Google’s options for Motorola in light of its Android profits
So what is Google to do with Motorola Mobility? It has two main options. My comments are added in italics.
Motorola option 1: The costs must be recouped, become more like AppleQuoting “Android Isn't Free – How Google's acquisition of Motorola Mobility will make it more like Apple” by Farhad Manjoo on Slate [via Daring Fireball].
Now Google has to find a way to recoup at least $12.5 billion from Android (on top of whatever else it was investing to build the OS). That looks very difficult. Earlier this year, Gene Munster, an analyst at Piper Jaffray, estimated that Google makes just in ad revenue per Android user per year. By 2012, that number could be $10 per Android user per year. Across all users, that would mean about $1 billion in annual revenue. Even if that figure grows over time, it will take a long time for Google to make back the money it spent on Motorola, let alone to turn a profit.If you doubt that Google intends to earn money with Android, look at the following Larry Page quote:
The combination of Google and Motorola will ... offer consumers accelerating innovation, greater choice, and wonderful user experiences. I am confident that these great experiences will create huge value for shareholders. [Source: The Official Google Blog]More corroboration: Android OEMs should hear Microsoft, Nokia out on Google-Motorola combo (Peter Bright for Ars Technica).
... the article says that "People close to the deal said one of Google's motivations was its desire to design devices, not just the software that powers them, thus giving it the sort of influence that rival Apple enjoys with its iPhone and iPad."I have always wondered about Android’s business model. So should Android indeed become more like iOS, this has pros and cons:
Hardware design isn't the only thing that might trouble other OEMs. Court documents released in the ongoing court case between Microsoft and Motorola showed that Google has "highly proprietary" Android-related source code that its OEM partners, including Motorola, currently don't get access to.
Open question: will Motorola get access to this code and thus a competitive advantage over the other Android OEMs?
- Pro: Clear business model. Cell phone owners can become Google’s customers instead of advertisers and carriers.
- Con: Android would be less open and diverse.
Motorola option 2: Keep the patents, sell everything elseJoshua Topolsky, writing for This is my next..., argues:
It’s going to be hard to run this “separate business” honestly with the partners and goals that Google seems to have, and adding another 20,000 employees to a current staff of 29,000 is an expensive undertaking — especially when no one has explained exactly how this makes anybody more money. The sad fact is that a Motorola / Google partnership where everything stays as-is or even expands is hard to see functioning in any light. They are two very different businesses with two very different goals, joined now only by a single shared interest: keeping the wolves at bay.
If Google got what it wanted, and Motorola board members got a payday — is there anything else left?
(Note: Opinions expressed in this article and its replies are the opinions of their respective authors and not those of DZone, Inc.)