Carriers
AT&T’s Android lockdown is about money, not the iPhone [OPINION]
March 28, 2010 | by Andrew Kameka
AT&T
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AT&T announced its second Android phone, the Dell Aero, last week at CTIA. Just like its first Android phone, AT&T has opted not to let the Aero install apps from outside the Android Market. A few blog authors and readers have suggested that this is a move to appease Apple and protect iPhone exclusivity. I’m not buying that. AT&T’s decision is motivated by the one thing that drives all business ventures – money.
Here’s a dirty little secret that isn’t actually a secret: carriers take a 30 percent cut on all sales of apps in the Android Market. When you shell out $6.99 for SlideScreen, about $2.09 of that goes to AT&T, and the remaining funds go to the app’s developer (LarvaLabs). Those $2.09 payments will eventually add up to big bucks as Android grows, so it’s not in AT&T’s financial interest to let customers obtain apps outside of the system that raises revenues.
“But AT&T is losing money on potential phone sales,” you say. “People are less likely to buy a lockdown device.” Poppycock! Anyone who would buy a Backflip or Aero probably isn’t among the power users of Android who would care or even be aware of this issue. This is something that people will likely discover after they have already purchased the phone and learn about some great new app like Swype that they’re unable to use because AT&T told them they couldn’t. The carrier will still make money because if they can move units with the Backflip or Aero, they build subscriber rolls and raise a generation of users who probably won’t know any better (or care once they do).
I know that Android users often believe there’s some great conspiracy by AT&T to stroke Apple’s ego and maintain the iPhone cash cow. But AT&T would avoid Android all together if that were the case. The carrier wouldn’t spend money to advertise a product and sabotage it with silly tactics that would turn off potential customers.
AT&T’s CEO Ralph De La Vega doesn’t have time to think up new ways to make Steve Jobs happy, but he’s got plenty of time to think up new ways to keep his investors, stockholders, and his bank account happy. That’s why the Aero won’t be able to install apps from outside of the market. That’s also why you probably won’t buy the phone, but you aren’t the average consumer. The average person who walks into AT&T will purchase the Aero or Backflip and leave thinking they’ve got the perfect phone. AT&T will be $200 richer, with more money likely to pour in once those folks hit the Android Market.
Rant and rave all you want about the spirit of openness that Android should represent, but I doubt AT&T will care once the quarterly reports come out and its still the richest carrier.
AT&T risks alienating Android power-users and losing them to other carriers but, does AT&T really care? Afterall, as stated in this post, AT&T’s ARPU will go up by forcing the Android Market on the users which will more than make up for a few thousand frustrated Android deserters.
I have one thing to say to my future fellow Androidians: Root or flee? That is the question.
Powerusers make up a very minimal amount of customers. Honestly, they care more about the mass market, because that's what is going to make or break them in the end. Most people buying a smartphone don't even know the OS on it, or care to know. They just want it to work. I'm an Android user but I gotta give it to Apple for making the OS pretty much transparent to the user. (Majority of) People aren't ready for their phones to become like their computers just yet.
So then why make yahoo the search engine on a google phone..dumb article
Why is AT&T taking a 30% cut? After all, the market is operated by Google, isn't it?
Google could easily make an argument that they deserve a portion of the money, but they chose not to for whatever reason (probably to increase Android adoption and improve their reach in the mobile search sector).
Wow. I didn't know that carriers were getting a slice of the app pie on Android!! That totally makes sense now! And it's recently come out that Google is paying carriers in other ways to push Android – maybe I even read it on this site. I really cringe at the thought that carriers will gimp android more and more and go back to the way Verizon used to be – charging for every little thing. You think it's headed that way? Kinda worried.
google never took a cut from android market sales… just because apple does doesn't mean google has to. after all the goal is not to create short term profits
AT&T is not the first. Carriers all over the world have taken note of the fact they can strip Google from Android and sell the advertising rights to anyone whom they choose. This can be done to Android phones that have already been manufactured by issuing a hot update to the OS. China mobile did this a few weeks ago to all the Androids they had in stock from Motorola. They went to Bing! IIn the USA it is Yahoo with the big bucks. It is no big deal. Google does not have the right to expect anyone to include Google products in Android, they gave the OS as Open Source and anyone can do anything they want with it.
Now Google is trying to fight back as there may be a stock holder revolt over the issue of their providing equity for a money losing OS. Google is now offering to share the profits from advertising with carriers and manufacturers too if they leave Google as the default search engine.
uhm no
google offered yahoo more than a year ago to use android and remove all google services
they want to make android the standard mobile os owned and developed by the OHA
Disagree @Anonymous. Totally agree with Andorid Follies. Google is not just making Android out of the goodness of it's heart. They are a for-profit company and have stock holders to answer to. Google does everything for one reason – ad delivery. That's their bread and butter and every app or piece of tech they roll out serves only to get you more dependent on their great tools so they can track your usage and serve up ads based on that usage. It's laughable that everyone thinks they released Android – or any product for that matter – out of the goodness of their hearts. It's all aimed to generate ad dollars.
Just like their entire issue with China censorship. That wasn't about Google fighting for free speech. It was about Google fighting for more eyeballs to see their ads.
this has nothing to do with anything discussed in this article. I think you may have replied on the wrong page.
Dave, the Yahoo deal also had nothing to do with Google. It was about the fact that Yahoo paid AT&T to be the default search provider on its phone. Again, another move motivated ENTIRELY by money.
Power-users can always buy unsubsidized phones like nexus one.
"I know that Android users often believe there’s some great conspiracy by AT&T to stroke Apple’s ego and maintain the iPhone cash cow. But AT&T would avoid Android all together if that were the case."
Not true. AT&T understands, that failing to launch any Android device will lead to downturn of its user base. It tries to squeeze between two evils – losing potential customers because of absence of Android devices and breaking its exclusive relationships with Apple. These AT&T attempts look totally unsuccessful. Android community is very vocal (I'm proudly try to take my part in it), so more and more non-dedicated "feature phone users" are becoming aware of what they are losing. It won't take long for current buyers of Motorola Backflip and Dell Aero to realize that they were treated unfair, so they won't continue to deal with AT&T.
Android is all about openness and freedom to install and use what you want, so AT&T won't succeed in its fullish attempts.
My recent post Nexus One screen is blurry, not so good for text?
I actually believe Android will be gimped even further. Most customers (aka non-geeks) don't care what OS is running on their phones. Those "ordinary" customers eclipse the numbers coming from the "Android community". That's what carriers need to appeal to for success. In general, hard core power users make up a very very small amount of the customer base.
Most customers don't care what OS is running on their phones, but wouldn't they care about their phone lacking features/abilities of similar phones owned by their friends (those phones from other providers who do not "cripple" Android – Verizon, T-Mobile, Sprint)? When a friend shows how she went to this site and downloaded this nice little app, or how she is using nice Google Turn-By-Turn Navigation instead of yours ugly AT&T navigation app.
And besides, Android customer base is different from an average one, much more literate.
Your article doesn't pass muster. I would hazard a guess that 99% of all apps are downloaded from the market. About the only apps you don't find there are betas. I don't know if AT&T is doing Android dirty to protect the iPhone or not but what I do know is that even the idiots at AT&T can't believe that there's major money being lost to apps not being installed through the market.
There are people who install betas, illegal apps, and apps from alternative markets. Remember, this isn't just about what happens TODAY, it's a future-proofing move. Mobile apps are expected to be a huge business and AT&T is trying to get a hold of it. App sales are not going to be a make or break business today or tomorrow, but it is potentially a significant earner as Android grows.
"There are people who install betas, illegal apps, and apps from alternative markets."
Such people are aware of what Android is supposed to be and won't buy crippled AT&T devices anyway.
And besides… don't you think that Verizon, T-Mobile, Sprint don't need money? Still they support openness of Android phones to much bigger degree. I'm not working in AT&T and I don't know what is on their mind. If it's not a forced influence of Apple, it's only can be a very short seeing and a lack of understanding of a current Internet trends. As a result, in a long run they will lose money and lose supportive customer base.
There are a lot of people who hate Microsoft, don't you think it doesn't hurt them? (MS is becoming more and more open these days, but bad memory is still here.) AT&T may share the same fate…
My recent post Nexus One screen is blurry, not so good for text?
They sure do, but those companies were smart enough to recognize that this a bad idea and not get carried away by their greed.
That's right. It's quite possible you are right and AT&T managers just didn't get it.
We should start a campaign so people don’t unknowingly buy an ATT android phone.
99% of people don't care. If Google, Apple or Rim concentrated and built products for just high end geeks, they would fail! They need to appeal to the market that buys a phone, fires up the app store, and buys apps. Google's openness is coming back to bite them in the butt. They should take back control of the software update distribution. New update, everyone visits google/update, end of story. For crying out loud, why didn't they see what happened with Windows Mobile – who are suprisingly making their OS more generic. It has to be all about mass market for success. That's why Windows Mobile failed. It was too high tech for mass market use.
I disagree. Now-a-days, it seems that the general public want more feature out of their phone, and feature phones are starting to be an oxymoron. Even though they most likely won't know what the latest cell phone trends are, they know what's out there, and they want it. For instance, I was talking to a good friend of mine who knows NOTHING about cellphones, infact, he still thinks Motorola RAZrs are cool. But When I showed him my new Nexus 1, he said damn, I want one. My point being that people don't have to be knowledgeable about cell phones to know what they want. The reason why Android is so popular and why people buy it is because it has what they want, a feature packed, capable, high-tech phone… and that's exactly what Andorid is. PS I agree with you on the WinMo thing, entirely true… plus it always froze!! UGH
Until Google stops allowing access to the market. In recent stories Google has said that they don’t share revenue from apps
Andrew, thanks for the great post. Often, people think that limiting Android is ALWAYS about promoting Apple. Your post got right down to the point…it's about money. All the carriers know they are behind the curve on generating revenue from Apps. They're trying to play catch up and Android is the only way they can do it. The fact that Google's "open approach" is coming back to bite them in the butt (Google search stripped for Yahoo for $) is kind of disturbing but Google made their bed and have to live in it now.
You hit the nail on the head when you said that the "normal" non-geek person walks in the carrier store and is oblivious to the fact that they can and can not install certain apps. And most of them don't care…until the day they search and can't find the app in the store. This all goes back to fragmentation. It's really really getting bad
has anyone noticed that the TV ads for the backflop contain no mention of it being an android device?
it's about Apple IPhone & IPad .If it was money they would have had x10 and other phones released and locked down so they could have made money month's ago.After the next gen IPhone comes out you'll see all the nice android phones follow.
I guess i'm late to the party but very true and the only people to say otherwise probably work for at&t or don't know anything about android. I was with at&t for one month my parents bought the phone and paid the bill. at&t is so bad I gave that up to go to sprint and get an android phone which I rooted and so fourth and can't imagine having to deal with at&t and their "idea" to not include install non market apps. That is where some of the best apps come from
att still holds one of the greatest phone ever invented ,the IPHONE, droid and other current clones still have yet to out shine the iphone. how many droids came out since the iphone? how many of them distinctly stands out? it seems like every month they out do one another their credibility gets weaker and weaker as the day goes by. This isnt the case with the iphone.