Blogger: Richard Monson-Haefel
If you missed the Google Android announcement than you are either not interested in mobile application development or you are living under a rock. In any case, there has been an enormous amount of speculation on the subject so I thought I would weigh in.
The Google Android platform requires a very different business model for network operators, which is why it’s a non-starter unless Google gets its hands on that 700 MHz spectrum they’ve been after. Here’s why:
Mobile network operators from China Mobile (the largest) to the Verizon (the close-ist) make their money from subscribers through contracts and, increasingly, value-added services. The thing to remember is that the mobile providers want, and usually have, complete control over the mobile network. They like it that way. Mobile providers decide what you see and what applications and content you can access. They are, in effect, in control of the entire channel. This is their business model and one that has proven enormously profitable despite its destructive impact on innovation in the mobile space.
Google’s Android business model proposes taking that control away from providers and giving them a new revenue model, one based on advertising and to a lesser degree data transmission fees. It’s a cool business model, no doubt about it, if you are Google.
Can you think of a better way to advertise your product than to put it on people’s mobile phone? Its right in their face and with personalization – don’t get me started on the privacy issues – marketers will be able to tailor adds directly to very specific consumers. Do a search for automobiles on your Android phone and you can expect to see an advertisement from a major automobile manufacture on your home screen next time you go to make a call. It’s a brilliant venue for advertising – perhaps the best ever devised. It’s like putting a personalized build board in front of every consumers face.
As I said it’s a great advertising model, but network operators are not in that business today. What Google wants is for the mobile network operators to do an about-face on a business model that has proven successful and very profitable to one that has potential but is unproven. Do you really think mobile network operators are just going to give up control? Although Google has buy-in from a couple network operators – think of it as insurance on their part – and mobile device manufactures, this means very little at this point. Google intends to share advertising revenue with carriers, but why should carriers share anything when they can control the whole market?
The only thing that will make the Android platform successful, as far as I can see, is if Google managed to win the 700 MHz spectrum that the FCC plans to put up for auction. If it does that, then you can expect the entire mobile economy to change very quickly and established mobile operators – in the