Less Than Free 330
VC Bill Gurley has up an insightful piece on the strategy behind Google's releasing turn-by-turn mapping for free. He calls it the "Less Than Free" business model, and it is beyond disruptive. On the day that Google announced its new service, the stock in the two companies that had controlled the market for map data, Garmin and TomTom, dropped by 16% and 21%, respectively. (Those companies had bought Google's erstwhile map-data suppliers, Tele Atlas and NavTeq, in 2007.) "When I asked a mobile industry veteran why carriers were so willing to dance with Google, a company they once feared, he suggested that Google was the 'lesser of two evils.' With Blackberry and iPhone grabbing more and more subs, the carriers were losing control of the customer UI... With Android, carriers could re-claim their customer 'deck.' Additionally, because Google has created an open source version of Android, carriers believe they have an 'out' if they part ways with Google in the future. I then asked my friend, 'So why would they ever use the Google (non open source) license version?' ... Here was the big punch line — because Google will give you ad splits on search if you use that version! That's right; Google will pay you to use their mobile OS. I like to call this the 'less than free' business model. This is a remarkable card to play. Because of its dominance in search, Google has ad rates that blow away the competition. To compete at an equally 'less than free' price point, Symbian or Windows Mobile would need to subsidize." Gurley speculates that the company may broaden "less than free" to include the Google Chrome OS.
So let me get this straight... (Score:5, Insightful)
Gee, it's almost like they have a monopoly or some (Score:5, Insightful)
or something...
Let's see, using dominance in one market to establish dominance in another market. Check!
Monopoly (Score:3, Insightful)
Re:More than free? (Score:3, Insightful)
Re:Why does anyone want internet GPS anyway? (Score:5, Insightful)
What am I missing?
You're likely missing the bigger picture.
Eventually google's turn-by-turn will have integrated street view imagery, and probably virtual advertisements on the buildings paid for by those businesses (or their competitors)...
Furthermore, as you pass areas of interest, you'll likely see wikipedia articles and user-generated-content (read: pictures/reviews) pop into view (like Google Earth), and eventually google will own your entire travelling experience.
Re:Why does anyone want internet GPS anyway? (Score:5, Insightful)
Re:Gee, it's almost like they have a monopoly or s (Score:3, Insightful)
Re:Monopoly (Score:5, Insightful)
Ahh, another demand-created "monopoly". I find that concept just fascinating. Apparently in this day and age you can have a monopoly in something even when there are 50 alternatives just because the consumers overwhelmingly choose your product.
I find this concept baffling. There's a low barrier to entry, and if Google raised prices enough advertisers would go elsewhere. If customers didn't like the search engine, they'll go elsewhere.
This isn't what the antitrust laws were designed for, they were designed to prevent abuse of government granted monopolies or monopolies over physically limited (supply side) resources. There's no ethical or rational reason to define a monopoly as "being too successful in your field despite numerous competitors".
When one power company or phone company uses anti-competitive tactics to drive out their competition I'm all for going after their asses, but most applications of antitrust law nowadays are just bullshit crybabyism by competitors.
Re:Gee, it's almost like they have a monopoly or s (Score:5, Insightful)
you are very happy to point out that MS is convicted for abuse of a monopoly position, which is true, but please try not to make it complete fud-style.
First of all, having a monopoly is legal. Nothing wrong with that.
Secondly, MS got only convicted way after becoming a monopoly, AND abusing that position to work themselves into other market. Your comment makes it sound like it's the other way around.
Google can be argued to have a dominant position in search and online advertising, whether it qualifies as a monopoly you will have to ask a judge.
This subsidising of an ad-supported operating system imho does reek of abuse of position in one market (on-line advertising) to push out competitors in another market (mobile phone advertising).
Re:Gee, it's almost like they have a monopoly or s (Score:5, Insightful)
Re:Android WILL take over. (Score:5, Insightful)
Just sayin'
Re:Android WILL take over. (Score:3, Insightful)
"- Apples UI design is definitely better."
Yep, well, you just defeated your own argument.
Re:Android WILL take over. (Score:1, Insightful)
Re:You can't pay a negative amount (Score:3, Insightful)
Mathematically you can - any time someone pays you you are effectively paying them a negative amount. Sure, physically you can't, but when has that ever stopped a slashdotter's argument? :)
That's also the only possible way 'less than free' would make any kind of sense at all. And 'more than free' can't possibly be what's being referred to in this article - I mean, if the price is more than free then the price has some positive value, so you are paying for it.
Re:Android WILL take over. (Score:2, Insightful)
Absolutely! Linux on the desktop does share many of those common points. The key thing that distinguishes the two is that (in my opinion) Linux on the desktop doesn't actually compare well to Windows from a user's perspective. Unfortunately one of the major factors when deciding between the two is a dependency in what a person is used to. Fortunately, Android has FAR less of a battle to win in the smartphone space given how relatively simple phones are compared to computers and how poor Microsoft's offering is compared to the rest of the market.
Maybe I'm blind (Score:4, Insightful)
I fail to see the harm. In order for this sort of thing to be illegal, some user somewhere has to come to actual harm somewhere. Instead of paying through the nose for navigation information (much of which is already public knowledge), people get it provided by advertising sponsors like they get their free TV. There's room for free TV and cable also. As long as the other providers provide a premium experience and content, they'll be fine.
Should they fail to provide a premium experience and content, they'll lose customers. Isn't that what's supposed to happen?
In the article he points out that Google wanted to do some things with the data that they didn't want to let Google do. They told Google no. In the old world, where the buyer of that data had no choice that would have been the end of the story. But now, apparently Google has the resources to build their own data and publish it however they like - they're not held hostage by the vendor of their information.
It seems fair to me that if Google takes the trouble to drive a car through and photograph every major intersection in the country, index it against their map, address and aerial photographs, they ought to be able to publish that data any way they like.
In a world where we have monopoly after monopoly leveraging their power to prevent progress, here we have a powerful company leveraging its tremendous market power to cause progress to occur. I think that's fabulous.
Re:Android WILL take over. (Score:2, Insightful)
The difference is that all the telecom companies aren't in Microsoft's pocket from the start.
Re:Android WILL take over. (Score:5, Insightful)
Aren't those the same arguments used when talking about the superiority of Linux on the desktop, and yet we still have less than 5% market share?
Unlike the desktop, people don't have 20 years' worth of weird old DOS and Windows apps that they 'need' to run on their phones.
Plus I don't believe that Linus is paying companies to install Linux on their PCs yet.
Comment removed (Score:3, Insightful)
Re:Android WILL take over. (Score:3, Insightful)
Arguably, Apple has had great success by having a completely closed system which is why the argument that Android will succeed because it is open is such a fallacy in my opinion.
Android may be great, but its implementation is different on every Android phone. Different hardware, different features, different amounts of android functionality. You don't really have a consistent user experience any more than you do with Windows Mobile. Also, I bet that apps will not run the same across the hardware since so many different phones running Android have a wide variety of specs. I can see it turning into the nightmare that game/application developers have when making an application for the PC - you have a few hundred million permutations of possible hardware combinations in your potential user-base - good luck getting it to work properly and consistently on all of them!
Even to this day nearly every app made for the iPhone/iPod Touch will work very consistently across every version. Granted, the newer versions of the iPhone and iPod touch run and load the applications faster than their predecessors but the overall hardware that the developer has to deal with is very nicely uniform. This is also one of the core reasons why I think that the 360 and PS3 and Wii have such success compared to the PC for gaming. When you buy a game for those platforms you expect that you can take it home and it will just work.
I'm excited to see Android provide some real competition to Apple but realistically, even if Verizon does get the iPhone because Apple is facing strong competition from Google's mobile OS, do I really want to go back to Verizon? They have a great network sure, but they also had crappy customer service, dicked with their phones by disabling features and then trying to sell them back to me, doubled their smartphone cancellation fee and employ all kinds of scumbag tactics including selling unlimited data plans that aren't unlimited. Why is everyone so keen on being their customer again?
Where do you draw the line? (Score:3, Insightful)
Ahh, another demand-created "monopoly". I find that concept just fascinating. Apparently in this day and age you can have a monopoly in something even when there are 50 alternatives just because the consumers overwhelmingly choose your product.
Then how do you, as a matter of law, divide between "good" monopolies that just provide the best service for customers and "bad" monopolies that use armtwisting to get ahead?
What about companies that do both to get ahead in a single market?
What happens when a company gets its lead position in one market the "good" way and then uses its power in that market to leverage its way into another market that it normally wouldn't be able to compete well in?
Because that's what our laws against tying are about. I'm not sure that Google counts as a monopoly, but what they're doing is clearly tying. They are using their ad services to squeeze competitors out of the mapping market in the same way that MS used its OS dominance to kill the original Netscape. Mind you, I'm not saying that Google is violating antitrust law (since I know enough about antitrust law to know how little I know), but we're not talking about Google winning the mapping market through just being awesome. We're talking about an unfair pricing advantage.
Re:Monopoly (Score:2, Insightful)
But how is this ANY different from Intel locking AMD out of the OEM market for years? After all, it wasn't like Intel had a product that people hated, hell most folks didn't give a crap WHAT CPU was in their machines as long as it ran their software. They had those catchy jingles, pretty stickers, etc.
Because in most cases x86 was patented/had loads of copyrights and basically needed Intel's blessing just to get an x86 CPU. On the other hand, -anyone- can develop an Android OS, license free, and basically use it how they see fit.
Only we geeks and those that watch market news know we could have had a much more competitive landscape if the chips would have been allowed to sink/float on their own merits. Netburst was crap, a total space heater, and was always slower than Athlon, yet Athlon lost. Because Intel could say "Buy Intel(C) chips and enjoy this nice fat check. Buy AMD and....NO SOUP FOR YOU!"
Athlon lost? AMD provides about 50% of the CPUs for most computers in brick-and-mortar stores today. During the Netburst era people went from "We want Intel inside" to "I want the fastest CPU for the $" and in many cases it was AMD. For a while AMD was ahead, and with the advent of their x86-64 CPUs Intel had a lot of catching up to do. However, with the Core architecture Intel sped ahead, released the Atom CPU for netbooks and the Core i line for high-end systems while AMD really had/has much left, especially when compared to the Core i7 or Atom CPUs.
I don't see how this is any different. Google has such a cash reserve they can make sure nobody else can compete NOT by the quality of their product, which lets be honest most haven't tried an OEM Android and have no clue if its good or not, by simply giving out those big fat checks to companies that "Go Google(c)". How is it ANY different?
Lets see here, because of the fact that there are multiple competing OSes? The fact that Android is F/OSS? Lets see here, for a mobile device you can either choose to have it run Android, Windows Mobile, various distros of Linux, customized OSes, etc. If you don't want OEM Android you can always, you know, choose to use Windows Mobile, write your own OS, hack together a Linux distro or compiled Android yourself. You don't have to "license" Android from Google, you are free to do whatever with it.
Re:Android WILL take over. (Score:2, Insightful)
Windows did not dominate the OS market by superior design, but by superior approach. MS built a platform and let any hardware manufacturer use it. Google apparently read their tech history and is taking the same approach MS did a few decades ago, with the open factor as icing on the cake. I expect the rewards to be huge.
Shiny and marketing only go so far.
Re:Android WILL take over. (Score:1, Insightful)
Aren't those the same arguments used when talking about the superiority of Linux on the desktop, and yet we still have less than 5% market share?
Just sayin'
but
1. there are no cant-live-without apps preventing people from migrating
2. people buy new cellphones more regularly than they buy new computers, and featurewise, new smartphones / older ones >> new PC / older PC, so the incentive for switching is there
3. they have the support of carriers, and last i checked dell and hp are in microsoft's pockets
4. users are not expected to install android on their phones
and so on
in other words, android has none of the disadvantages that linux distros suffer from
Re:Gee, it's almost like they have a monopoly or s (Score:1, Insightful)
No it's not. Having dominance in one market is a monopoly. Using dominance in one market to establish dominance in another market is an illegal monopolistic activity, in some countries anyway. Using a strategy that gave you a monopoly in one market, in another market is perfectly acceptable though which I think is what Google is really doing here.
Exactly. Google's entire business model is:
1. Find advertisers willing to pay to get ads in front of people.
2. Make a bunch of free services and software to attract people to put ads in front of.
Somehow this is now anti-competitive? Nothing is stopping anybody else from doing exactly the same thing. Google is just better at it than the runners up.
Re:Gee, it's almost like they have a monopoly or s (Score:1, Insightful)
First of all, having a monopoly is legal. Nothing wrong with that.
But there *is* something wrong with that. The conditions of an Efficient Market, upon which our current iteration of capitalism is more or less based, actually demand competition and mathematically prove that both affordability and total innovation ultimately suffer when monopolies exist. Some economists believe 4 companies owning a total of 80% in a given market effectively form a cartel, and gouge their customers automatically; they charge more and innovate less unconsciously, even if they don't communicate with one another, even if they don't know the other 3 competitors *exist*.
Google probably controls almost 80% of search *by itself*. If 4 companies owning 80% of a market can do serious damage, one company owning 70% or 80% is a potential catastrophe.
Google gives us cool things for now, but ultimately their primacy online could be an even bigger problem than Microsoft's primacy in operating systems.
Re:So let me get this straight... (Score:3, Insightful)
Google isn't going to force carriers to do things a particular way. They've created an operating system that's fairly easy to root and take over, so even the most stringent anti-customer policies will be broken pretty easily, just because of the OS. I pity the companies that waste development budget on trying to lock their phones down from now on, it's only going to get easier and easier to break out. My phone already has a completely automated, well-maintained 3rd-party OS distribution called CyanogenMod, and it has a completely free updater; I get upgraded at the same time everyone else does, and keep my root and my free tethering and other free root-only apps.
Basically it's a tiny computer with a cell radio and an open source OS. This is win, no matter what the carriers try to do.
Re:Mod parent up! (Score:3, Insightful)
Unfortunately, a lot of this comes down to hardware support from cellphone manufacturers. Maemo 5 is open-source, and looks very very cool... However, the only phone that runs it is the N900, which is more of an old-fashion brick than a real cell phone.
I prefer Maemo, because I like to program in Qt4, rather than Java, and there are real advantages to a cell phone that runs Xorg, However, Android has momentum that I think is now unstoppable. If you want to hack for fun, go with the N900. If you want a customer base for your apps, go with iPhone first, and Android second. Long term, I suspect Android will even surpass the iPhone in user base. If you want to own an application niche, now is a good time to hop onto Android.
Re:Monopoly (Score:3, Insightful)
Way to set up the straw-man btw. The concern isn't that Google is using anti-competitive tactics in the search/advertising business. Instead, it is about Google using its dominant position in the search/advertising space to compete in the mobile os space.
Is it really doing that? How does their dominance in search and advertising help them gain dominance in mobile OS? Do users want their search and advertising, but is using Android the only way to get it? No. You can also get Google's search, maps, etc if you buy an iPhone. Any other phone manufacturer is free to give their customers access to Google.
What Google is doing is not leveraging their dominance in the search/ad market to gain dominance elsewhere, they're giving stuff away for free in other markets in order to maintain their dominance in their original market. They couldn't care less about the other markets. They just want to enable as many people as possible to use those few products where Google makes the big bucks.
Re:most users aren't aware of how much google know (Score:1, Insightful)
ChoicePoint [wikipedia.org] already knows all of those things about you and more, and then they sell that data to anyone who can pay. Way more evil than Google.
Re:Monopoly (Score:3, Insightful)
Intel already had a power dominance in the CPU industry (still do... about 51% of all semiconductor profits come form Intel's x86 chip line). The went to their OEMs and said, basically, if you buy this other, competing product, we're going to hurt you. We're going to charge you more for our products, and you may have a problem getting the latest ones. The big reason this was illegal, is the same reason it was possible: Intel is so big, they have monopoly powers. If they didn't, they couldn't strong-arm anyway, they'd be told to go pound sand. Or silicon. This is the same level of control Microsoft still enjoys over the majority of the computer industry. It's no illegal to have that kind of control, it's illegal to use it to artificially restrain the market from other competitors. That's precisely what Intel was doing.
Google is not doing anything like that.. they're simply saying, "if you put the 'Google Experience' on your Android phone, we'll share revenue from that phone with you". Why not... they're not yet a major force in Smart Phones. And it's not even a requirement to use Android... many of the phones out there are taking the "roll your own" approach, like Motorola's Blur interface, Sony's new Rachael, and the HTC thing.
The big reason is phone companies and networks alike are loving Android is that this is the opposite of their previous treatment. You want Windows Whatever on a phone, you pay Microsoft the $25. And as usual, MS has done little to promote that... hey, they get their $25 buck for every phone, whether it sells or not. Or take Apple... they went to AT&T, and demanded a little of their action -- you pay us, and we'll let you carry the iPhone. If not, we'll take it elsewhere... apparently, AT&T was one of those elsewheres, after Verizon said "no". Apple taking money from Verizon is no more or less abuse of monopoly powers than Verizon now taking money from Google. Verizon is far more powerful in the phone industry today than Google, but this isn't abuse of monopoly powers, since neither is any kind of monopoly.
The big win for Google is ultimately expanding this. While Apple's still trying to get a deal in China with the number 3 carrier there, Dell just struck a deal with China Mobile.. the big 500,000 customer China Mobile, to supply them with Android phones. The simple fact is that Android is liberating the possibilities of the mobile networked computer we still call a phone in ways even better than MS-DOS and Windows did with the PC, since no one is ultimately in total control of the platform.
This also does offer consumers a level of assurance that never existed before. If you're worried about your carrier cutting off features, you know you can root your phone, install open source versions of Android, etc. You can buy a "Google Experience" model like the DROID... carriers are not permitted to mess with those. Ok, sure, Google is, but they have yet to be shown to be interested in locking me out of functions. In fact, they keep handing me new ones, free. No gun to the head... I don't have to use Google Navigation... but it's SO cool...