Cash is a four letter word that is sought after by every company because its availability or lack of it determines a company’s wellbeing. Free is again another four letter word that is music to every consumer’s ears. Their admixture makes a heady cocktail that companies religiously want to avoid. Google’s Android project is a prime example of such a shotgun wedding, which despite scoring heavily in the popularity charts is slowly proving to be a double disaster for Google. The Android OS which has breathed new life into many handset makers (read HTC and Motorola) and is poised to become the number Mobile OS platform with a mind boggling market share of over 40% (as per Gartner) is becoming a major predicament for Google. Despite its soaring popularity, Android being a free open source platform is not raking in the desired moolahs for Google and is turning into a “much fame no gain” concept for the bellwether company. .
For the Mountain View giant, Android is proving to be a major headache and rapidly becoming a failed experiment. Google has already splurged an astronomic sum of 1 billion dollars for its development and six years later the earnings accrued post Android’s release is in no way vindicating the gargantuan amount of money that Google has burnt on R&D. Many experts argue looking at Google’s 1 billion dollar mobile ad revenue, that Android has already become a cash cow that Google will continue to milk in the years to come. What they fail to take into account is the fact that in the last two years Android has only been to garner revenues to the tune of $130 million dollars which is a miniscule 6.5% of Google’s total advertising revenue pie that it earned through mobility devices. These lackluster figures definitely do not augur well for Android’s future.
Audy Rubin responsible for Android development
Google desperately needs to radically alter its Android pricing and selling strategy. So will this quagmire force Google to bite the bullet and put a price on Android. Well most experts feel that the answer is a resounding no. However if Google fails to find a solution quickly, Android will not be able to sustain itself by its shallow and insufficient revenue stream and that may very well spell disaster for Google’s mobile dreams.
However taking stock of the mess that it finds itself in, Google over the past few months has definitely upped the ante. It has issued stern directives to major carriers and handset makers that it will not allow any more tweaking of the Android platform without prior permission. This will put an end to the fragmentation of the Android market and the thorny issue of numerous indigenously developed applications not being device compatible.
The burning issue is since Google is handing over exclusive rights of its OS to the handset makers, then why it is not charging a royalty fee, which in no way will hamper the price elasticity. A company exists to enrich its shareholders and illogical social services have no place in a capitalistic market. Android revived the dwindling image of HTC and made it a brand again. It enabled the likes of Motorola and Acer an entry in the smartphone and tablet space. The fact that Google is performing these services for a free is construed as a folly by its shareholders who will rightly demand a greater show of capitalism.
Going ahead Google plans to develop two separate versions of Android foe tablets and mobiles. Maybe then it will think of charging a royalty fee for its software. Otherwise it will repeat the same mistakes in the tablet space also. Google’s model defies basic economic model. One can correct a price set too high by lowering it. However by setting the price OS as zero and then later trying to monetize it, is an untested model with little or no chance of success.
Google is undoubtedly a behemoth with deep pockets and Android has so far notched up impressive volumes. It’s the cash quotient that must be worrying Google’s CEO Larry Page. Basic economic model dictates one must set a price for a particular service one is rendering. Lofty ideals and the oxymoronic concepts of loving volumes and delighting customers must make way for a sensible shareholder pleasing approach.