Guest Post: What if Google Never Bought Android?

Today we have a contribution from Ari Kuchinsky, who writes about the stock market, technology and often the intersection of the two.  Here’s an interesting piece that goes a long way toward explaining how Google can “afford” to subsidize so many cheap phones.  Enjoy! – JB


What if Google Never Bought Android, Inc.?

Google ($GOOG) was the dominant search engine in 2005 and remains so today. But the threat to Google in 2005 was losing its dominance as traffic shifted from PCs to mobile devices.  Imagine if Google didn’t buy Android, Inc. back in 2005.

Where would Google be today? How would the sale of mobile devices be affected? It is questionable whether Google would dominate the mobile search market. Google would be at Apple’s ($AAPL) mercy in cutting a deal to make Google the default search engine on the iPhone and iPad. If Android did not exist, I have to believe that Windows Phone would have, albeit much less successfully, filled the void. Apple would be even more dominant and Bing might have a presence on mobile devices.

By purchasing Android, Google accomplished what Microsoft ($MSFT) set out to do in the 1990s with Internet Explorer. Google search is the default search engine on almost all smartphones and tablets. On most Android devices, there is even a search button that takes you to Google. In the aggregate, all of these searches are monetized through Adwords.

But what are the implications going forward? Apple’s primary business is selling hardware and software. But Google’s primary business is advertising. Google is happy so long as smartphones and tablets have Google set as the default search engine. Any other revenue earned from Android is gravy. There are a slew of Android smartphones available for $0 with a 2-year contract.  Older model iPhones can also be purchased on the cheap. The 3G is free with a contract and the iPhone 4 is only $99 with a contract.

So why are these devices becoming so cheap? The maturation of the technology is certainly an important factor. For example, the cost of a multi-touch screen is less than it was a few years ago. But I believe the biggest factor is the subsidy provided by Google. Google is an advertising company and they are giving away Android to phone manufacturers to ensure their place as the default search engine on mobile devices (and thus their search business subsidizes the cost of developing Android). Likewise, Amazon ($AMZN) is happy to give away the razor to sell razor blades. The Kindle Fire is only $199. Amazon is happy to sell cheap devices in order to drive sales of their electronic media products. Neither Google or Amazon are “products companies” like Apple.

Going forward, the comparison has been made that the iOS/Android battle of closed verses open is analogous to the Macintosh/Windows battle of the 80s and 90s. But I think this time around could be tougher for Apple. How do you compete when your primary competitors are in a different business and give away their product?

Follow Ari Kuchinsky on Twitter:  @arikuchinsky



Tags: , ,

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. online dating commented on Oct 14

    … [Trackback]

    […] Info on that Topic: […]

  2. trusted online casino malaysia commented on Nov 20

    … [Trackback]

    […] There you will find 39668 additional Info to that Topic: […]

  3. google hotels commented on Nov 22

    … [Trackback]

    […] Find More to that Topic: […]

  4. Regression testing solutions commented on Nov 28

    … [Trackback]

    […] Read More here on that Topic: […]

  5. Best Text to Speech Online commented on Dec 07

    … [Trackback]

    […] There you can find 42288 more Information to that Topic: […]

  6. 토렌트사이트 commented on Dec 19

    … [Trackback]

    […] Find More to that Topic: […]

  7. ثبت شرکت commented on Dec 25

    … [Trackback]

    […] Here you can find 51310 additional Information on that Topic: […]

  8. bandar togel terpercaya commented on Jan 24

    … [Trackback]

    […] Read More to that Topic: […]