Mobile Video: The Next Frontier

Rob Enderle

Boy, this isn't Android's week. First thing I saw when I got up Monday morning was news from the night before indicating that yet another root kit malware application has made it into the Android marketplace, then the version of Flash going into its latest tablet version, honeycomb, isn't final, only beta, and finally that Barnes and Noble (and partners) is the latest company to have to experience legal fees because Google couldn't be bothered to protect its IP.

 

This isn't the search market where it is currently dominant, and its lack of effort is seriously hurting this platform. I think this reflects an excess focus on cost, which can be a common problem for a company overly concerned with approvals from the financial market, particularly when that company is run by numbers-centric engineers. Google's crown is slipping and not just because it seems to be missing social networking. The firm seems unaware of how badly tarnished its brand is becoming.

 

Let's explore why this is.

 

Excess Focus on Microsoft

 

From the beginning, it seemed that Google was positioning itself as the anti-Microsoft. Coming out of a school that was heavily funded by Bill Gates with what appeared to be the starry-eyed open source mantra of the time, the company promised to "do no evil" and then, over the next decade, forgot the "no" part.


 

I think this is because if you focus on something heavily, even the caricature of something, which is how those outside of Microsoft saw Microsoft, you can't help but emulate some of the behavior you are focused on. For instance, Steve Ballmer and Bill Gates supposedly left an IBM campus in the early 90s before they broke up with IBM and concluded they never wanted to be as clueless as IBM was then. Yet you could argue that within 10 years, they were demonstrating behavior similar to what they objected to at IBM in terms of losing track of their market. Proof in point was the massive number of failed consumer products over the last decade. These products anticipated the iPod Touch, the iPhone, and even the iPad, among others, but missed the mark so badly that they mostly aren't even remembered today.

 

The difference between the firms could be a big problem, however. While key Microsoft products are tied to revenue, which makes problems like this self-correcting because cost overruns or revenue shortfalls are pronounced with a traditional model, Google doesn't use a traditional model and revenue is non-aligned.

 

Cost-Based Management

 

I think that the core problem at Google is that its model forces it to focus excessively on cost because revenues aren't tied to the product. In other words, as long as the product delivers eyeballs to advertisers, the cost of anything beyond an on-switch is, to Google, excessive. That is why the Android team appears to be so thinly spread, that is why they can't seem to get their arms around reviewing the apps for the application store for malware, that is why they don't market the platform, and that is why they suck at OEM support. It isn't that they are stupid, it is that their model, because it lacks a product-related revenue component, only has costs. With costs, you can only cut, cut, and cut again.

 

Put another way, with a product that makes money, if you really get folks excited and sell a lot, you'll typically get a big bonus and spike the company's stock. With a product that is free, if you sell a ton of product, your support costs go up, providing a disincentive to do well, at least before the OEMs can take up the entire support load. And since the advertising revenues would likely follow weeks after the product went out and likely go into a different department, an iPad-like launch with lines is something you'd probably want to avoid in favor of a much more gradual ramp to market.

 

In short, Google's model drives low quality and behavior that shifts costs and problems to the OEMs and carriers.

 

Wrapping Up

 

Google's Android model is under fire and may not survive.

 

While Microsoft is willing to license, both Apple and Oracle seem much more willing to stop the sales of the related products and all three appear to be working to make Android unprofitable to the OEMs. On top of this, the only applications that appear to be pulling decent revenue are those that are advertising-based and only a small subset of applications lend themselves to advertising. Unless this model is fixed so that licensees are better protected and products are higher quality, it seems unlikely it can survive long term.



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