Google isn’t a web application company—they’re an advertising company. That’s what they do best, and that’s what drives their company. Of Google’s $23.6 billion of revenue in 2009, all but $760 million of it was derived from advertising, and nearly 70 percent of it was from Google’s own websites. Everything Google does must be understood within this context. Google builds services like Google Maps, Gmail and Docs and gives them away for free not because they have a philosophical belief that web applications should be free, but rather because giving them away for free gives them a competitive advantage. Free services, running Google ads, are obviously advantageous because free means more people will use them than if they charged and thus they can realize greater advertising revenues. There’s another reason they don’t charge for their services, though. Since Google’s business is advertising, shifting industries away from paying business models is in their interest. If people are willing to pay for email, mapping and documents, Google’s business model is limited. Thus, using the outsized revenues they make from advertising on search, Google gives away Gmail, Maps, Docs, navigation, translation, et cetera, so no one can compete in those areas—to make free the norm for these services. If Google is giving away a quite good service, it’s hard to compete with them in that area, and so the economics of that business shift away from paid services to advertising-supported. And if a business becomes dependent on advertising for revenue, that’s good for Google, because they’re better at it than everyone else. Google, though, doesn’t just want to run ads. If that’s all they wanted to do, they could strike deals with other companies to provide ads for their services. That, however, is a risky proposition; a competitor could come along and supplant Google as the leading ad-provider, and they would be finished. So, that’s not Google’s strategy. Instead, Google’s strategy is to weaken other companies’ businesses (say, email) by offering something quite good or good enough for free, take over that market, and then use their new dominant position to rake in advertising revenue. Android’s Business Strategy
This helps explain Google’s motivation for Android. Google could, of course, just extend their search advertising to mobile phones, Adsense for mobile devices and build mobile versions of their web applications so anyone can use them. That might make for a fine business, but it’d also be a rather weak position to be in compared to where Google is now. Phone makers could change the default search engine on their phones to something other than Google; mobile devices might change how people find information—they might switch away entirely from using a search engine, and in that case, Google would be dead in the water; or, worse, perhaps mobile devices could move people away from using advertising-supported web applications, and toward primarily using paid-for applications; in that case, Google would really be screwed. Read more: TightWind is written by Kyle Baxter.
This helps explain Google’s motivation for Android. Google could, of course, just extend their search advertising to mobile phones, Adsense for mobile devices and build mobile versions of their web applications so anyone can use them. That might make for a fine business, but it’d also be a rather weak position to be in compared to where Google is now. Phone makers could change the default search engine on their phones to something other than Google; mobile devices might change how people find information—they might switch away entirely from using a search engine, and in that case, Google would be dead in the water; or, worse, perhaps mobile devices could move people away from using advertising-supported web applications, and toward primarily using paid-for applications; in that case, Google would really be screwed. Read more: TightWind is written by Kyle Baxter.
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