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Android and the philosopher's pencil

Does it not strike everyone as odd that a company whose business is in the cloud also needs to peddle systems software…even devices?

It’s like a philosopher at a conference trying to convince the audience of his idea requiring that they use a certain type of pencil to take notes. And only he can give you that pencil.

This should lead to serious questions: Firstly, maybe you don’t need to take notes, secondly perhaps you don’t use a pencil and thirdly why his pencil?

Analogously: Firstly, Google services don’t need specific devices to be used because they’re designed around web standards. Secondly, they don’t need specific client software or APIs either and, thirdly, they certainly should not need specific systems software. Like the philosopher, Google does not charge for their pencil, but that’s beside the point.

You can only conclude that either the philosopher’s is a scoundrel or his idea is not that good.

So which is it?

  • Narayanan

    Philosophers also need their daily bread ;-)

    But seriously, it is the same reason as why Apple does not want to allow Adobe suite for application development. ie; Turf protection.

    Secondly, in Google's case there is a history of offering all services for free while getting the herd hooked on Google. This in turn drives the competition out of business making the herd entrenched even more. (GMail, Maps …)

    My personal theory is that even in the case of Android market place, Google would rather have Free Apps (ie; Admobbed) to boost the search and ad revenues !! Hence the slow move on the expansion of paid apps ;-)

    Good metaphor.

    • http://www.asymco.com asymco

      The answer that Android is "protection" or defensive implies that the Philosopher requires his pencil because he knows that there is a slick salesman in the next conference room selling really cool pencils which may at some time stop working, especially in the middle of his talk.

      Fair enough, but still the question remains why is the philosopher so paranoid, and must he still worry about slick notepad salesmen? Where does it end? He is in the philosophy business, giving wisdom and vision, not in stationery. Once you tally up all the dependencies to the wisdom business how long is the list?

      • Narayanan

        You absolutely right that it is a defensive strategy at first glance, but look at the post iPhone roll out scenario in Q2/2007.
        The first ones to read the tea leaves were Google and they knew that had an open field and a small window of opportunity. So out went the old RIMdroid designs and the current iAndroid took its place. So in a sense it is more an offensive move from Google to grab the soon to be vacant territory. Plus, they knew Apple was going to let VZW stew in its gaffe of turning down the iPhone.

        As of now, they are continuing the same approach of land grab as much as they can, before MSFT finally shows up to the table.

        RIMM capitalized on the the 2007 momentum, but they also wised up to the impending threat but got a lifeline from the international markets.

        So to sum up, they are not worried about the salesman in the next room. They cannot touch them in any case as your charts eloquently show. They are worried about the elephant that was caught napping but might come swinging. To be fair, the elephant also seems to have learnt a hard lesson and is definitely better prepared after the Vista/Kin debacles.

        The only thing, in my opinion, that can be disruptive to Apple is the chronic Apple indifference that has spread within the user community. The incessant Apple bashing that has been going on for so many years has left the average person incapable of looking for alternatives to Microsoft( and now to some extent Google), especially overseas. The afterglow of the ipod/iphone has made a significant positive impact in the US and Europe, but elsewhere there is still minimal change, though the wind is shifting slowly.

        I remember, when Zune was introduced, a friend went and got it despite my advice and later on would defend it tirelessly. When I see some Android fans, I am reminded of those conversations.

      • Adam

        The more I think about Android and ponder the same questions you raise here, the more convinced I am of the brilliance of their move.

        Stating the obvious, Google is an ad company. So their primary concern is anything that gets in between their ads and the end user. There are a lot of layers between ads and end users, as Chris Dixon points out in a brilliant post on the subject (http://cdixon.org/2009/12/30/whats-strategic-for-google/): "Human – device – OS – browser – bandwidth – websites – ads – ad tech – relationship to advertiser – $$$"

        They want to either own or commoditize each of these layers so that they encounter zero friction in delivering ads. Everything they do is to this end. Apple and the iPhone are a HUGE threat to this strategy. The iPhone UI and Apps layers are under the total control of Apple and anything that goes through them are at the complete whim of Steve Jobs. Apple becoming the de-facto mobile platform it would be an existential threat to Google's core business.

        Most companies react to disruption too late, but Google here has done an almost scary good job of responding. So good, in fact, that I think that it may have partly been just dumb luck. They had a phone under development back in 2005 — not to respond to Apple — but rather to prevent Microsoft from owning the mobile OS layer like they do on the desktop. They were far enough along in development that by the time they realized who the real threat was (Apple), they were able to very rapidly respond and build their own competing OS and Apps layer. To steal your metaphor, they've effectively punched a hole through the fabric of the mobile web with this "pencil" of theirs…

      • Adam

        The other bit of luck they had was Schmidt being in the right place at the right time, sitting on Apple's board during early iPhone development. I think this may have been one of the biggest blunders of Steve's career.

  • Jon T

    The philosopher is terrified and behaves in a way that he believes goes some way to disarming his real and imagined enemies.

    Certainly Microsoft was and still is his number one enemy. Windows mobile in any incarnation will never be a major force again.

    Apple, the partner turned imagined enemy. Or did the philosopher see into the future, and was frightened by what he saw?

  • Bradley Bishop

    But what if a peddler of pencils comes up with an idea that competes with the philosopher's idea and causes a large percentage of people to believe in the pencil-peddler's idea rather than the philosopher's? I believe Google foresees a future where iOS devices don't need Google's services, so they feel like they need to do something to stem the tide (tsunami?) of iOS-device proliferation.

    • ChuckO

      Agreed. Maybe this is the lesson Schmidtty walk away from the Apple board with.

  • http://www.cristinaberta.wordpress.com cristina berta

    Pencils are necessary for distribution. Back in Internet 1.0 days Google paid a lot of money to AOL to be the search engine on their page, because that was the easiest way to be found by consumers….Over time the need and willingness to pay for these distribution deals went down, as consumers were typing http://www.google.com in their browsers and their market share went over an irreversible tipping point.
    In mobile, they tried to do this by getting distribution deals with handset vendors and operators….However, this was difficult and implementation less than ideal…Plus Google increasingly came under the pressure of diversifying revenue streams away from search… Hence Android and Google Chrome….
    So pencils not really necessary but an excellent way to ensure distribution !

    • http://www.asymco.com asymco

      The irony is that Android does not ensure distribution. It's easy to rip out any Google reference from Android implementations. Perhaps this is something Google thinks will be uncommon, but there is no way to control that. It's still amazing to me that a company selling web services needs to also own the platforms that underlie those services and risk alienating those who are actually more capable at making better platforms and hence can offer even better distribution. Something looks wrong about the whole business model premise.

      • http://www.entradista.com Ian Betteridge

        And in China – likely to be the biggest market for mobile internet in the not-too-distant future – "ripping the Google out of Android" is exactly what's going to happen. Android in China is going to have Baidu, not Google, as its default search engine sooner or later.

        This is a perfect example of where Google's engineering-led culture will hurt it in the long run. The inclination of the engineers was the make Android open source. A better business route would have been to make it freely-licensable to any member of the Open Handset Alliance under stricter terms ie no removing Google as default search.

      • Gandhi

        That would risk the wrath of antitrust authorities

    • ChuckO

      This is Googles version of Apple's walled garden although Googles implementation is as usual more Microsofty. They need to keep you in Google world with it's ever expanding services paid for by ads. It's like the all inclusive vacation. It's safer and easier to stay put and spend your money here. They can't build that on other people's hardware because Apple and MS start you off with too many competing products so not an immersive enough experience.

      One of the few generally held concepts that seems correct is it's all about platforms now and being a purely web based platform ain't going to do it. It's too easy for customers to leave.

      One interesting thing is what does this mean for Facebook? Apple should probably buy Facebook and Facebook should probably want to bought by Apple. that would be a juggernaut.

  • http://muir.tumblr.com John Muir

    Google's mania for Android and its subsequent Apple bashing is indeed a curious thing. So unlike them. What's the motive?

    From what I can tell, it's like a bald man's epic combover. It didn't happen overnight. Google invested in Android to defend against Microsoft. Google feared that Microsoft would use Windows Mobile against them if it could win a monopoly share of the smartphone market. Plausible if not likely effective, given Microsoft's impotence even with a desktop and browser stranlge-hold. That all changed in 2007 with the iPhone. Windows Mobile died as a threat. Apple was immediately a generation ahead of the rest of the industry. 

    This was when Google made its curious decision. Apple was an ally, a friend, and heavily invested in open web standards. But Google decided the threat of Apple dominance was enough to give Android a new target. They went after Apple: company without the search and advertising interests of mutual rival Microsoft. A great mistake. Google just turned its best friend into a furious competitor. 

    Chrome OS makes sense: it competes with Windows on low end laptops, where Apple has no interest and Linux traction is poor. Chrome the browser is a wise project too, as it helps to stoke progress in web standards and browser stability, areas where Google is vitally dependent. But Android is a grave error. Pride and fear steered the decision. The further they go, the deeper the damage. 

    • http://www.entradista.com Ian Betteridge

      I love the phrase "a bald man's epic comb-over" – I'm so stealing that and pretending I made it up :)

      • http://muir.tumblr.com John Muir

        You and me alike.

    • http://www.asymco.com asymco

      Could not have said it better myself. Poetry.

  • Johhny Ives

    The philosopher's pencil is modifiable and can be use to take notes in many ways, on many things. The salesman in the next room is selling a pencil that can only be used in ways in which he approves, for certain "approved" notes. I choose the philpsopher's pencil. While respecting the salesman's slick pencil design I am wary of being held captive to his notes only.

    • kevin

      Not exactly. That salesman's slick pencil still allows one to take notes using all open web standards, and beyond that to establish and advance those open web standards, which the philosopher was supposedly claiming as the true wisdom. Or was that not what was really being taught? Was the philosopher really only interested in protecting the very profitable advertising turf, and deceiving all with the true wisdom? Hypocrisy?

  • pk de cville

    "Chrome OS makes sense: it competes with Windows on low end laptops,"

    And I hear they'll be putting out a Google branded tablet to go against the various iPad models (coming in different sizes)…

    Seems like Apple w/ iAds and Google are fighting more and Msft is gaining a surprising ally.

    Not a great strategy: moving from to 2 against 1 to 1 against 2!

    I'd love to play the game of 'Risk' with those super smart guys assuming they stick to their grand startegems.

    • http://muir.tumblr.com John Muir

      I'll believe in Google's iPad killer when I see it. Chrome OS is a passable substitute for Windows on a cheap laptop, but it's no iOS. The longer competitors believe that touch is something you can just bolt on to a pre-existing system, the further behind they fall.

      If someone had told me in 2006 that Google and Apple would be such rivals by 2010, I would have thought they were an idiot. Yet, somehow, just that kind of thinking seems to have invaded Google after all.

  • http://www.andcurve.com/ Kevin Teljeur

    @asymco: My belief is that Google's moves generally are inclined to be disruptive. Google require a flexible, unstable environment with no one clear dominant power, in which they can harvest money as the common denominator. This is easier with the Internet accessed from the desktop, where the browser is a window onto that environment (and where they've introduced the Chrome browser in order to accelerate the technology used in browsing) but much harder with mobile.

    It's clear from your data (I found the site via Daring Fireball's link to your 'Android’s Pursuit of the Biggest Losers' post) that if there had been no interference, then the market would get carved up between iOS devices and RIM, which would be very bad for Google. Since Microsoft and Nokia are no longer reliable players in the mobile Internet market, there is a need (for Google) for a third force to disrupt the market, if it is not to be dominated by Apple or RIM. Hence introducing a new OS, re-packaged and with the hard work already done for handset manufacturers who are generally not great with delivering a common platform experience.

    I personally think that this is a good thing for the consumer; while I really think that Google is in a sense interfering for the sake of interference, the result is competition which is good. But at the same time, it's an artificially created one, where Google isn't trying to 'win', it's just making sure that no-one else does. I doubt that it has a long-term commitment to staying in the game past that point and once Apple loses share significantly, Google will start to lose interest in the platform. What happens past that is anyone's guess, but fragmentation is a likely option.

    k

    • http://www.entradista.com Ian Betteridge

      Kevin: "…the market would get carved up between iOS devices and RIM, which would be very bad for Google."

      Kevin, I've seen this stated a lot, but I just don't see it unless Google really doesn't believe in the web as a mobile applications platform. Neither MS nor Apple would hobble their browsers enough to hurt Google. And an online ad served on an iPhone or Windows Mobile phone is just as valuable to Google as one served on Android.

      So unless Google believes the Wired line that "the web is dead" and apps will become the biggest Internet platform, Android is a large amount of money to spend without a coherent ROI model.

      What Android *had* done, though, is accelerate the adoption of smartphones amongst consumers by pushing down the prices. Assuming that Apple will retain its high-margin strategy, the cost of an iPhone to an end user isn't going to come down fast, which limits the number of customers who can have one. Android phones, on the other hand, are much cheaper – you can basically get them on low(ish) cost contracts for free these days.

      This in itself increases the mobile browsing market, which will add to Google revenue. It's hard to determine how much, of course, which means you can't really say whether it's money well spent for Google.

      • http://muir.tumblr.com John Muir

        Good points.

        Before smartphones and tablets, Google flourished on the desktop where (even the hard core Mac heads like me would have to agree) Microsoft was overwhelmingly dominant. Not only was Windows the majority platform, but Internet Explorer was the majority browser, and Microsoft chose to be slow to advance either of the pair. Didn't do Google any harm, did it?

        There's a phoney war going on regarding mobile apps versus web apps. Apple's keen to do everything it can to establish the iPhone as a viable, long term, mainstream platform. That means apps, apps, apps. A lesson learned the hard way with the Mac from 1984-1995. Yet Apple's doing nothing to cripple Safari, quite the opposite. A weak browser makes a weak phone. E.g. Windows Phone 7.

        Apple don't need Google to lose for the iPhone to win.

        This is a non-zero-sum game. Yet Google seems determined to make it into one. That's the fundamental shape of their mistaken strategy.

      • http://www.andcurve.com/ Kevin Teljeur

        I take that point, but I also think that this is exactly what would worry Google; mobile devices are more locked down, and the iPhone is a great demonstration of how and why that works. There is basically only one browser on iOS. It is a very good browser, it is based on a platform shared with Google, and yet it is ultimately controlled by Apple. Apple decides who the search provider is, who should get the data, and crucially may change the terms of operation at any time. Google can be locked out at any time, and on top of that what Google wants is the data from the device, not just the eyeballs.

        Also, as you point out, Apple keeps their devices at the high-end of the market. And with it a deliberately limited market share, which suits them. It keeps demand and prices/margins high. This doesn't suit Google, who need wider coverage. I don't entirely buy the Apple-Microsoft analogy such as described here:
        http://arstechnica.com/staff/fatbits/2010/08/can-
        because I think Apple has found it's spot as the BMW of computing, and doesn't bother with the low-margin end of the market. Google doesn't care about the handset manufacturers or networks, as long as they don't get locked out altogether.

        As I say, I don't believe that this is about Google winning or Apple losing; to me, Apple doesn't want to win except in it's niche market of being the high-end device provider, but Google wants no-one to win in any market, which allows it to influence and feed from those markets. As long as no-one controls the portal (in this case, the whole device, via the OS of the device), Google can do business with everyone.

        I do agree that Android is a very large outlay for Google on something that has no direct return, but for the above reasons, I think it's worth it for them, to artificially create a competitive market. And let's not forget that every Android handset does have the branding of a certain search provider prominently displayed…

        k

      • Gandhi

        "Google doesn’t care about the handset manufacturers or networks, as long as they don’t get locked out altogether."

        Except that by introducing Android, Google pushed Apple to do exactly that.

        Microsoft, for the longest time, in their quest to beat Google threw billions to compete in search. Google is incredibly strong in search. Except there is no money to be made in search – the money is in advertising. The boneheads Microsoft never realized this.

        With the iPhone, Apple is/was strong in the operating system. But the money is to be made in selling the widgets. Google made the same mistake in mobile handsets that Microsoft made with search. They tried to attack the enemy where they are strongest. And just like Microsoft against Google, Google will not succeed against Apple by attacking it where Apple is strongest.

        On the other hand, when Google attacked Apple, Apple did not respond by entering the search engine business, or Gmail, or Google maps. Apple responded and attacked Google where it hurts the most – online advertising.

        So now not only is Google potentially locked out of 25% to 33% of the mobile market (iOS devices running iAds), they have also created a fierce competitor in Apple whose core strength is ease of use and brilliant marketing. And reports suggest the familiar Apple-control with respect to iAds, they also suggest these ads are very effective – that is Apple can command a premium because it serves more effective ads.

      • Beej

        Bingo! At least one person here remembers where Google makes virtually all its money. It's not that the idea isn't that good, or that they're scoundrels; they're directly reinforcing and defending their sole revenue stream.

        Google currently makes bank selling ads on open compatible systems. Mobile is a very likely and lucrative future for them. Microsoft and Apple both want Google dead. With these conditions, Android and even phones make perfect sense.

      • http://muir.tumblr.com John Muir

        He's a smart fellow, Siracusa. I think he's right: Apple wants every level of the smartphone / pocket computer market. Just like they did with mp3 players. Steve Jobs said as much about the iPod back in 2004 when he criticised Apple's addiction to high prices in the 80's when he was exiled. The last thing you want to do is marginalise yourself.

        The trick is to balance both forces: the need to remain relevant versus the need to make sustainable profit.

      • ChuckO

        Thank you. It's so annoying to constantly hear the Apple only wants the high end of the market nonsense. They offer products both MP3 and computing across the price spectrum. What they don't do as Jobs and Cook explained in regard to netbooks is offer cheap crap that doesn't work.

      • http://www.asymco.com asymco

        $1000 for a laptop was considered low end ten years ago. Both income and choice have increased since.

  • Narayanan

    I just read about the RIMM downgrade to SELL.

  • M

    Google's philosophy is hard to pinpoint (is there one?). Their business model even more so. They are likely following their intuition and taking a shotgun approach.

    I think that they are trying to contribute to computing in their own way. Many things will not be successful, but some will be runway successes. I am thinking Google Maps for example. Street view!

    Also, having worked for a traditional firm (Nokia) it would be hard to understand deviation from the profit motive. Would Nokia develop a PC OS?

    But let's look at Apple itself. Did it not make a crazy move by building an iPhone? or an iPod? Why would a computer company build Phones and Stereos? What's next, iWashing Machine?

    But then again Nokia was once an iGalosh manufacturer. How about iPaper: Nokia's history starts in 1865 when mining engineer Fredrik Idestam established a groundwood pulp mill on the banks of the Tammerkoski rapids in the town of Tampere, in southwestern Finland, and started manufacturing paper.

  • M

    And how about taking on the Chinese government because censorship does not agree with the founder's values. Would Nokia pull out of India because the Hindu caste system does not agree with Nokia's corporate philosophy?

    In some ways Google is nuts to think they may make a difference, and to walk away from profit which others will gladly take. Then again it may turn out to have been a stroke of genius.

    • ChuckO

      I think your exaggerating what Google did in China. They made some sort of effort there which is more than most companies but it wasn't much.

  • http://dawningawareness.com Michael McDaniel

    It seems to me Google is making OSes for the same reason Apple locks down the iOS world. They don't want to cede control of their application work to OS and browser implementors.

  • ChuckO

    I think Google realizes they need to build a hardware/software "platform". The way they are going about it is probably the cheapest way possible which makes sense because it's not currently a core competency for them so they get to experiment with HTC/Motorola/ETC. helping to foot the bill while they learn. Probably at some point this coalition of the failed will stop working for Google (as Asymco pointed out) and they'll do the hardware themselves. Maybe one of the benefits of working with the Android hardware folks is as a tryout for who they end up buying to get into hardware.

    • http://www.asymco.com asymco

      If Google realizes they have to build a HW/SW platform then their business model is broken. They have a cloud strategy which only makes sense if the platforms that are used to access it are commodities. If they are not commodities then it can only follow that a cloud strategy is dead.

      Microsoft exploded in value when it was proven that a software only strategy could work on top of commodity/cloned hardware. Software as a business has 80% margins, no inventory and it was hugely more profitable relative to the layers beneath it.

      Cloud has similarly asymmetric value propositions to the layers beneath it that should signal that it too is a break into new business models.

      It has not happened yet and not only does the market recognize this (see GOOG) but Google management is recognizing that they need to get into the layers below. It's like Microsoft in 1995, upon launching Windows 95 saying they will launch the Microsoft PC 95. There would have been howls!

      • ChuckO

        Based on Google's moves so far with Android and it's partners I think they are even more amoral toward their partners than Microsoft and the howls will not dissuade them if they feel they have to get direct into hardware.

        I think this is sort of like Google's AppleTV right now. A "hobby" they are experimenting with. The big difference is Apple dropped the iPhone so there an existing "ideal" to work from whereas in the AppleTV market because of the content side mainly there can be no ideal at this point.

        It's a different level and type of hobby for Google because there are actual opportunities in this market but I think to a great extent they are working from tactics more than strategy as they feel their way through jumping into the smartphone business.

        Steve Jobs and Next, oops I mean Apple, are going to be very hard to beat here because they've been training for this for 30 years and Googles stumbling their way through but that's all Google can do since they are learning from Apple. I just hope Steve can stay alive long enough for Apple to win.

      • ChuckO

        I think the simpler way to make my point is Google is doing the best they can against Apple. Short of having a better answer than the iPhone that's all they can do. Giving up doesn't make sense since they have a lot of money and big egos. So since I agree with your "biggest loser" analysis I suspect at some point they will take a stab at doing hardware themselves.

  • Sam Penrose

    I have no idea why you've chosen this metaphor. The simple explanation for Google's sponsoring of Android (which is I believe the best way to see it) is that they are commoditizing their complements: mobile web access was expensive, limited, and terrible, which meant that mobile web search was miniscule. They invested in mobile web access to generate mobile web search. The only remaining questions are whether their investment made cost/benefit sense and to what extent mobile web search is a different market than web search.

    • http://www.asymco.com asymco

      Mobile web access was booming before Android and it really took off after the iPhone. The motivation for Android was to defend against Windows Mobile. This comes from multiple first-hand accounts.

      • Sam Penrose

        [Early comment withdrawn, now that the ongoing discussion has enlightened me.] Here's a way to think about Google: when you couldn't find things on the Web, Page and Brin invented a way to do so, which created a huge amount of value. They took a few years to figure out how to capture value, finally coming up with "advertising": i.e. selling attention. But search as such is not attention (it's not even the only way to find things) and there is at least one plausible imitator of their search service besides. So Youtube and FB were/are threats not so much because they capture searches as because they capture attention. Google can fight back by trying to continue to dominate search (and therefore to capture attention), by finding another form of monetizable attention to capture, or by finding something other than attention for which they can charge $billions/quarter at a hefty margin.

        Andrew Odlyzko has observed that value in communication technologies over the centuries has been dominated by low-latency, 1:1 communications (initially letters, now cell phones). FB and phone device and service providers have obvious adjacency to that locus of value. I wonder how Google might realize such adjacency?

  • rd

    Google is like a cable company.
    first they entice you with no commercials.
    then later on they start jacking up the
    prices and have local commercials which essentially
    pimp their own product.
    Just like cable company, google does not believe in
    customer service.

    Google has no choice but go after where there is recurring
    revenue. Software has a high profit margin but so does
    food and medicine.
    Bandwidth and Cellphones also have very high margin,
    lockin and monopoly status. So obviously google will
    try to get in that. High of $629 stock price is long away
    if google cannot come up with couple more home runs
    and time is running out.

    • Walt French

      Spot on. Most Battle of the Titans are between two or three very complementary products, Coke v Pepsi. But with software / data / access tools, the boundaries are incredibly flexible and ever-changing. Apple can take over advertising on its phones in a stroke of a pen. Google can fund a thousand phone competitors, none of which individually will be able to make a profit, to try to undercut Apple's commanding lead in mobile. Verizon can, if it's allowed deals like it proposed with Google, charge “content providers” expedited delivery fees or demand a share in YouTube revenue streams in exchange for which they bypass the billing caps.

      Endless possibilities in this wild west. And Branding, lock on customers, is key to all the players. Thanks to their buddies at the FCC, Verizon & AT&T get to mark up Americans' airwaves and sell spectrum back to us at a tidy profit. They've got their customers pretty much locked, and I'll SWAG that those two carriers have sliced 10 points off competitors' share in the last two years. (Data, anybody?) Their playbook has ALWAYS been to keep the hardware companies barefoot & pregnant; working for them. Apple has upset this and now has critical mass. Google came to Verizon's rescue; Verizon has had to give up VERY LITTLE of its power to get a slew of phones it can control. (Take frinstance the DroidX that is locked down completely in only running a Verizon-approved OS version. Open? Hahahaha!)

      Want a one-word answer? M-O-N-O-P-O-L-Y. It's how you make maximum profits in business, and the “free market” advocates are quite happy to let very un-competitive, un-free monopolies form as long as they can get in on the game. Too bad it's so sucky for the rest of us.

  • yet another steve

    Google's cloud only remains ridiculously profitable when it is the ONLY cloud. Google will be able to get the most for its ads because it knows the most about YOU.

    It will be interesting to see if Apple ever plays the privacy card. iAds will never be nearly as important a revenue stream as devices, so Apple's customer (the source of its cash flow) will always be ME, not the people who want to know about me.

    Right now Apple just has its hands full exploiting ios of course–how much of Android's success is just a matter of limited Apple distribution. And for a company its size Apple is remarkably able to focus.

  • Highlifehusker

    You have to think much much bigger. In 5 to 10 years, the only computer people will be buying is their cell phone. You'll plug it into a big monitor to edit video, connect it to your tv to watch video. Next year we'll have dual core A9 processors, 18 months later there will probably be quad core A9 processors. Cell phones already have HDMI, are able to edit video and photos, etc. There is a real opportunity to completely kill Windows outside big businesses…that's why Google created Android. The problem is that Apple had a better initial vision, and so they are competitors by default on the way toward killing the existing consumer pc industry.

    • http://www.asymco.com asymco

      I completely agree with your guess of where Google wants to go. I sensed it when Android was announced. But there is one problem. You can't disrupt something that's not good enough. Disruption can (and, to be sure, will) happen only when mobile devices and the networks they depend on overshoot the needs of the majority of users.

      The way the mobile computing is shaping up it's far too early for Google to come in with a disruptive strategy. Apple and soon others will be iterating far more rapidly with an integrated approach than what Google can do with a modular approach. The Nexus One showed the limit of their ability to integrate. Market forces will force fragmentation to increase. [you can test the overshooting premise with a simple question: are improvements in the product/service being valued and consumed? In other words, is a new product offering features that can't be absorbed and can't be monetized. My take is that people are hungry of every morsel of smartphone improvements being offered today.]

      Footnote: Apple intuitively knows this which is why they self-disrupt all the time. Once the smartphone market commoditizes, you can be sure Apple will have longed moved on to other things.

  • FalKirk

    Gentlemen and Ladies: Thank you all for a most enjoyable discussion. I was on the road today and checking in on my phones, so I wasn’t able to contribute. But I certainly haven’t seen many discussions on the web that maintained such a high level of intelligence and civility.

    I hope I will not be diminishing my praise of others by specifically acknowledging the posts of John Muir at 11:02 AM and Ghandi at 3:06 PM. I thought the points made there were particularly relevant and insightful.

  • GoodyBird

    That's hindsight 20/20

    They were worried that iPhone will gain the same market share
    as the iPod (in america) or PC in the world.

    Maybe Apple would have been good for them under jobs,
    but would if jobs leaves?

    That's the business. you make bets and some of them
    better than others.

  • ericgen

    I tend to agree with the view that Android, while initially a defensive move against Microsoft, shifted once the impact of the iPhone was observed. I suspect that it didn't happen initially, but only after Schmidt (on Apple's board and likely before his recusal from iPhone discussions) saw the tremendous response to the iPhone.

    It's also likely, as has been speculated, that Apple always intended to have the xcode SDK, but didn't have it ready for the initial iPhone release. It's just as likely that Schmidt was also privy to this information. This leads to the suggested possibility that Schmidt could see a world where Google's ad stream on iOS devices would exist solely on the whim of Steve Jobs.

    What I have not seen suggested anywhere is that Schmidt, being in actual, fairly frequent, physical contact with Jobs, gambled that Jobs' health was bad enough that Goggle could get away with its Android gamble without much risk of ever having to bear the wrath of Jobs.

    It seems plausible to me, again, this is just unsupported speculation, that Schmidt believed that Jobs was going to die before there was ever any recrimination for his Android affair. Also, without Jobs guidance of projects to the contrary, Apple would still likely be beholden to Google for many of the services provided on the iPhone. It would be win-win for Google.

    It's still too early to tell how bad and completely Schmidt has lost this bet, but IIRC he lost his seat on Apple's board right after Jobs returned from his medical leave. And Schmidt did actually look awfully uncomfortable in his little coffee shop chat with Jobs.

    Just speculation! But, it'd be interesting to know more of the details along the way of Android's transition from a WinMo competitor to an iPhone clone.

  • http://, Iphoned

    The answer to the philosopher's pencil paradox is that the philosopher 's writings can only be read in full with a special pencil. I.E. Google may believe that their cloud vision to be realized still needs a proper browser with proper features and one that Google can nevolve, I.e. Chrome. Thus a Google device, I..e Android where Google can insure Chrome is ncessary. So in this sense it would make some logic for Google to peddle a device OS, although in practice the connection may be a stretch.

  • gridlock

    Just a reminder on what Google themselves say about it:

    As for how Google’s investment in its Android mobile platform will reap rewards, Google CFO Patrick Pichette said, “Android in terms of cost is not material to the company.” He noted that recent Android launches like the Droid X were undertaken completely by partners like Motorola and Verizon. “It’s a formidable return in that what you have is the entire market exploding.”

    Meanwhile, even though Google proudly notes that there are now 70,000 Android apps, SVP product management Jonathan Rosenberg reminded analysts that by far the most popular application on phones is the browser, and that mobile search is up an order of magnitude. Pichette said Android is both an “offensive” and “defensive” effort for Google, and that it gives the platform away for free to help grow the market.

    Rosenberg pointed to a couple factors that will help mobile value grow, noting that new ad formats like click-to-call are very promising. He said that the logistics of authenticating and consummating transactions on mobile need to be improved. The overall mobile system should “move very aggressively to acquire more of those commercial transactions,” Rosenberg said. For more on that topic, see our recent GigaOM Pro piece on mobile payments (sub req’d). Rosenberg also noted that due to the small screen size on mobile “a display ad really gets in your face” — and Google just acquired AdMob to get more deeply into that space."

    Android will reach a quarter or even a third of all smartphones in the next two years, given the alliance Google signed with the likes of LG, Huawei and Media-Tek for low-cost hardware running Android and mainly headed to China and India with their burgeoning middle-class.

    Now, if I am selling a high-end product for a Western consumer, I'd do an intelligent interactive campaign for iAds – take Nissan, for instance – which will take me weeks or months to get developed and approved in collaboration with Apple.

    But if I want to target a market where billions of people will enter middle-class status ready for a spending spree in a few years, rather than go after broke-ass debt-laden profligate consumers-turned-savers, I'd just keep on buying adwords from Google…
    And, guess what, those billions of people in emerging economies will skip cable altogether, they'll go directly to mobile internet for their computing, shopping research and mobile payment needs. And Android will be waiting them there – cheap and flexible in tens of reincarnations.
    Unless SJ is waiting for iAds to take off and then commoditize the whole platform – then iPhone would probably be unstoppable as a complete offering. But Apple and commodity are oxymorons, at least until SJ lives, so, as someone pointed out, by that time Apple will probably be producing electric cars or smth like that.

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