5by5 | The Critical Path #68: On Very Large Scale Integrated Companies

A review of RIM’s latest service pricing surprise; what do maps cost and what are they worth and the way to think about Google as a business.

via 5by5 | The Critical Path #68: On Very Large Scale Integrated Companies.

  • You saidin podcast that Chrome is just a cost centre with no revenue . I think it saves them money that they have to pay out . They have agreement with Firefox under which they renewed for upwards of $1 Billion with a bowser that has lower market share . So in effect they are saving a boatload of money by having a browser for which they do not have to pay referral fees to anyone .

    • A cost center is exactly what you describe. Saving money is what motivates the work. Android has the same value to Google as payments for distribution via iOS are quite substantial (though Android also has a revenue sharing model with operators and OEMs).

  • graphex

    Not to nitpick but Playbook volume of 224k is 1% (not 10%) of Apple’s expected 24 million iPads.

  • Greg Lomow

    Great show. In response to your comments about Google. Google has two major parts to its business: 1) knowledge acquisition and 2) selling ads based on this knowledge. All of Google’s services or ‘pipes’ (as you call them) such as search, maps, news, google+, etc. (a) serve to acquire information about users and what they are looking for and (b) serve as a venue to serve ads based on this knowledge that has been acquired about you as a individual and based on the aggregated knowledge Google has acquired about similar users doing similar things online.

    Google is better at doing this than other ad-based businesses such as radio, newspapers, magazines, etc. because (a) the web provides a better vehicle for harvesting info about user activities (through cookies and various online IDs) and (b) Google has mastered how to acquire knowledge and serve ads algorithmically and statistically (which means it can scale and be tuned).

    Regarding Android. You can see how Android makes sense in terms of the model above – it provides a platform for delivering Google services which in turn (a) helps to acquire knowledge about mobile users and (b) is the basis for serving ads to these users. Of course Android has run into a couple of hiccups. First, not all Android users are tied to Google services (such as Amazon users), but this still makes it useful to Google overall. Second, no one has cracked-the-code on how to serve up ads on mobile devices that generate the some revenue as other platforms including desktop, TV, radio, etc. Nevertheless Google is betting that someday someone is going to figure it out and then they’ll be able to leverage Android to generate more ad revenue; and they believe it is better to get hundreds of millions of people using their platform now, rather than trying to lure them at some future date when user acquisition costs might be higher. Only time will tell if this bet will pay off for them.

  • dmx

    Too bad Google didn’t realize there are way too much money to be made in the mobile device market than in ad market. Andy Zaky summed that up nicely.