Nov 17 2009

Less than Free

If you think free, open-source software is disruptive to the computer and software business, consider what Bill Gurley calls Google’s “less than free” offerings:

Google’s free navigation feature announcement dealt a crushing blow to the GPS stocks. Garmin fell 16%. TomTom fell 21%. Imagine trying to maintain high royalty rates against this strategic move by Google. Android is not only a phone OS, it’s a CE OS.  If Ford or BMW want to build an in-dash Android GPS, guess what? Google will give it to them for free.

It also poses real challenges for the leading smart phone players – RIM’s Blackberry and Apple’s iPhone. Without access to their own mapping data, these vendors now face an interesting dilemma. Do you risk flying naked without free navigation or do you suck it up and swallow the above average royalty fee for each and every handset? Neither option is stellar.

Google’s brilliance doesn’t stop there.

It is hard not to have been surprised by the rapid rise in recent buzz surrounding the Google Android Smartphone OS.

With Blackberry and iPhone grabbing more and more subs, the carriers were losing control of the customer UI, which undoubtedly represents power and future monetization opportunities. With Android, carriers could re-claim their customer “deck.” Additionally, because Google has created an open source version of Android, carriers believe they have an “out” if they part ways with Google in the future.

…“so why would they ever use the Google (non open source) license version.”…. – because Google will give you ad splits on search if you use that version!  That’s right; Google will pay you to use their mobile OS. I like to call this the “less than free” business model.

Amazing – Google and the phone carriers will still make money off of the consumer via advertising, while simultaneously lowering costs…  This is technological innovation of market forces.  I want to see how RIM and Apple deal with this kind of competition.

And I want Rogers to offer me a better deal on an Android device, since they are making ad revenue from Google…

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