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Google vs. Android Part IV

Verizon, unfortunately, is also what ruins the phone. Or, rather, what it’s forced Samsung to do to the phone, which you could sum up in a word: Bing. Bing is the default—and only—search engine on the Fascinate. A Google Android phone. In the search widget, in the browser, when you press the search button. Bing. No, you can’t change it. There’s no setting for it, and the Google Search widget that you can snag from the Market is blocked (or at least very carefully hidden). Being unwittingly forced into Verizon and Bing’s conjugal relationship is infuriating on its own, but the implementation also feels like the sloppy hack that it is.

via Daring Fireball Linked List: Matt Buchanan on Verizon’s Samsung Fascinate Lightning.

John Gruber astutely adds:

Android is “open”, but who it’s open for, primarily, are the carriers. (Somehow I doubt we’ll see any Windows Phone 7 devices where Google is the one and only search option.)

The primary defense of Google’s Android strategy is that it’s beneficial in driving traffic to Google’s services/properties. This is by no means a certainty. To the contrary, it seems likely that the Android experience will be defined by operator back-room deals.

See also: asymco | Android vs. Google Part II

Coupling a lack of control over the platform, the revenue streams, the user experience, the potential banishment of AdMob from iOS and an attack on Google’s brand, Android is currently winning the war with Google.

However, my money long term remains with Google. They can and will eventually beat Android. Perhaps with Chrome.

[Footnote: if anyone wonders why Verizon, Google's best friend in mobile, is gutting Android, you need to remember an exclusive five-year deal Microsoft struck with the carrier to provide search and advertising services on the phone. Microsoft was rumored to pay $500 million for the opportunity.]

  • Guido Baldoni

    Watch out, this article has an "andrOD" tag.

    • http://www.asymco.com asymco

      Thanks. Fixed.

  • http://www.ecolojic.com Joshua

    Makes you wonder why Google continues developing Android, if it is so easy for the Chinese and operators to cut the links to Google out of the end result. Maybe if this kind of behaviour continues they will abandon it in favour of Chrome OS. No matter how you look at it though, it's looking like their strategy of taking the game to Apple is backfiring a little.

    Maybe they should have made the license a bit more "open" to prevent operators from locking customers down?

  • David Chu

    Google decided that the #1 priority was to get as many handsets out as fast as possible. In doing so, they made numerous concessions along the way to the carriers.

    What else can they do but continue support? They put these units into the wild and attached their brand name to it. It would be a huge hit to their brand and reputation if they ended support.

    “We are very careful of the features we introduce because once you release a feature, you can’t take it back.” – mr. Jobs (not verbatim)

  • http://franksting.net.au Gavin

    Isn't it interesting how Android is promoted by "those who know" as 'open' without taking into account the natural behaviour of the Carrier who has the complete opposite mindset?
    So even if each consumer were clever or interested enough to use that "openness" to do their own thing, many of these carriers and manufacturers are preventing even that or at least attempting to. This Verizon/Bing situation seems like an insidious example of that.

    It seems to me Android is in danger of becoming, in effect, the new WinMo of the "Smart" handset. It may 'win' the market share argument in the short term, but it will be interesting to see where these fickle carriers and manufacturers are with regards to OS in the next 18 – 24 months.
    I think we can be certain Apple will still have an iOS but will the others be running Android, Windows Phone or their own?
    Surely it'll be whatever makes them a better bottom line. If MS are going to PAY to be on the handset, as with the Verizon/Bing example, and it provides a good user experience, what happens to Android then?

  • GoodyBird

    Here's an idea, Google sells the android phone manufacturer
    the right to splinter android.

    goals achieved:
    1. No more competing with apple.
    2. Money return for the development of android.
    3. Blow to winP7, since all their clients have their own OS now.

    Though, I wonder if Google can pull that.

    • http://www.asymco.com asymco

      The underlying control problem with Android is that it's open source. The nature of open source is that the author grants the right to modify the code. Since they did not write Android but took it wholesale from the Linux code repository, Google itself is a licensee of previous authors of Linux so they don't have the right to restrict its modification.

      If you live by the sword, you die by the sword.

      • Mike11

        But couldn't Google gradually swap out open source parts with proprietary ones? Maybe not on the OS/kernel level, but everything UI etc.? So that in the end the open source OS kernel would be like Microsoft's Windows CE and the closed source Android UI would be like Windows Mobile/Phone? Apple does something similar with Mac OS X.

      • GoodyBird

        mmm…but I think that's only contradict clause 2.
        They can still pass development to the manufacturer.
        And they can build their proprietary stuff on top of android,
        or splinter it. Basically they'll have their on OS.

  • http://www.asymco.com asymco

    Added footnote to suggest Verizon's motivation.

  • Hantu13

    While it's not clear that this strategy will play out to Google's benefit, it's worth playing out the alternate scenarios as well.

    Would it have been wise for Google to risk disintermediation to the mobile market by carriers and smartphone vendors like RIM, Apple, etc.? Bing exclusivity at AT&T and Verizon does present a very ugly picture for a company driven by search based ad revenue.

    Of course, this could be mitigated by lots of cash, which isn't in short supply over there, but still not a very pretty picture.

    The biggest risk is that search simply doesn't play a huge role in mobile at all, which is a disastrous until GOOG figures out another way to make money… This isn't a fight Google can afford to be a bystander in.

    Anyway, great blog, and your points about Android v Google are well thought out and prescient. Just not sure they had a lot of good alternatives…

    • yowsers

      MSFT buys search exclusivity on an Android OS. That must have made for an unpleasant shock down in Mtn View. Love the irony of that, BTW (for some reason the image that comes to mind is how a neural virus takes over its host — thinking sci-fi here.)

      Still – that's one tactic MSFT can use in the search wars: use a portion of all those $billions they have for obtaining exclusivity clauses in contracts for mobile search. If they go after enough carriers aggressively like that, would Google find itself in a position of counter-bidding for space on its own OS? Google wouldn't necessarily lose money on that, but it would compress their mobile search profits.

      Considering the anticipated growth of mobile smart devices, and with it the potential market for mobile search / ads overtaking desktop search down the road, this could be one of the early battles shaping up for that space.

      The Android fragmentation would make that strategy very porous, though (too many devices, too many carriers). If they could get it carrier by carrier, it has a chance of causing Google some heartburn.

    • http://www.asymco.com asymco

      You're right. I did give it some thought. They very well may be damned if they do and damned if they don't (do Android). The dilemma points to a serious crack in Google's business model. I brought it up in the posting called Android and the philosopher's pencil (link below): namely that it's terribly worrisome that a company offering cloud-based services needs to push something so crude as systems software.

      http://www.asymco.com/2010/08/20/android-and-the-

      If their business model was sound, the systems software and devices underlying their business would not be control points and would be commoditized. Since evidently they're not, then the control point in the value chain is a lot lower than where they reside.

      • http://lowendmac.com Tim Nash

        If you go back to the original motivation for Android, it was to block Microsoft from being the gatekeeper to Google's cloud software. Hence all the desperate deal making with the carriers and manufacturers, so that Android would become the worldwide alternative to iPhone. Since however, few manufacturers and developers are making money from Android and there are significant patent risks, especially for US sales, expect all parties to keep looking for a better solution.

        More details in 'Has Google already lost the Mobile war?' http://lowendmac.com/nash/10tn/has-google-lost.ht

  • Mike11

    Couldn't Google just not allow the Marketstore on Bing-only Android phones?

    • Gandhi

      And face the wrath of anti-competition regulators? Google is the 800-pound gorilla in search. I am sure the regulators are just waiting for an excuse to get at Google, especially with the privacy breaches.

      • Mike11

        Well, Google could at least demand a choice between Bing, Google etc.. Bing could still be the default search engine, maps provider etc. but users should be able to change that manually and not be actively prohibited like right now. Or otherwise the smartphones don't get access to the Android Marketstore.

        On the other side, it would be pretty funny if Microsoft started it's own Android "Bing" App Store and it would be preinstalled on all those Bing-Android smartphones… And if Microsoft made it popular enough then that way Google would loose a lot of it's influence over manufacturers and carriers. AFAIK there's nothing Google could do to block that (at least not without some radical changes).

    • http://www.asymco.com asymco

      Don't really know if they could or could not. In theory they could but that might be another self-inflicted wound. The Android market may be the only revenue generation option on those devices. Much of their apps, being free, are monetized through ads through adMob, a Google subsidiary.

  • Gandhi

    "However, my money long term remains with Google. They can and will eventually beat Android. Perhaps with Chrome."

    And I am sure the few developers for Android who genuinely put in effort to make quality apps will be thrilled to hear all their hard work is for naught.

    All this talk about Chrome OS like it will be the second coming. Any public betas out there? Any announced products set to ship with it? A bigger question – what exactly will Chrome let you do that is better than what is out there?

    With each passing day, I see Google become more and more like Microsoft – desperate to do anything and everything to maintain their hold on online advertizing while the business around them gets slowly chipped away by better business models.

  • Iphoned

    It is a shame this type of crap is selling so well :-(. Sigh. From the latest numbers, it looks like Androids collectively will outsell iPhone by 50% this quarter.

  • Iphoned

    Piper Jaffreys' latest estimates put Androi's potential contribution to Google revenue at $1.2b. (I saw it on one of the recent posts, but dont' have the link at the moment.) I wonder how this is calculated? If it is an indirect contribution from Search on Android phones, I wonder if the analyst subtracted the negative contribution from the Web searches on PCs Laptops that the phone searches replaced. I.e. clearly phone search is only partially incremental to Google if at all, since a lot of mobile searches are just replacements for searches that would have been made on PCs. One can even hypothesize that it is a negative contribution, if more people use Apps vs browser! I.e more mobile use, leads to the OVERALL decline in browser search as essentially PC searches get replaced by Apps use. I love this Google strategy. It has all the signs of their other successful products such as Wave and Buzz. But unlike the other Google successes, this one is surely hurting Apple sales.

    • RattyUK

      "But unlike the other Google successes, this one is surely hurting Apple sales."

      Not entirely convinced by that.

  • Iphoned

    I wonder if the gazillions of Android devices to be eventually sold in China would carry Baidu search exclusively or at least by default?

  • http://ThePhilosopher'sPencil Hantu13

    Horace,

    Terrific post- you really hit the nail on the head- It's the decline of importance of search as the best medium to capture audience attention, and therefore advertising dollars.

    This is a foolish distraction for a company that doesn't "get" social…

    • Hantu13

      Referring to your post on the philosopher's pencil, of course!

  • http://lowendmac.com Tim Nash

    Will Verizon's Android phones with Bing count as Google activations?

    When responding to Apple's 230,000 per day iOS devices, a Google spokesperson said, for the Android figures, they only counted activations of Google services. As Google makes most money from Search, will a Verizon phone with Bing still count or will Google start fudging the figures? (by counting say, use of Google Maps as an activation)

    • http://www.asymco.com asymco

      Forget activation figures. What matters is devices sold and the world knew how to measure that before Google decided to publish "activation" figures.

      • http://lowendmac.com Tim Nash

        Devices sold and Android version matter to manufacturers and developers but how many of the devices use Google search and services is important for Google revenue and how sustainable Google's current business model is.

      • http://www.asymco.com asymco

        Agreed, and Google may never find out. It's very likely that they'll never know how many Android devices will be in use in China.

      • poru

        Devices sold, yes, but as Horace and others have crucially pointed out we have to take Android fragmentation into account, as this affects the developer enthusiasm and the overall apps ecosystem.

        If I want to purchase e.g. 1000 mobile devices for my enterprise, I can count on essentially a single model/OS for Apple devices (assuming end-user upgrades). I can also count on a certain number of staff already owning an iPhone (or iPod touch). If I buy Brand X Android device (Samsung, HTC, etc) there is no such guarantee and I can't even be sure the handset will survive or be maintained after a year or so.

        It will be interesting to see how many carriers enable the Android OS upgrades as time goes by. If they don't, the Androids will become more "disposable" and it will be easier to buy a new one rather than keep an obsolete one. This leads to churn in the Android user base and potential defectors to Apple.

        Having said that I'd be thrilled if there are useful and competitively priced alternatives to iOS, if only to keep Apple on its toes.

  • http://www.ecolojic.com Joshua

    Further to your Footnote, Horace, I wonder what effect Verizon's Bing deal might have on the negotiations with Apple for the iPhone?

    Whilst I can envisage that Apple would happily change the default search engine to Bing, I can't see them removing Google, Wikipedia etc as options for the user to change to.

    Verizon's attitude towards it's customers does seem rather at odds with Apple's obsession with the customer.

    • http://www.ecolojic.com Joshua

      Basically, in my view, the Bing deal just might mean we don't see the iPhone on Verizon for 5 years. Sprint et al will be stoked!

    • http://www.asymco.com asymco

      It's impossible to predict if iPhone ends up on Verizon. There are far too many possible deal breakers. Even debating the subject highlights the fact that it's operators who control distribution of phones. Users want it, the vendor wants to sell it to them but they can't. What's kind of power must be present to interfere with such strong market forces? That power has not diminished all that much in three years of iPhone.

  • Tom

    There seems to be a parallel between Google's open approach to android, and Intel's approach to chips.
    Google provides android as an open OS, which more and more has come to be understood as easily controlled by the telcos, even at Google's loss. This is ok for Google because more devices out there means more google services being used and more ad revenue for Ggogle. The phones can be ok as long as they're good enough to let people use google services.
    It seems, with Intel's rapid acquisitions of postpc chip makers and the company's move beyond desktop/laptops, Intel is more interested in getting chips sold than in the quality of the devices they're sold into.
    The WallStreetJournal's interview with Mr. Was very telling:

    "WSJ: Are tablets and other Internet-connected devices an alternative to PCs?

    Mr. Otellini: For some people, they are. But if you look at it globally, it's a coexistence.

    I don't think PCs are going to go away, by any stretch. I don't think tablets are going to rule the world by any stretch. The netbook phenomenon, the growth curve is sloping off, but it's still going to be something in the range of 40 million units this year, which is 3½ times as many tablets.

    The industry is working pretty hard on getting other brands of tablets out there. They are not going to let Apple run away with this one."

    The Intel CEO seems more interested in inciting the sale and distribution of Intel chips than in anything else.

    • http://www.asymco.com asymco

      Sounds like that famous quote by the then-CEO of Palm Ed Colligan: "PC [meaning Apple] guys are not going to just figure this out. They’re not going to just walk in."

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