The Great Google gPhone Myth
October 20th, 2007
Daniel Eran Dilger
Pundits have seized upon rumors of a new mobile phone product from Google as their golden ticket for bashing the iPhone. The “gPhone” is the perfect foil for fear-based rumormongers because it’s a secret Google hasn’t said much about publicly. That lets the wags blow it out of proportion and stretch it into an iPhone Killer. They’re wrong, here’s why.
They’ve Been Wrong Before.
These wags don’t exactly have a reputation for hitting many intended targets correctly in their iPhone-related prognostications. In fact, the entire crew of Apple naysayers have been wrong repeatedly without exception ever since they started dedicating their columns around tearing down the iPhone.
Wrong on Hardware.
First they tried to suggest that Apple couldn’t figure out how to deliver a phone, since it hadn’t before. CNET’s Michael Kanellos unintentionally ridiculed himself by observing that Apple’s iPod “conquered the problem of small screens and cheesy navigation,” but that “unfortunately for Apple, problems like that don’t exist in the handset business.”
Palm executive Ed Colligan’s famous lines, “We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in,” is funny particularly given Palm’s existing lineup and its Folio folly.
In all fairness. Colligan said all that before seeing what Apple had to offer. The wags who repeated the same idea after seeing the iPhone weren’t underestimating Apple, they were underestimating the intelligence of their own readers.
They later assured us that LG’s Prada LG850, announced a few weeks after the iPhone, was just as good as the iPhone, not because it was, but because it gave them something to use as a distraction. With the Prada phone forgotten, a new stand-in was needed. That role was briefly assumed by FIC’s OpenMoko and the Neo1973 phone.
As with the Prada and Neo1973, reality has not been kind to the populist pundits’ overhyped comparisons of various other “iPhone Killers” versus the actual killing performed by the actual iPhone.
Wrong on Software.
Wags then pleaded with us to believe that there were actual, existing, competitive smartphones that delivered features similar to the iPhone already. They said phones running the Palm OS and Windows Mobile have a web browser and email, too, without ever showing us an actual comparison. That would be embarrassing.
Microsoft doesn’t show off its user interfaces in its advertising for the same reason sausage manufacturers don’t advertise what goes into their hot dogs. Filming either would be an exposé, not an advertisement.
Shills complained that the iPhone was a problem for consumers because it couldn’t run those mobile Java apps that nobody uses, and that iPhone users couldn’t buy the overpriced junk software currently on market for Palm OS and Windows Mobile devices, or the worthless ringtones and game applets that Verizon and Sprint rent to users at exorbitant prices.
Wrong on Economics.
Pundits then told us the iPhone was horrifically expensive and that nobody would buy it. In reality, the iPhone was actually one of the cheapest smartphones on the US market. With the required two years of service included, I found it was about $200 less than the “$99” Motorola Q from Verizon Wireless, and that was before Apple dropped the price of the iPhone by $200. With the savings, you could buy an iPod Touch and give it away.
After complaining about the iPhone’s price, they then complained about the reduction, and tried to insist that users were harmed by Apple lowering the price and offering early users a rebate as a thank you. Those same critics later insisted that–in regards to another product in identical circumstances–the best way to deal with high demand is to raise the price initially until supplies can be maintained.
The iPhone was recently reported by Strategy Analytics to be AT&T’s top selling phone in the third quarter, and the fourth most popular phone in the US. That’s despite the fact that Apple’s phone is only offered by AT&T, which only provides service to about a third of US phone subscribers.
So despite all the hoopla about how nobody could afford it, Apple’s iPhone not only outsold every phone AT&T offers, but outsold every other smartphone period. The three models ahead of it were led by the Motorola RAZR V3, a basic four year old feature phone now commonly offered for free in the US with new contracts.
Having shamed Motorola, Palm, Nokia, Sony Ericsson, and LG in delivering a phone with advanced hardware and software features, the only remaining competitor who could be thrown at Apple’s iPhone would have to be larger than life and come riding in from the heavens on a mysterious dark horse.
Microsoft is too busy working on service pack fixes for Windows Vista to be expected to turn Windows Mobile around. On top of that, the Zune fiasco doesn’t exactly suggest that Microsoft could deliver a salable phone anyway, even if it decided it wanted to throw billions down another new rathole after piling up $8 billion in losses from its consumer electronics offerings within just the last year.
That leaves the fantastically valued Google as the only candidate for taking on the iPhone. Google is rolling in money, having captured the majority of the blossoming online advertising market. It desperately needs to expand into other businesses.
Problems With the GPhone Propaganda.
The main problem facing pundits chanting their hope that the GPhone will attack Apple’s position is that Google has no interest in taking Apple’s iPhone down. Google is working to broaden its search services into mobiles, but the iPhone is already a Google ally, prominently featuring Google Maps integration and Google search integration in its browser as the default search option.
Google attacking the iPhone would be like Microsoft destroying its PlaysForSure alliance to establish its own player: a pyrrhic victory. Microsoft used to claim about 15% of the music player market in conjunction with a variety of its PlaysForSure partners. It now has its own 3%, which it has sucked from the veins of those same partners. Even worse, Microsoft traded the scant software profits it was earning from partners for significant hardware losses on the Zune. Google isn’t that stupid.
The second significant problem for GPhone proponents cheering on an alternative to the iPhone is that Google isn’t a hardware company. It sells advertising. The only hardware product Google has ever sold is a rack mounted search appliance system designed to index corporate data. It’s a PC running Google’s search software, painted blue.
That makes Google a little less qualified to take on Apple’s iPhone than Sun. Recall that Sun’s brilliant idea for an iPhone Killer was an OpenMoko phone photoshopped to mimic the iPhone. Sun’s jPhone had a key feature: it sported a Java logo and included software nobody had been buying, rereleased under a new name: JavaFX.
Jumping into the hardware business isn’t easy, even if Apple makes it look like a cakewalk. Every year since 2001, Apple has pushed out new generations of iPods that flew from the shelves. The iPhone sailed into acclaim, basked in free publicity for six months, and then promptly trashed sales records for phones, despite being sold at its real price in cutthroat market full of profitless, subsidized phones tied to contracts and fractured by mobile network incompatibility barriers.
The Soft in Software.
There are plenty of companies with the capacity to design and sell music players, but none have done anything to wrestle away market share from Apple. It’s certainly not for a lack of trying.
Sony has designed some very attractive hardware, and others including Archos delivered features such as video playback long in advance of Apple’s own video playing iPods. The problem with most competing devices is dreadful software.
From cryptic displays that require a teenager to decipher and navigate, to PC music library software that is weak on features and strong on limitations, the software behind most music players leaves any latent potential in their hardware completely unusable. The situation with mobile phones is even worse. Many users don’t even try to sync their phones, and those that do are plagued with limp software.
The Hard in Hardware.
Microsoft wields enormous power over the PC desktop, and has forged partnerships with studios and online merchants to distribute their content only in Windows Media format. Even mighty Google fears the desktop position of Microsoft’s software stranglehold. While the company’s mobile and music software is nothing to brag about, the real problem with Microsoft’s consumer products is horrible hardware.
Most of Microsoft’s clunky Windows Mobile phones are built by HTC; its boxy brick music player, the Zune, was built by HD-DVD holdout Toshiba; its Xbox 360s have the worst failure rate of any games console, costing Microsoft an extra billion dollars in warranty work just over the last year on sales of only 12 million units.
While the Windows maker pumps out clownish hardware that looks like products of the old USSR, it has billions to blow and has connections with PC hardware makers that have enabled it to dictate hardware reference designs over the last decade. Microsoft is trying hard. It’s just not an easy game to play.
Three Components of the iPhone’s Success.
Google is not going to be magically better at hardware than Microsoft. As Palm’s Colligan would say, “they’re not going to just walk in.” He was actually right as far as hardware goes.
Apple didn’t just waltz into the mobile phone market out of nowhere; the company had thirty years of hardware expertise. It had been building iPods directed at a market similar to that of mobiles in terms of cost, expense, and components over the last half decade.
Apple also had spent the previous five years deploying software to support mobile media playback, data sync, and messaging features. It also had a cross platform development system and a mobile ready operating system, even if the media knew nothing about it. Apple could today say that Palm “isn’t going to walk right in” and deliver good software out of nowhere.
Apple also had one other thing it that had been developing over the past five years: a retail presence. Those retail stores in key locations made a huge impact on the rollout of the iPhone. If Apple had to rely on AT&T to sell its iPhones, it would not have generated a fraction of the publicity or the sales on its opening weekend.
AT&T’s retail stores are as effective at selling the iPhone as Sears was at selling the Mac Performas, or Best Buy is at selling the Apple TV (or the Zune).
Apple’s retail stores not only built excitement, but prepared customers to expect more in an electronics sale. They provide free training sessions and technical support, and they narrow the range of options down from the bewildering number of options consumers face in a big box retail store to–in many cases–a choice between good, better and best models.
Nobody is going to “just walk in” and blow out hundreds of new retail stores, not Microsoft and not Google. Palm is desperately struggling to run sad looking mini-stores that are perpetually empty. Dell is finding retail is a lot harder than mailing boxes over the phone. Gateway already gave up on retail.
Don’t Just Walk In.
Apple didn’t “just walk in,” it prepared the way for the iPhone over a period of five years. In contrast, Microsoft tried to “just walk in” with the Zune, hoping that it could throw out a me-too product and snatch away iPod sales like a fast talking con man running a shell game. Without a retail presence, the Zune was left to sit on the shelf next to a dozen other more attractive music players. It was no surprise that it failed miserably.
Google knows better than to “just walk in” and deploy a complex mobile product that is far more difficult to sell than the Zune. Mobile phones require a service provider partner and desktop integration software, on top of being a complex hardware product themselves. There’s also a competitive fashion component, just like automotive design. Google has none of these things in place. Google has some great applications, but none are fashionable.
So why would the company hire Andy Rubin, a co-founder of Danger, the maker of Sidekick mobile devices? And why did Google buy Rubin’s Android startup two years ago?
Along with Rubin, Google’s acquisition of Android–a secretive company that was known to be working on mobile phone related software–landed the company Richard Miner, formerly a telecom tech executive Orange, and Chris White and Andy McFadden, who had also earlier worked with Rubin at WebTV.
Google’s Mobile Business
Over the past two years, Google hasn’t built up a business selling high end consumer electronics hardware to pave the way for an iPhone replacement. Instead, Google has delivered a variety of mobile products aimed at pulling users toward its online ads and search results:
Google SMS lets mobile phone users text in queries and receive search results on their phone via SMS: movie show times, nearby restaurants, weather, translations and pretty much anything else that can be googled.
Google Maps offers mobile client software for finding directions and plotting search results on a map.
GOOG-411 lets mobile users find information using their voice, with free directory information search and hands free dialing that automatically connects your call. You can even say “text message” and get the search results you asked for in a follow up SMS.
Google has also integrated its Gmail, Picasa online photo services, and YouTube videos into mobile offerings. Is Google is going to attack Apple’s iPhone product–which provides direct integration with Google’s web search, Maps, and YouTube as prominent features–just because the idea is titillating to Apple haters?
Google is not going to sell hardware at all. The most likely scenario is for Google to partner with other hardware makers, as it has with Apple, to incorporate support for its existing services while it works on new ones. The company might also push ahead efforts to move more of its online applications into prominent use on mobiles.
That would follow its strategy on the desktop. Google has funded the Mozilla Foundation and pays to distribute Firefox in order to establish its Google Toolbar against the expansion of Microsoft’s own moves into online search. Google is also paying to distribute OpenOffice. Google isn’t trying to take down Apple, it’s after Microsoft.
That has left many to speculate that the GPhone is really a Windows Mobile killer, designed as an alternative mobile operating system for the type of feature phone hardware Microsoft refers to as “Windows Smartphones,” such as the Motorola Q and Samsung Blackjack. They lack touch screens and have very little RAM, but they can deliver ads and search results.
These phones’ features represent what will soon be the low end of mobiles. They are cheap but are not cheap enough to sell well in the market. Microsoft’s Windows Mobile software is only making them slightly more expensive. With free software and an advertising subsidy, they might be profitable enough to sell in the mass market.
That would give profit-pinched hardware manufacturers like Motorola and Samsung some extra breathing room while expanding Google’s role in the mobile market for search related products.
Google is also rumored to be doing the same thing in the PC market, lining up efforts behind distributing a Linux-based operating system paired with Firefox, OpenOffice, and its own search integration. It would be pointless for Google to reinvent any of those components from scratch. It would be similarly absurd for Google to try to bump Apple–one of its closest partners–out of the way with a new iPhone-like product that the company is not equipped to design, build, sell, support, or market.
Next time the pundits pull out the gPhone vs iPhone prattle, point and laugh.
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