Google’s long-term disconnect with Android

Fred Wilson has an interesting opinion piece today. He specifically calls out the following tweet and goes on to argue against it:

Fred’s argument is that Google is thinking long term, while Apple and Samsung are thinking short term. This is why while Apple and Samsung rake in billions of dollars of profit today, and Google comparatively doesn’t seem to be making much in mobile. He concludes the post with a with trailing-12-month stock chart comparing Apple and Google, and noting that the market understands Google’s long term view – hence its stock is significantly outperforming Apple’s stock.

I recreated Fred’s stock chart here:

Screen Shot 2013-03-18 at 10.47.44 PMIndeed a grim chart for Apple, and in support of Fred’s viewpoint, right?

Well, if you show the same trailing-12-month stock chart, but just time shift it back 6 months to Oct 1, 2012, this is what you get:

Screen Shot 2013-03-18 at 10.50.13 PMDoes it still support Fred’s argument, or does it support the opposite? What has changed in the past 6 months that has dramatically shifted the tide towards Google and against Apple? If anything, aren’t there reports of Apple gaining market share (and Android losing market share) in the most recent quarter?

We can play around with these stock charts some more, but the point is – it is of little value to pull out the most recent stock chart when it just happens to conveniently support your pre-assembled conclusion. Fred could have made the exact same post a few months back – would he have used the stock chart as an argument then?

But enough of that, let’s talk about some of Fred’s other thoughts, and here I quote the meatiest two paragraphs:

…They have gmail on so many phones. They have google maps on so many phones. They are getting the majority of searches on mobile phones. And that doesn’t even begin to address Android itself. It is the dominant mobile operating system around the world. Just think about all the data they are getting from this enormous mobile footprint they have assembled.

You can change handsets pretty easily when all your data is in the cloud. There is no moat around a hardware only franchise these days. But the software you choose to use on your phone is different. There the moat is much bigger. And where your data goes in the cloud is even more important. Changing that out requires a major effort for an end user.

Some observations here – first, Google doesn’t need Android to put Google maps and gmail onto phones; in some cases Android helps with that, in plenty of others Android actually works against Google in terms of promoting Google services. Just read a few of Benedict Evans’ posts, such as this most recent one.

The second paragraph is a much stronger argument, but again, there is a disconnect – Android the OS is not Google’s cloud service. In an alternate universe, Google never created Android and coexisted peacefully with Apple, offering deep service integration with Apple’s devices (remember the original iPhone and how Youtube, Google Maps et al. got preferential treatment?). If the argument is again Android provides a delivery channel for those cloud services, the counter-argument is again two-fold: 1) if Google had stayed as a neutral cloud services provider, some (if not all) hardware vendors would likely be fighting to integrate with Google’s services, giving Google the access it needs anyway; 2) Android can and has been used against Google, as delivery channels for other cloud service providers – Amazon and all the Chinese internet companies actively do this.

In closing – I don’t disagree that Google could be playing the long-term with Android, but they are tackling the long-term disconnect in terms of how Android fits into Google’s strategy. It’s not all roses as Fred and his stock chart suggests.


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