The Staggering Android Business Failure

http://www.slate.com/blogs/moneybox/2012/10/18/android_s_business_failure_motorola_is_costing_google_big_time.html

by jusben1369 • 14 years ago

32 36 14 years ago

arscan2• 14 years ago

It is a stretch to call Android a "staggering business failure" based on losses incurred by Motorola. Android wasn't intended to make money directly -- it was intended to protect Google's real interests (remote services that drive advertising revenue). Closed mobile platforms could easily cut Google off from their users, and ultimately their revenue stream.

Perhaps it wasn't smart for Google to get into the hardware business in the mobile space. But calling Android a business failure because of it? No way.

rhizome• 14 years ago

Given the events of the day, I'm considering stories like this to be bear attempts at stock price manipulation.

htf• 14 years ago

Yes, and Google hasn't really even gotten started yet with monetizing Android. The real money maker will be Google Wallet. Just imagine Google taking a 2% cut out of every transaction you make through an Android phone. No one will be calling Android a failure then.

rst• 14 years ago

Particularly since they bought Motorola in large part to get access to its patent portfolio.

Sumaso• 14 years ago

I'm surprised that Google hasn't used Motorola to make a nexus device yet.

Samsung seems to be doing pretty well for themselves making android devices, it doesn't seem too much of a stretch for Motorola to do the same.

redthrowaway2• 14 years ago

They likely want to get Motorola's house in order first and make sure they have the product people necessary to make a great device, before they entrust them with doing so. Worse than Moto being a loss leader for a few quarters would be a $12B acquisition falling flat with its first major release.

zmmmmm• 14 years ago

My personal theory / guess (and let's face it, we're all guessing) is that Google doesn't particularly want motorola for phones at all.

I think they've decided they need an in-house capability to produce hardware in general and they intend to suck all the juice out of Motorola and then discard its corpse so that they have the ongoing ability to invest in R&D for hardware like Google Glass, self driving cars, etc. Just like they decided years in advance of needing it that they had to have a mobile OS in their arsenal, they've now decided that strategically they have to be able to produce hardware. Not because they want to but because there are strategic initiatives they can't pursue without that.

Think of it as the biggest acqhire in history (+ a boat load of patents, of course).

Steko• 14 years ago

Google obviously depends greatly on their partners for Android's success and giving the Nexus business to their subsidiary right off the bat would probably end up sending Samsung, HTC, et al into forkland.

That said Google is supposed to be making a better effort to keep all of the A list Android handset makers more in the loop instead of just working with one at a time and dumping it on the others with the Nexus launches.

jusben1369• 14 years ago

I always thought they just wanted a big portfolio of patents in mobile to fight Apple. I agree, early on, that the early Google phones were a way to kind of kick their partners in the rear to step up their game. Now though they have. I doubt Google could surpass the Samsung phones. Perhaps they could equal them but why would you do it for just that reason given the channel conflict you're creating?

jere• 14 years ago

>And at times unwise investments can be the ones that do the most good for the world.

This is probably extremely naive, but I feel this way about almost all of Google's products.

jug6ernaut2• 14 years ago

"Android has been a pretty epic failure"

How did this reach the front page? Android has around 1.3 MILLION activations per day. To blatantly call this an "epic failure" is astounding. Furthermore I don't know how the acquisition of a cell phone manufacturing company can be linked to Android. Motorola makes more than just Android devices, and even if they didn't the stated linked is hard to make.

tptacek2• 14 years ago

This was a tiny article --- that's what Matt Yglesias, Slate's econ columnist, writes --- and you didn't even read it; the whole article is about how Android can simultaneously be a market success and a business failure.

Next time, read first, then comment.

jug6ernaut2• 14 years ago

Full quote then.

"And it's pretty clear that when you account for the costs of the Motorola purchase, Android has been a pretty epic failure. And yet as a product it's an enormous success—the most popular smartphone OS on the planet and even more than that a huge driver of smartphone adoption."

This does not change what I said in my previous comment. Even if you relate it JUST a business aspect and ignore that you can't do that. Lets look at googles stock breakdown.

http://www.trefis.com/company?hm=GOOG.trefis&from=home%3...

Motorola makes up 2% of googles worth, where Mobile Ads make up 34%. Granted this can be assumed to not be completely Android, even if we assume that only 25% of that is from android devices, thats 8.5%. So 8x Motorolas worth and about 21Billion based on Googles 245B market cap. So a worth of 21 Billion in worth is an "epic failure"? Ok...

ceejayoz• 14 years ago

The very next sentence says exactly what you're saying:

> And yet as a product it's an enormous success—the most popular smartphone OS on the planet and even more than that a huge driver of smartphone adoption.

The title refers to Android being a business failure, not a market share / number of activations failure.

arscan2• 14 years ago

To be fair, the author does call it a product success (# of activations per day could be used as a metric to support that). But then he/she attempts to call it a business failure because of these Motorola losses. That's WAY off the mark. Android is a strategic product intended to protect their real business (advertising) in the mobile space.

erichocean• 14 years ago

Well, anyone looks stupid when you misquote them:

"And it's pretty clear that when you account for the costs of the Motorola purchase, Android has been a pretty epic failure."

IOW, Google has failed (so far) to profit from Android, and it doesn't appear likely to any time soon...

nissimk• 14 years ago

Doesn't an acquisition always cause a hit on earnings for the first 1 - 4 quarters as the new companies figure out how to integrate their businesses?

strandev• 14 years ago

This particular hit comes from Motorola losing money last quarter, not the costs related to acquisition.

hiddenstage• 14 years ago

"..the extremely costly Motorola acquisition was directly linked to Google's decision to launch Android as a major business venture."

That is blatantly false. How did this make it past editing?

krakensden• 14 years ago

There is no editing of Yglesias' regular moneybox posts. Spelling and grammar errors are pretty common.

It's probably possible to defend this as having been correct but poorly worded, on the grounds that Google's Android strategy changed around the time they bought Motorola.

snowwrestler• 14 years ago

Would Google have bought Motorola if it had never bought/developed Android? I think not. The former is a direct consequence of the latter.

forgottenpaswrd• 14 years ago

Slate was property of Microsoft in the past.

It seems like the old owners remain a big influence there.

I suppose it is MS Ads money what creates continuous praises to the Lord there like with other media (PC magazine...).

mmanfrin• 14 years ago

> There's a fascinating lesson here because the extremely costly Motorola acquisition was directly linked to Google's decision to launch Android as a major business venture.

What.

mattmaroon2• 14 years ago

This is a misunderstanding of both why Google made Android and why they bought Motorola. They made Android so that Apple wouldn't have the ability to kingmake any rival search engine just by making it the iPhone default. They bought Motorola largely for patents. Neither would appear to add to the bottom line in the short term if successful, but without them you'd see a massive hit if Google's theory was correct.

pedalpete• 14 years ago

Your statement about why google "made android" is incorrect. Android had been in development from 2003 and was purchased by google in 2005. Long before the iPhone had been introduced.

Motorola was (I suspect) bought for the patents, as you stated.

mattmaroon2• 14 years ago

Well, the Android Google bought resembles the one that Google took to market in name only. But if you like, change "made" to "bought" and the effect is the same.

makhanko• 14 years ago

This article is an excellent example of the knee-jerk reaction from the stock market and the attitude that if it's not profitable this quarter it's not worth doing.

confluence• 14 years ago

Bullshit.

Android has one job and one job only. It is there to kill iOS.

Why does Google want to kill iOS? Because it makes money on ads and if Apple controls the entire high-end mobile platform - they've got Google's future by the balls and they can squeeze them or their competitors for all they're worth.

So what does Google do? It commoditizes the complement just like Microsoft did to kill Netscape - aka the introduction of a free alternative - IE.

You release some product for free - probably the cash cow of another company (iOS/Netscape vs. Android/IE). You push industry wide adoption across competing interests that absolutely loathe the competitor or you squeeze them until they adopt it as an industry standard.

You now turn the cash cow into a free/undifferentiated product that quickly assumes inflation tracking rapidly falling commodity pricing (most tablets are now indistinguishable - as is the software - prepare the squeeze). This pushes your competitor's cash over into your business model (licenses/search).

Android is an astonishing success with billions of devices activated, and a growth rate that is in excess of iOS by an order of magnitude. It is already well on the way to killing iOS and the entire Apple platform.

Apple is dead. Long live iOS!

It was good while it lasted.

thedrbrian• 14 years ago

And yet google still make more money from iOS than android , Microsoft is taking even more money from google and apple are buckets of money from their mobile platform. I'd bet apple and their shareholders will take a "dead" platform over the "winning" google one.

crabasa• 14 years ago

Since this article has no substance and just exists to feed the "Google stock is tanking" frenzy, I'm assuming all the upvotes are for the irate and entertaining comments?

dm8• 14 years ago

Most of the Google's mega acquisitions are long term. And Google indeed thinks long term. People were saying the same about Youtube in 2008. But look at YouTube now.

I'm sure Android is helping Google's revenues rather than hurting. And Android is going to be game-changer in places like India/China. Imagine how much ad revenue Google will generate. Google beat MSFT with Android not AAPL.

Zigurd• 14 years ago

Buying a patent portfolio attached to a troubled hardware-maker is hazardous for a company like Google. But if Moto didn't make Android devices, this story would have no link to Android.

Maybe there is a wider story in that Android strategy hasn't been consistently good or effective. Mixed messages about what Google will do with Moto made OEMs nervous. Prior to Nexus 7, tablet marketing wasn't brilliant. But everyone should be so feckless as to bumble their way to 1 million+ activations per day.

lurkinggrue• 14 years ago

Android is a staggering business failure?

Yeah, well, you know, that's just, like, your opinion, man.

The Staggering Android Business Failure

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