Android is Winning!!!...or is it?

It isn’t the biggest shock of the young century that the “internet search giant” is about to report a less than stellar quarter. Today Operation Linkbait asked Why Google Could be in Serious Trouble.

Maybe the headline is only stock linkbait, but over the long term, Google really is facing a rocky road.

If you’ve been following along, you can guess how the story goes...

I summarized one thread of the story in Web Browser Market Share. The problem is that the Google epic plays itself out in real time — not ADD time — so it is hard to see trends when the players are moving at an almost glacial pace (that is, by ADD standards). In that post, I hoped to speed up the action so that everyone could see the trend.

The Android Gambit

Google was absolutely correct that they needed to get on top of the mobile business so that competitors could not grab the advantage. They bet heavily on Android since it appeared that they would own mobile if they controlled the dominant mobile platform. At the time, they were afraid that Microsoft would dominate — as they had on the desktop — so they needed to block that at a heavy cost.

They did.

Implicit in Google’s reasoning were the assumptions that “mobile” meant “cellphone” (or smartphone) and that all smartphone users where about equally valuable to Google. These assumptions were basically correct when Google committed itself to the Android Gambit.

It made sense then and it would have made sense now — if the world hadn’t changed. But the world has undergone two profoundly disruptive changes. Unfortunately, both changes are named “Apple.”

The first assumption was invalidated by the little iPhone. That little puppy proved that all smartphone users were not interchangeable. The users who realized that a cellphone could be an information appliance that they could use to surf the web (and buy stuff) were far more valuable to Google than those who only used their cellphones only as telephones.

Google’s dominance in the number of mobile devices shipped is due to their decisive advantage in the least desirable segment of the market — cellphone users, not internet appliance users/shoppers.

Guess what? Apple grabbed Google’s most valuable customers with their subversive little cell phone. The advantage in numbers only works in Google’s favor if the users see and click on ads! If they’re only making calls, they’re not seeing ads!!

The second assumption was shattered when Steve revealed that the iPhone was just the opening act for the main feature. When they were ready, Apple launched their second and more deadly assault on the hypothetical “information appliance” that science fiction fans have dreamt about for years. Here’s the instant replay.

That was the killer, but no one keeled over right away. Its effects take years to play themselves out.

Although Android is the leader in the sheer volume of units shipped/sold, most of the mobile commerce is from tablets (a.k.a., iPads), not cellphones! Apple has a huge majority of the users who actually use mobile devices for internet browsing and, especially, mobile commerce.

That’s what brings us to today’s news. It’s a simple enough story but below the surface Google is gradually feeling the effects of dominating the wrong part of the mobile space. They need the customers that Apple grabbed and they critically need to get Google ads within sight of iPad users’s eyeballs. They are left with the problem of supporting Android, which hasn’t done any business on tablets that are priced to sell at a profit.

Today’s news is that they can’t charge top dollar for mobile ads; mobile is a different world for them and they haven’t figured out how to make it the moneymaker that desktop was. There are other reasons but one facet of it is that this Android Gambit is not working out as they had planed.

The “Google in Serious Trouble” story reports a leaked earnings report and includes the placeholder text, “PENDING LARRY [Page] QUOTE”. Perhaps they will find that they cannot print Mr. Page’s comments once they have them. In that case, I suggest a fallback position: Call Horace. He understands what’s happening.