Google last week announced its acquisition buy of Motorola Mobility for approx. USD 12.5Bn and the public reaction was Google is competing with Apple for hardware. For most of us in the industry it was more a case of Google looking to Motorola assets namely its patents which it tried to buy from Nortel recently against Apple et al and lost. ( Some say its to offset any litigation from Apple against the android platform).
Google’s main business is search and its arena of activity was namely through the pc or laptop. Hardware has in fact changed the way we interact with the web and now its on the move through various devices; ipad, the iphone or other smartphones.
The challenge with such hardware is fragmentation of hardware and operating systems. This means that having uniform applications are no longer applicable much like they were with the pc (unless of course you are a mac user).
Mobile Internet usage has surged in Asia namely because of Japan initially but now as the emerging asian countries start endorsing the web, the infrastructure and indeed the monetisation it could bring; the interaction of the web and the growth of new online countries means the growth is in Asia. Some Asians will not be able to afford the pc or laptop and will settle for connectivity to the web through their mobile.
Google is merely preserving its dominance in search and its existence by ensuring that the new age of internet users have Google at the forefront of their mind when logging onto the web. Google has also built many functions that will try to navigate the user back to Google through maps, Google daily deals etc.
Google does not need or in my opinion want to get into the hardware mobile business but this was a strategic move to press ahead with Motorola patents that assist in the user journey and also given the price differential between Apple iphones and android based phones – why would it not be smart for Google to have control of the price elasticity of the smart phone market and sell Motorola android based phones at a distinct price variance to Apple? and thereby control a greater share of the market.
I think this strategy would make perfect sense in Asia especially since price sensitivity would be fairly high in this region as markets here are just emerging and economies are moving to the new dawn of prosperity.
Let’s say if Google brought down the price of smartphones to 50 USD against Apple’s 200 USD then its safe to assume that at a price elasticity of 4x the multiple of the Google smartphone – that it would cause an effect in the marketplace. Of course I have only looked at price here – the largest component of buying an iphone is desire. Desire is ingrained in our being and not something that can be manipulated by price – but it can if the masses cannot afford it and look for the a version that is affordable.
With Google giving back a better revshare model back to its app creators and Google itself developing such useful apps like Google Earth, GMaps its likely that the differentiators may only in the future exist through the hardware not through the app market.
The smart phone users are getting smart…. we’re not necessarily convinced that a convergent phone is actually a better phone – unfortunately the call quality, the battery life are affecting the core feature of the hardware….it being a phone. I know my largest battle with the iphone is not the aesthetics or the apps but actually the amount of time I have left on charge to make a call. Also the fact that you cannot buy another backup battery which is something I usually have with me is challenging with an iphone. Sure you have various iphone devices that you can attach that make the iphone look as long as a UK telephone box, but they are not the same as having a spare battery.
One of the interesting things about Motorola and Google buy was that Motorola does not have a large presence in Asia; in fact Motorola is more dominant in USA and some countries in Europe. So the excitement of this deal I believe will be felt in Asia – Google with Motorola should make an interesting play in Asia with the other larger smart phone hardware providers here being HTC and Samsung.
So if new internet users are coming from emerging markets; mostly Asia than its fair to say that Google will want to ensure its status in search remains in prime position; and if these users are interacting with the web through their smart phones then its makes full sense this is not just about litigation or patents alone.
It’s a smart move and this is why Google dominates because it has the vision to do so. It also makes perfect sense when Microsoft is working through Nokia that Google would look to buy a mobile hardware company. After all, sad to see it so but the web world looks set for dominance by three players; Microsoft, Google and Apple.