The Google I/O keynote on May 28th 2015, confirmed a thought that I have had for a long while.
On April 3rd 2013, I wrote a post (in Japanese) titled “Predicting Android’s Change Of Direction: Thoughts from Andy Rubin’s Demotion” (「Androidの方向転換予想：Andy Rubin氏の降格を受けて」). In that post, I argued the following;
- Andy Rubin considered Android to be very valuable in and of itself. For him, it was important to make Android the best that it could be. This meant being better than iOS.
- Larry Page is not very interested in Android itself. His interest is in Google’s cloud services, and Android is only one of many initiatives to maximise their user base.
- Hence Android’s market share itself is not important, nor is controlling Android an imperative. Even if iOS, Firefox OS or Tizen expanded their market share, that would not be a problem as long as they used Google’s services.
- Android does not need to be the best smartphone OS.
From this, I predicted that Android would stop trying to copy iOS in the attempt to get iOS users to switch. Instead, Android would probably focus on the low-end in order to expand the use of smartphones in markets where iOS would not have a strong presence.
The 2015 Google I/O keynote strongly suggests that this indeed has been their strategy ever since. The signals that I observed were;
- Android M itself (excluding the cloud services that would also be available on iOS), no longer adds major features that would give it an advantage over iOS.
- The announced Photo service is also available on iOS from day one. Now on Tap which is not feasible on iOS which is why there isn’t an iOS version.
- The improvements on offline connectivity are geared towards countries where Internet connectivity is unreliable or expensive compared to the average income.
Google itself mentioned that Android M is mainly about fixing bugs and annoyances in Lollipop, and if that is to be believed, then the next version of Android coming out in 2016 should have many more features. However, since I am now more confident of my reading of Google’s strategic imperatives, I am pretty sure that this will not be the case. I predict that the 2016 version of Android will also not have any major new features.
In short, I am now sure that Google no longer intends to compete with iOS with Android. Essentially, they are giving up the high-end smartphone market to Apple and they are cool with that. Instead, Google sees Android as a vehicle to spread their services to market segments that iOS cannot penetrate.
How will this strategy fare in the future?
This strategy is sound if Google’s sole objective is to learn about what people are doing. However, from a financial standpoint, there are many risks. By far the largest risk is, what if Apple is successful in distancing itself from Google? What if Apple somehow succeeds in significantly reducing the number of Google searches performed on iOS?
There are several dark shadows on the horizon in this regard.
- Google search may no longer be the default search engine on Safari. (link)
- The vast majority (75%) of mobile search ad revenue comes from iOS (from Goldman Sachs)
- Apple has been working to reduce iOS’s search reliance on Google, and the ability to display Wikipedia search results in Spotlight have reduced Google clicks(9to5mac).
It seems that either these reports are false, are insignificant, or simply that Google’s management is oblivious to these threats.
Either way, Google’s strategy makes it financially vulnerable due to an over dependence on iOS. Since Google still lacks a strong alternative revenue source to search ads, anything that causes it to lose this revenue will significantly slow the company’s growth. The only way to mitigate this risk would have been to attempt to capture the high-end smartphone market in collaboration with Samsung. This is very much to opposite of what Google’s actions suggest.
I am now quite sure that Google’s management gave up on the high-end smartphone market at the time when Andy Rubin was demoted on March, 2013. The past two years has seen Google focus on the low-end smartphone market, while deemphasising high-end features, and even fighting with the vendor that dominates high-end Android phones.
2015 is the year when we might see this strategy backfire. There are multiple reports that suggest that Apple will more aggressively distance itself from Google, and that this will have a significant impact on Google’s growth.
Importantly, by neglecting the high-end smartphone market, Google has burnt the bridges and has no backup strategy if this is indeed what happens.