According to soldiers of the Android Crusade, 2011 is the year Google will crush iOS to declare its inevitable suzerainty over mobile territories.
Seth is the current commander of the “Google 24/7” column at Fortune and a former IT manager. ‘Nuff said.
Fred is a VC. His business is mostly about scale, with a portfolio full of companies whose lucrative exits are predicated on having scale for commensurate multiples: Etsy, Zynga, Tumblr, Twitter, Foursquare, Disqus, etc. Unlike angel investors who prefer flipping smaller properties to larger acquirers in a short period at smaller multiples, VCs like Fred’s USV need hits, at least a few big hits to justify significant management fees, bigger funds, longer incubation times and higher expectations. No place for the Apple ecosystem in Fred’s portfolio. Nothing wrong with that, this is America. Neither is there anything wrong with “fearing and loathing” Apple and declaring it “evil” so long as we understand where that angst is coming from.
Fear and loathing in Googlistan
Even though he personally uses Apple products, Fred has no use for Apple as an investor. To him, the Apple ecosystem is not “open” enough for his portfolio companies to reach sufficient scale for lucrative exits. In fact, it wouldn’t be too much of an exaggeration to say Google’s business model for Android Fred prefers is diametrically opposed to Apple’s.
As business models go, there are currently two dominant ones: either people like your product enough to purchase it or they don’t care enough to buy it but will overlook its deficiencies if it’s “free” in exchange for their personal browsing and purchasing info sold to advertisers. The former model is Apple’s, the latter is Google’s.
Apple sells emotional experiences. The price is what users pay to be delighted by Apple’s stream of innovations and to be free of the lowest common denominator burdens and the pervasive harvesting of their personal info.
Google sells eyeballs. To be more precise, the clickstream attached to those eyeballs. Thus scale, indeed dominance, is absolutely crucial to Google’s model.
The weight of scale
Android may be a lackluster clone of iOS in terms of UI and fluidity, but as an economic proposition it’s nothing short of an extension of Google’s desktop/online business model. Google’s model wouldn’t work with something like 20% market share. If a market is highly fractured among smaller players, business models like Google’s that rely on massive scale wouldn’t work well. As with Microsoft’s Win32 API or Office formats, scale is erected to beget inevitability. Inevitability becomes its own marketing engine. Windows had virtually no security architecture by design for so many years, even long after its costly effects became obvious globally, but because it was ubiquitous, thought to be irreplaceable and thus inevitable, it has continued to net Microsoft billions year after year. Likewise, MS Word could get away with some of the most insane formatting problems ever invented by man only because it has so dominated “desktop productivity apps” that it’s become inevitable. If anyone, even Microsoft, were to design a modern word processor today, it sure wouldn’t be Word. And yet everyone else designing a better Word has had a very difficult time of competing with the inevitable. Inevitability is the Kerberos of profitability.
Like Microsoft, Google doesn’t sell best-of-class user experiences to paying customers. It sells their eyeballs to advertisers. The more eyeballs, the better. The most, the best. If it can dominate a market and thus make its products and platforms inevitable, it wouldn’t even have to care about user experience at all. Google Buzz didn’t have to have good user experience because Google management thought if they could just bolt it on top of the very dominant Gmail it would make Buzz…inevitable.
In Fragmandroid: Google’s mad dash to Microsoftdom a year ago, I looked at the undeniable similarities between the two companies’ willingness to raise their paranoia to a level of corporate survival strategy:
During its growth period, Microsoft entered into one risky bet after another, from cable TV to office equipment automation to Dick Tracy watches. It saw threats to its core revenue base from every new development, every new player to come along. And expand and spend it did. It did, mostly because its management thought it could.
So Google too has to be everywhere software could possibly run: wikis, cars, windmills, electric meters, audio ads, location-based services, microblogging, catalogs, print ads, web page layout apps, online answers, social networks…even when, as you may have noticed from the list, it fails to get any traction.
For Google, nearly all of whose profits depend on advertising revenue, dominance expressed as clickstream traffic is the currency. To maintain that dominance the “Don’t Be Evil” company has been willing to go into business in China despite all evidence of rampant human rights violations, get into bed with the worst phone carrier to rape net neutrality, let its “walled backlot” search become a cesspool of SEO swindlers, collect unauthorized data via illegal WiFi mapping all over the globe, risk exposing private email account data in hopes of capturing social graph info by default, favor its own properties in search results in surreptitious ways and so on.
Whether it’s on the desktop, mobile or TV, the ability to sell advertising by maintaining market dominance is everything to Google. But then what’s in it for Google’s Android hardware “partners”?
What happens when one company ties its market destiny to another’s rate of innovation? The movie “One OS, Many Partners” that we’ve seen before in Wintel theaters didn’t have a happy ending. Having secured a very fat market dominance, Microsoft displayed an embarrassing level of paternal indifference and inability to innovate.
Even Microsoft’s biggest partners complained: Acer about lack of proper tablet OS support, Dell about better server support against Linux, HP about media center innovation and nearly everyone about getting burned by the WMP/PlaysForSure/Zune debacle. At the end of its inevitability run, most of the Microsoft “partners” were left holding the bag…of stalled innovation, disappearing margins and market irrelevance. That’s the leitmotiv of the “One OS, Many Partners” screenplay.
It’s a classic dominance play, and Google is perfecting it in its rerun. For years, Google played deaf to complaints from publishers and studios about its copyright violations of their books, news and video. Until, of course, its own operations scaled enough to dominate those distribution channels to then dictate terms to content owners: “You can’t live without our traffic to your website, so let Google commoditize and leverage your properties for next to nothing.” Just like the Wintel hardware manufacturers who had no OS of their own and were thus at the mercy of Microsoft, content providers that stood by and never developed their own digital platforms find themselves now at the mercy of a dominant Google. This inevitability is worth so much more to Google that the several hundred million dollars it has already spent on Android to give it away for “free” remains a rounding error on its balance sheet.
Between Android’s market dominance and overwhelming commoditization of mobile content, stand Apple’s iOS devices and Facebook (and perhaps to a lesser extent Microsoft and Twitter). On these platforms, Google search – the key to dominance and inevitability – is either absent, highly mediated, in decline or mostly obviated. That’s why Google’s most belligerent words and actions have recently been directed towards those two companies. In a reversed mirror-effect, Microsoft used to call open source an anti-capitalist “cancer” then, Google’s Android head likens “un-open” Apple to North Korea today. Google loves to index Facebook social graph data, but won’t let Facebook access Gmail relationship graph – of course, all in the name of “openness”.
One company. One OS. One explosion.
So the Android crusaders will be circling us in 2011, swinging their $85 smartswords to demand our capitulation in a rapture of inevitability. Inevitable like Knoll, Orkut, Froogle, Lively, Health, NoteBook, SideWiki, Answers, Wave, Buzz, Nexus…like an army of 41 shades of blue. No matter. Resistance is futile.
Curiously, even the most successful Android hardware manufacturers like Samsung and HTC are hedging their bets on Google’s mobile platform either with their own OS (Bada) or Microsoft’s (WP7). Why would experienced OEMs hedge their bets on Android if it were so open, so free and so benevolent? Let’s hope they too have seen the “One OS, Many Partners” movie and still remember the OEM extras with un-speaking roles in the “Razor Thin Margins” and “Race to the Bottom” scenes…when everything exploded.
Update: Incidentally, none other than Vic Gundotra, former Microsoft chief evangelist and current Google engineering VP and hit-man for mobile and social, echoes precisely the strategy outlined above that Google has been using: “It’s an art to create a sense of inevitability,” reports BusinessWeek:
In Silicon Valley, that kind of evangelism usually involves firing insults at the competition. While that hasn’t typically been Google’s style, Gundotra hasn’t shied away. As he says, “It’s an art to create a sense of inevitability.” In a keynote speech at a Google event for developers last year, he even took aim at Steve Jobs and “a draconian future where one man, one company, and one device would be our only choice. … That’s a future we don’t want.”