Why Google Acquired Motorola
Here’s my take on the Google acquisition of Motorola.
Google is an ad platform. Anything else they are into they are into because it enhances the platform.
Google has a vested interest in seeing every service/app/etc. on the Internet go to FREE. Why? When something goes for free on the Internet you can virtually have infinite demand. With no scarcity and the cost of distribution of the service/app at almost zero, adoption will be widespread.
More pages on the Internet being used by more people in more ways means more ways for google to advertise. And if that page is owned by google, double good. So when Google acquires online word-processing app Writely and turns it into the FREE Google Docs service, it gets widespread adoption. Now, if you want to compete in this space, you have to be free, too. Cue YouTube, etc.
Free on the internet is Google’s friend.
Now, in Mobile, which will be an even bigger market for advertising than desktop Internet, there’s a real dogfight underway. Google’s Mobile Operating System (OS), Android, which controls the programs that run on smart mobile devices is the trojan horse Google can employ to lock up the mobile ad market.
Google needs two things to happen to dominate mobile. 1) they need their OS to be dominant and widespread. 2) They need the cost of mobile handsets to – like the Internet – move lower and lower so that adoption is more and more widespread.
By acquiring Motorola they meet both goals: 1) they’ll lock up 30% of the handset market right away so NO MATTER THE FUTURE they control the destiny of the OS … no longer dependent on their third party partners who may have competing objectives. They can now drive Andriod as far and as fast as they want and the other handset makers using the OS on their phones will have to keep up. 2) Watch for them to aggressively push the price of a smart handset lower and lower. By doing so their phones (which of course has their OS and so will increase market share of the OS, helping goal #1) will be more and more widely adopted and put pressure on other handset makers to lower price, putting those devices into the financial reach of people who couldn’t previously afford them … more eyeballs for ads.
So I’m betting we’ll watch Google drive the cost of smartphones to ridiculously low levels.
When it’s understood that Google’s MO is to drop the price of computing and apps to zero (b/c it lowers the cost of platform usage and thereby expands platform use), their strategies almost always make sense.
ALSO, a propos of my last blog post (on patent trolls), Google acquires 24,000 patents in the acquisition, which helps them in the patent war against Apple, Microsoft, etc. Let’s hope they’re DEFENSIVE patents.