Prediction: Google will sell Android to Samsung
Android is a failure. It does not matter if you like the OS, it does not matter if, for example, you hate Apple. Android is a failure. Yes, I know it’s the most popular – used – smartphone OS on the market right now. Does not matter. It’s a loser because, ultimately, Android is a business. Or at the very least, a business strategy. In both cases, it has failed.
Google has already dropped billions of dollars on Android. They refuse to say how many billions, exactly, though I would not be surprised if it’s close to $20 billion. The original purchase, the $12.5 billion acquisition of money-losing Motorola, the ongoing development, marketing and promotions, revenue sharing with carriers, the cost of Google Play and the licensing efforts for digital media, the cost of building apps specifically for the platform.
Add it up and that’s lots of billions of dollars. To say nothing of other costs, such as the cost of pissing off Apple to the point where Apple boots out Google Maps. Google made a strategic bet on Android and that bet has cost them dearly.
But wait! Didn’t Google just mention something about an $8 billion mobile run rate?
Yes. Made up numbers.
I’m not saying that when co-founder and CEO, Larry Page, recently said the “mobile run rate” is now “$8 billion” that he was lying. Rather, that until the numbers make their way into the signed earnings statement, they are of little value.
In the recent earnings call, Page said that mobile revenues “run rate” had grown from $2.5 billion a year ago to $8 billion. Seems like a big deal, only we simply do not know. Perhaps the run rate of $8 billion is starting…now. So, from 1 October 2012, let’s say, till 30 September 2013, mobile revenues for Google will be $8 billion.
You’ll note that Apple earned more in **profits** this past quarter!
Worse, that “revenue” number is (deliberately) murky. How much of that $8 billion goes directly back to publishers – of books, music, movies – whose work is on Google Play? We don’t know. How much of those revenues are sent to carriers, whom Google cuts deals with? What amount of those revenues comes from iPhone, iPad, Blackberry et al?
It is possible to speculate. For example, earlier this month, Opera, which offers a popular mobile browser, and runs a mobile ad network that serves some 10,000 mobile sites and which delivers a sizable 40 billion mobile ad impressions **per month**, gave us some rather surprising news: iOS dominates, yes, but Android isn’t even in second place for generating ad revenues. That crown goes to “Other”.
It’s worse. While Android generates the second highest percentage of traffic by OS, it beats only lowly Symbian for earnings per impression.
Because Google went and copied the iPhone look, feel, app approach, app market and touchscreen UI, no one can be surprised that Apple has done everything they can to limit Google’s reach on their platform. Google Maps is no longer embedded. Nor is YouTube. Apple, never an advertising company, launched iAd, and they’ve cut deals with Facebook and Twitter – not Google+ — to integrate those social media services more deeply into iOS.
Imagine, though, how much Google could benefit – and at such a lesser cost – if they were friends with Apple, not enemies? Apple is closing in on 500 million iOS devices sold. That is a massive massive audience that Google badly wants to align themselves with.
Don’t forget, as well, that revenues and profits are not the only damage Android has done to Google. Because they are the dominant search company in the world and now own the dominant smartphone platform, they are almost certainly likely to generate more government scrutiny over monopoly practices and privacy acts. Plus, we now think less of Google. Google used to stand for open. Now? They cut exclusive deals with (closed) carriers. They pick and choose which selected few company will be first to market their latest OS. They sign exclusive content deals with media houses. They, alone, decide who gets to be part of their handset alliance and they, alone, decide when to release Android, or not. Their massive Motorola purchase only exacerbates the closed nature of today’s Google. After all, you can’t run your own hardware maker and be open, can you? Hell, it seems like Google Motorola has spent the past year trying to rework FRAND patent rules.
Android has become an expensive noose around Google’s neck. They need to off-load it as soon as possible. I predict Samsung will acquire it.
Samsung is now the dominant smartphone handset maker in the world. In Q3 they sold, er, shipped, 57 million smartphones! That wasn’t simply about double what Apple shipped, er, sold. Samsung accounted for an astounding 35% of all smartphones shipped this past quarter! Plus, they are growing!
Other big Android companies, including HTC, Motorola, LG and Sony can’t seem to even generate a profit with Android!
Now picture Samsung controlling Android. In one fell swoop they knock out their Android rivals. As they scramble, Samsung takes even more market share. Plus, with full control of Android, Samsung is not dependent upon Google or carriers for updates – and fragmentation remains a chronic problem for the ecosystem.
With control of Android, Samsung can do what it’s long dreamt: control an ecosystem and all its parts. Notice how Samsung does not really show off its products in their ads, nor do they show them side by side against Android competitors. Rather, they mock Apple customers. Do not be fooled. Samsung wants Apple customers. They want those folks who spend a great deal of money and who are loyal to the platform, who use the Apple ecosystem, Apple’s iTunes, Apple’s payments. Samsung wants to be just like Apple. As long as Google controls Android that can never happen.
Google wants to own the search-maps-mobile-location ecosphere across all computers. Smartphones are computers. If they ditch Android, they can. They can focus on maps and search and other mobile-local services across platforms while not posing a threat. Win win.