Does the Google Motorola Deal Bode Badly for the iPhone?

by Ostatic Staff - Aug. 16, 2011

The news about Google's $12.5 billion dollar deal to buy Motorola Mobility has stirred up a lot of discussion about what the impact will be on Android, Apple's iOS, Samsung and many other players in the mobile technology ecosystem. As GigaOM notes: "The news is a shocking turn for the fast-growing Android ecosystem, which was built on Google’s operating system but didn’t include any actual hardware built by the company." Android has, of course, been snapping up market share in the smartphone market, and Google's Motorola purchase will make it a big player on the hardware and software sides of that market. But some of the reports claiming that Apple's iOS strategy is doomed seem premature.

Many analysts have already noted that players such as Samsung and other hardware makers who have been betting on Android as a mobile OS may consider switching to Windows Phone 7 rather than contend with a new Google that controls both Android and a major smartphone hardware ecosystem.  But what will the effect be on Apple.

Noted open source writer Matt Asay writes on The Register:

"Google doesn't make money directly from Android, and it really doesn't matter to Google how profitable its OEMs happen to be. The more smartphones and tablets there are on the market, the more money Google makes from advertising and other indirect revenue sources. In fact, while Apple is the single largest recipient of mobile-advertising money among the smartphone manufactures, as a group Android OEMs dominate the category....Second, it's critical to remember who buys Android devices versus iOS devices: kids buy Android ("It's cheap!") while adults largely buy iOS ("Pricey, but it makes me cool with the other soccer dads!"). Guess which group will be buying devices long into the future?"

There are some very good points here. Although people don't always realize it, Google's overarching goal is to feed the maximum number of people into its lucrative search/ad system, and it only needs a critical mass of Android devices to be serving that goal--rather than needing to reap profits from selling the devices themselves. And, as we pointed out here, Android's momentum is concentrated primarily in the consumer market for smartphones, not the business market. It does indeed reach many young smartphone users.

Still, the iPhone and the iPad have both found success through Apple's outstanding design and innovation. Google has experimented with being a hardware player before, with very mixed results. The company has realized that you have to support hardware, that it doesn't have deep expertise in hardware design, and more. It's a reach to decide that Apple, with its legendary design assets, will simply fold in an increasingly Android-driven smartphone market. Bet on Apple's design wins, and innovative ideas, to keep it competitive.

After all, until this week, did anyone really believe that Motorola was up for any design or innovation awards on the mobile technology front? Far from it. Google won't turn that tanker around in an instant, and Apple will continue with design and innovation wins while Google takes the steering wheel.