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Google Mobile OS Competitive Strategy - May 2010


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Competitive strategy and recommendations for Android dominance, analysis as of May 2010

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Google Mobile OS Competitive Strategy - May 2010

  1. 1. Competitive Strategy Group, May 2010 Rajeev Kalavar Adam Rahman Diana Tsao Srujana Vallabhaneni Slide 1 Mobile OS Strategy
  2. 2. Primary Sources / Interviewees • Subir Jhanb Google, Android Engineer • Herman Ng Google, M&A Finance Manager • Jerry Denton* Google, Marketing Director • Jahanzeb Malik Qualcomm, M&A Sr Manager • Bradley Layous AT&T, Chief-of-Staff • Gregory Hoffman T-Mobile, Finance Sr Director • Hitesh Anand Nokia, Head of Strategy *Name altered at request of interviewee for confidentiality Slide 2
  3. 3. SmartPhone OS: Porter’s Five Forces Competitive Rivalry (HIGH) iPhone (Apple), Symbian (Nokia), Windows Mobile (Microsoft), Research In Motion (Blackberry OS) Slide 3 Complements (MED) SmartPhone apps/handset, carrier plan, m-phone accessories, flash memory Threat of Substitutes (LOW) Need an OS to run Smartphone, especially with “open” handsets Bargaining Power of Buyers (MED) Consumers select from the many existing SmartPhone OS offerings. Bargaining Power of Suppliers (LOW) Mobile OS designed and made in-house; minimal suppliers. Threat of New Entrants (HIGH) Most telecom / software companies have ability to enter. Many firms in emerging countries launching new SmartPhones with simple, reverse- engineered OS.
  4. 4. Google Mobile OS: Android • Android central to strategy • Tightly integrated with Google’s web product offerings Slide 4 • Open Handset Alliance that sets standards for mobile devices; Initially 65 companies from across value chain • It is Open Source and free to handset manufacturers
  5. 5. • Symbian (Nokia’s OS) has leading global market share (small in US) • Android small, but has highest growth rate of all Slide 5 • Apple has had high growth and closing in on RIM. Extracts a significant portion of industry rents • Mix of vertical and horizontal models within SmartPhone business
  6. 6. Nexus One Launch • Advanced features with 5 Megapixel Camera, 1 GHz Processor, Google Android OS, GPS, etc. Slide 6 • Low-key launch: little marketing, one carrier, unsubsidized $529.00 / unit direct-to-consumer model • 74 days following launch, unit sales: • iPhone 2G: 1.0M • Motorola Droid: 1.0M • Nexus One: 0.1M • Nexus One Purpose: • Example of Android fully leveraging Google product offerings • Lift the innovation bar for handset manufacturers on Android • Google is signaling to Android ODM’s and Apple
  7. 7. Android Consortium vs Apple iPhone Apple / iPhone [Closed Platform] Andoid-Based Manufacturers History repeating itself like Windows / PC’s vs Apple Mac? Slide 7
  8. 8. Power of Brand •Google's brand valued at $100 Billion,* greater than brands like Coca-Cola and Microsoft! Slide 8 •Lends credibility to Android •Handset manufacturers can leverage strong Google brand to market Android-based handsets * 2009 Datamonitor report
  9. 9. Google’s End Game in Mobile •Is it the Nexus One? Slide 9 •Is it Android? •It is about controlling the Mobile Ecosystem and eventually extracting majority of its rents through mobile search advertisements with its portfolio of Google products as search transitions more from desktop to mobile computing. …No . . .No
  10. 10. Recommendations • Attract more handset manufacturers to Android Slide 10 • Increase mobile application offerings – Make Android Market easier for developers to use & quicker app approval process versus iTunes – Offer higher app sales cut to developers versus iTunes Product Integration • Match or beat tight integration offered by iPhone/ OS X/ iTunes within Handset/ Android OS/ Android Market combinations Market Penetration • In addition to mainstream users, target the enterprise / business segment
  11. 11. Recommendations continued Slide 11 • Ingredient marketing: Cover portion of handset manufacturers’ costs (Intel Inside case) • More integration in Google product offerings • Continue building VoIP capability through Google Voice Marketing • Protect brand image in mobile Leverage existing offerings
  12. 12. Questions? Slide 12
  13. 13. Google vs Apple: Collaborators turn Rivals 1. Enter SmartPhone market 2. Acquire Mobile Ad company 3. Block Mobile Ad firm acquisition 5. Reject Google Voice App from iTunes • Parallel between Google / Apple and Gillette /Bic case • Google does not have competitive advantage in hardware Slide 13 4. Antitrust Allegations
  14. 14. Collaborators or Competitors? 06.07 Apple releases iPhone 11.07 Google unveils Android 10.08 Google launches Android Market 07.09 Apple rejects Google Voice 09.09 Google CEO steps down from Apples board of directors 11.09 Google acquires AdMob
  15. 15. Collaborators or Competitors? 01.05.10 Google releases Nexus One 01.05.10 Apple acquires Quattro wireless 01.22.10 YouTube starts to rent movies. 01.26.10 Google Voice in browser released 04.08.10 iAd announced 01.10 FTC investigating Google/AdMob deal 03.10.10 Ads served on YouTube mobile 02.05.10 Apple bans word “Android” from App store 05.10 Apple to replace default search engine with Bing?
  16. 16. Google vs Apple: Mobile Strategy Slide 16 Apple Google Mobile OS Closed [OS X] Open [Android] Primary Mobile Rents Hardware Mobile Ads Partnership Limited [Primarily AT&T] Numerous [Open Handset Alliance] Customer Value End-to-End User Experience Integration: Mobile OS with Google web product offerings Online Store iTunes Android Market Apps Offered 190,000 50,000
  17. 17. Smartphone / Mobile Trends • Mobile phones have become like small computers • Features on Smartphones becoming “an extension of your senses” with vision (camera), touch (screen), voice (speech recognition), awareness (GPS), etc. • Consumers personalize their phones with applications • Growth in mobile search outpacing traditional desktop search. Substantial shift in revenue source for Google: from desktop to mobile ads. Slide 17
  18. 18. Component Suppliers Wireless Carriers Mobile Consumers Mobile OS Mobile Value Chain in US Mobile Retail Outfits Handset Manufacturers Mobile Handsets (in general): Wireless Carrier of Choice! Nexus One Consumers Android OS (Google) Google (online store) Nexus One Manufacturer: HTC Google’s Model (D2C): Semiconductor Chips Branded Companies Component Suppliers Semiconductor Chips Slide 18
  19. 19. SmartPhone Hardware: Porter’s Five Forces Competitive Rivalry (HIGH) Apple (iPhone), Motorola, Nokia, Samsung, Research In Motion, LG Electronics Threat of Substitutes (MED) Landline telephones, VoIP, PC, laptop Compliments (MED) Applications, carrier service plan, mobile phone accessories, flash memory, Personal Computer Bargaining Power of Buyers (MED) Consumers select from existing SmartPhone offerings. However, many options. Bargaining Power of Suppliers (LOW) Mobile semiconductors and phone hardware becoming commoditized. Threat of New Entrants (HIGH) Most telecom companies have ability to enter. Many firms in emerging countries launching new SmartPhones. Slide 19