In the Nerdiverse, the big news last week was/is Google’s acquisition of Motorola. The stated purpose for buying Motorola was to strengthen Google’s patent arsenal in preparation for the ensuing World of Patent Wars that seems imminent. A secondary possibility is that Google also wants to get into the hardware business itself; Motorola makes phones, but also makes a whole bunch of other telecommunication toys.
There is a lot of analysis1 all over the internet on whether Google will be successful in achieving its goals. Some pundits think that the cache of Motorola patents isn’t enough. Many question whether the purchase was worthwhile, not just from a patent-defense perspective, but, in the case of Google getting into hardware, whether that will really work. It’s not like Motorola is killing it in the handset market; they’re not even in the top 3 handset makers. Even ignoring this fact and looking at the other ways that Google could get into hardware via Motorola, one has to step back and wonder how Google could be successful there (i.e. developing modems, pagers , and other telecom equipment) when they don’t have a record of being able to develop their own hardware as a successful part of their business strategy (see Google TV and the Nexus phone).
Focus (or lack thereof)
What is Google’s fundamental business? Contrary to popular opinion, it’s not email. It’s not software. It’s not search. Google’s fundamental business product/service is you. Google sells things to you and uses you to sell things to others. Google is the ultimate middleman. This isn’t to praise or condemn; it just is. Google makes money off of ads.2
I once asked a bunch of nerds whether Android was a good idea for Google. A lot of them got mad and misunderstood the business critique for a technical critique. The foundational question is: How does x (where x is any business strategy) contribute to your business goals? The goals of most businesses include profitability, so in the case of Google, the question is understanding how much Android contributes to that goal.
Google wants more people to be on the internet to use its services. This increases the value of its ads and enables it to track more data to provide better business to customer connections. The logic goes something like this:
- Google wants more people to be on the internet so that they will use their services.
- Lots of people have cell phones but not smart phones because the smartphone experience is lame and they are too expensive.
- Google wants to improve the experience and lower the cost of smartphones so that more people will be on the internet so that they will use Google’s services.
∴ Invest in and develop Android.
There are several assumptions here. One, if people are on the internet they will use Google’s services. Google’s internet services are pretty great. But a lot is hinging on this; if people don’t use Google’s services, it doesn’t make sense to try to put them on the internet. Thus, it brings into question whether investing in and developing Android is worth it.
The second assumption here is that there doesn’t exist a good smartphone experience. There does. It’s called the iPhone. You probably haven’t heard of it. I’m not saying that the iPhone is the best smartphone experience out there. I’m just saying it’s good enough, which (again) brings into question why a company would sink millions into developing a better smartphone experience for the purpose of getting people on the internet when there already exists a passable experience that gets people on the internet. Part of the argument for Android is that Google wants to control the phone experience and integrate Google apps deeply into the smartphone experience. But this is where the whole “openness” idea doesn’t make sense: any phone manufacturer, then, could grab the source to Android and replace all the Googliness (e.g. Maps, Mail, Contacts, etc.) with something else. So why go to all that trouble of investing in Android if you’re subverting your own business purposes?3
Lessons for us
We will never grow as big as Google but the questions raised by this acquisition are clear: What are your fundamental business purposes? Is what you are investing your time and money in contributing to that? It’s easy for us, when tossing ideas back and forth, to get caught in what could be done. But it’s helpful to take a breath and re-examine how every project contributes to our mission and our goals. If they don’t match up, we either need to say ‘no’ or do some introspection on whether our mission and our goals are in line with who we are.
- Both Horace Deidu and Michael Anderson do some interesting analysis on this particular development. Particularly interesting is Horace’s analysis on the effect this purchase will have on Google’s current phone partners and Michael’s analysis on the effect that the iPhone is having at Verizon. ↩
- Quoting Google from its 2010 10-K Filing: We generate revenue primarily by delivering relevant, cost-effective online advertising . ↩
- To be fair, Google seems to be making quite a bit of money off of Android. A Forbes article estimates that in 2010, there were 22 million Android users that generated about $5.90. These are all estimates, of course, but that’s a lot of money, especially considering that the number of Android users will be growing and that the amount of revenue per user is estimated to grow as well. But what is telling is the other side of the numbers. According to the same analyst, Android only generated 16% of Google’s mobile ad revenue. Which means that 84% of Google’s mobile ad revenue was generated by non-Android sources. ↩