Best Google vs. Apple Piece Yet (GOOG, AAPL)

An absolutely great article by Bill Gurley about Google vs. Apple can be found here. His point of view aligns very perfectly with what we’ve been writing about here. Do yourself a favor and read the entire thing, but in the meantime, my favorite portion is blocked below for your convenience:

If Apple’s business model is aggressive relative to the carriers, in contrast Google’s seems unrealistically accommodating. You want to control the user interface? No problem. Want access to the code? We’ll make it open source. What kind of economics do we want? Nothing at all.  What the hell, we will pay you!  That’s right.  Google will give the carrier ad splits that result from implementing the Google search box on any Android phone. FBR Capital Markets suggests that Google is taking this idea one step further in its November 24, 2009 report titled Implications of a Potential Share Shift to Android-Based Wireless Devices. “Recent support for Android-based devices appears to be correlated with significant up-front financial incventives paid by Google to both carrier and handset vendors.” FBR goes on to suggest that these incentives may be as high as $25-50 per device. This is simply an offer that no carrier can refuse, particularly when U.S. carriers are currently in the habit of paying $50-150 per handset sold in subsidies

Simply, Apple entered the cell phone market by creating a phone so good, that every high end mobile phone purchaser wanted one. This has been a wildly successful strategy. Contrary to this, Google is entering the cell phone market by creating a phone that is also very, very good, but it’s adding a few wrinkles: it is accommodating to the present hierarchy.

Will it remain so accommodating in the future? It is naive to think that Google doesn’t see an opportunity somewhere down the road to bypass the cell-phone carriers altogether, but in the meantime, this is a palatable alternative to cell-service providers that allows the 99% of cell phone users who don’t own an iPhone to access an open-source, technologically advanced phone that major telephone companies will sell due to the favorable terms Google is offering.

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1 Response to “Best Google vs. Apple Piece Yet (GOOG, AAPL)”



  1. 1 Expanding into New Markets (GOOG) « Invest Smarter Trackback on January 11, 2010 at 9:21 am

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