone that we haven’t seen today. It’s a naïve way to speak to the audience, because Google knows that software development isn’t what’s been holding back mobile phone application development. The reason applications don’t get released on the mobile phone with the speed and quantity they do on the Internet is because there’s a lot of organizations that need to get paid for that application to operate. Think about it like a payphone (remember those?), when you drop a quarter that money has to be portioned out to all the layers on the mobile food chain: infrastructure building of towers, local and state authority fees for operating in a specific state, fees for different kinds of calls like service calls, carrier hand-off fees, phone manufacturer licensing deals, and all the management that’s required on all those layers.
Even if it does have a killer application/device we may not see it for two years –If you build a Web application or even an operating environment to be viewed via a PC, you could easily launch it tomorrow. Not so easy with mobile deployments. Besides the endless versioning, 247 handsets (SKUs) here in the U.S., there’s the gatekeeping of the carriers and handset manufacturers who will ultimately decide what gets placed on their devices and systems. Sure a bunch of them are part of Google’s Open Handset Alliance (OHA), but that doesn’t mean open licensing on any of their products and services. We’re going to have to wait and see how Android and OHA develops the market.
Just enticing developers with new open-source offerings won’t cut it – With an open communications tool like an Internet-connect PC, offering developers new development tools would be a great plan. But in a traditionally closed system like mobile you can’t just give developers great building blocks and say, “Tf you build it, they will come.†Getting Android on many phones will be more of a situation of which device manufacturers and chip makers are going to stick their neck out for the development of this phone. Will the carriers let this phone run on their networks? Right now Verizon and AT&T say no, and who knows how agreeable T-Mobile and Sprint will be even if they are currently members of the alliance. This announcement doesn’t change any business models in the mobile environment, and it won’t, until someone creates a mobile communications device that works better on an open network.
They’re trying to create a market from nothing – Google is trying to create a new market in the mobile space that simply doesn’t exist. There are no phones currently running the Android system. The company says we’ll see the first applications by middle of next year. We thought we were going to have to wait until then, but it appears that Valleywag has released some screenshots of an Android application. This is purely rumor. These could be faked.
Microsoft should be worried – Microsoft says they’re not too concerned about Google as the search/ad giant isn’t even in the mobile phone market. All Google has announced is an initiative with nothing to show. It takes years, says Google, to get into this market, and they’re right. That was until Apple released the iPhone. In the first 74 days since its release, Apple sold 1 million units of a single device. Microsoft’s Windows Mobile is available on 150 devices of which there are somewhere between 10-15 million of them currently in the market. Microsoft should realize that a single phone with a new operating system, could steal their market power of which Apple is currently doing already.
You can’t discount billions invested in acquiring customers – While Google’s campaign appears very noble, the carriers have spent a fortune lobbying, licensing spectrum, building out proprietary infrastructure, and acquiring customers. That’s their business model, a traditional proprietary business model. Google’s rationale for Android is opportunity based. Carriers will never see this as an opportunity. They’ll only adopt it if it’s a threat to their current business operations.
There is a grumbling developer community that’s eager for a new more functional development environment – The best proof of this was the race to hack the iPhone the moment it was released and the whole community singing Apple’s praises for opening up the iPhone for third-party developers.
My friend Scott Slater of the Personal Broadband Industry Association has a great joke about the complexities of the mobile phone market:
What’s the difference between a used car salesman and a cellular phone salesman?
The used car salesman knows when he’s lying to you.
