November 22, 2010 | by Michael Heller
I’m getting a little tired of the doom-saying in the media. I know it’s a natural occurrence. People need to find flaws in successful products and companies. I’ll admit, I’ve gotten caught up and done my share of doom-saying in the past, but ultimately I came to my senses and rationality and perspective returned. The Android community love to pick apart Apple’s closed system and the iPhone community loves to pick apart Android’s open system.
The Android community says that Apple’s closed system can’t be sustainable, and in the end Android’s openness will reign supreme. The trouble with that logic is that we’re arguing a different game than Apple is playing. Apple has shown with their computer lines, they don’t care about shipping the most units or having the biggest market share. They care about making huge profits (hence the vertical integration), and being trendsetters in the industry. There is nothing Steve Jobs loves more than watching other companies copy his ideas. So, Steve was surely seething when he saw Eric Schmidt announce NFC support, which was likely one of the planned iPhone 5 upgrades. Of course, we in the Android community always love arguing that choice is the ultimate positive aspect of Android, all the while conveniently forgetting that one choice is to have all the curation and design done for you, as is the foundation of the iOS system. I am not one of those people. I like being in control of my device, but I can understand those who don’t want to have that sort of responsibility.
Then, there are the doom-sayers who attack Android. Those who take Android’s open nature and say that everything inherent to its openness will be the flaw to take down the system. People say fragmentation is a bad thing, but in the end, the apps still work across the versions. Sure, there are some features that Google built into newer versions that don’t work with older, like voice actions, but choice comes to the rescue. If you’re on a phone that can’t support Google’s voice actions, there is always Vlingo for free in the market. Besides, features specific to new versions of the OS are an incentive for manufacturers to upgrade, or else consumers will choose handsets that will upgrade faster. If it won’t kill a desktop OS to have some programs require newer hardware or a newer operating system, it won’t kill a mobile system. Because, even though the path to an upgrade is easier on a desktop, the turnover is faster on mobile.
Recently, I saw an article in the Harvard Business Review saying that Google has sewn the seeds of its own demise by allowing manufacturers replace Google search as the default on Android handsets, because it undercuts their advertising revenue. This perfectly illustrates the myopic view required to even argue such a point. Yes, Google is losing some money on handsets that have Bing or Baidu set as the default search, but that is a drop in the pond.
Everyone took the recent news that Google had made $1 billion in mobile to mean that they made all of that money through Android which simply isn’t true. Google makes more money when there are more people on the Internet, regardless of how they get there. Google may not get ad dollars from search on devices loaded with Bing, but they still make money on all of the display ads on sites that those search results point to. Google is still the default search on iOS devices and many other smartphones, and get the dollars from those display ads. Plus, Google owns AdMob, which despite Apple’s iAd system, is the most common ad carrier in apps across platforms. Not to mention Google takes in a cut of Android Market sales. All of these factors combine to create the mobile revenue stream for Google.
There’s another niggling thing about Google phones loaded with Bing that may sound like blasphemy to some: Bing might be better than Google at some things. In my testing, I’ve found that Bing is still well behind Google in local results, but in straight search results, I think Bing could be better. For many searches, they offer the same results, but for searches that change over time or when there is more recent news on a topic, Bing tends to be more relevant and better at displaying the new information. At the least, there will be some people who prefer Bing, but don’t like Windows Phone 7, so having a phone with that option brings them into Android, where they will spend their money in the Android Market and be shown many ads through apps and websites that are hosted by Google. Yet, the openness that allows for all of this is somehow a fault in Android’s design?
Google did not create a system where manufacturers would sell themselves to the highest bidder. Google created an open system where manufacturers have that option, but that option must be weighed against ditching Google services that are highly competitive and very popular. Sure, manufacturers could sell out to Bing or Baidu, if they think it will ultimately lead them to more sales, or they can stick with Google, because there is a proven market segment that prefers that experience. Either way, the bottom line stays the same as it was before mobile exploded: Google benefits by more people having access to the Internet. It doesn’t matter if those people use Mac, PC, iOS, Android, Bing, Baidu, Yahoo, or Google, because eventually all roads lead to Google ads.