A Viable Contender in the Mobile Ecosystem: Google and Motorola

Yesterday’s announcement that Google is purchasing Motorola’s mobility unit for $12.5B created a storm of speculation and musings on why the deal was a “must have” for Google. Just weeks ago, Google lost the bidding game on Nortel’s mobile patent portfolio to Apple, RIM and others. Their bidding strategy, which included monetary amounts reflecting scientifically-significant numbers, showed a Google that did not seem serious about winning – and stopping just inches short of mocking the process. The Motorola patents are a solid win for Google in this deal, but patents are only part of this equation. Here’s why this deal works now, and in the future for Google:

Strong platform to further develop a unified Android

Google may be enjoying rocket-propelled growth of Android penetration in the marketplace, but it’s fractured. They remain the only viable competitor to Apple for an “ecosystem” play, encompassing hardware, software, apps and value-added services. Since Android is an “open” platform, many iterations exist. The transaction will give Google some leverage and a channel for unifying Android in the future, and provide a more cohesive baseline for developers and consumers.

Massively reduced cost in developing tablets and other form factors

Google has a less than stellar history in bringing hardware to the marketplace. Motorola knows how to effectively and efficiently design, develop, manufacture, and launch winning devices on a global scale. This expertise will serve Google well in the mobile space initially, and perhaps on an expanded scale as Google pursues more in-home, lifestyle strategies for creating revenue – such as Google TV.

Supplier and channel relationships

Motorola knows the supplier space well, and represents an alternative relationship to the relationships Google has fostered through Android and its mobile applications. This transaction should add a needed dimension to Google’s interaction with the players who bring the ecosystems to market, and will add leverage to future opportunities for pushing Google-based standards and revenue initiatives. Remember, Google still remains a search technology and advertising company at its core. This relationship expertise, and the acquisition of the executives who built the relationships, will be critical to Google’s success.

Access to the Motorola Solutions business

Google has plenty of options in bringing applications, cloud services, and business solutions to a broader audience. The Motorola Solutions business has enjoyed strong results and maintains a potent base of clients in the private and public sectors, giving Google a solid path of entry if terms and conditions can be made attractive for both parties. Also, for Motorola Solutions, Google represents a much less expensive think tank for experimenting in unified communications, collaboration and social media strategies. There is plenty of upside for both organizations to make this compelling once the deal is complete.

Facebook and Skype: Something old, something new

Yesterday, Facebook announced its video chat feature in concert with Skype as part of a larger redesign of their chat functionality – including uplifts to the interface. On the surface, this isn’t groundbreaking. Google offers video calling, Skype has a solid business model and installed base of users, and Facetime is gaining steam in the iOS realm. Two observations stand out from this product launch. First, Microsoft’s purchase of Skype makes even more sense thanks to a quote from Mark Zuckerberg at yesterdays launch. ”We have a very longstanding relationship with Microsoft,” said Zuckerberg, who noted that Facebook had actually been working with Skype prior to Microsoft’s acquisition. Any questions about Skype valuation, and the price Microsoft paid, can be put to bed. 750 million Facebook users just entered the fold of access, and the innovation potential is high.

Second, since no blog entry is complete without mentioning Google, group video chat is not available on Facebook’s service. Google Hangouts (part of Google+) supports this functionality and in the short term, will be a differentiator. Great products are born from great competition, and Facebook will close this functional gap quickly.

Enterprise Considerations

I have the unique opportunity to engage with many CIOs through the Telwares CIO Global Forum, and the topic of using social media to uplift the customer experience (and revenues) is a tremendous hot button. Introducing video to the social mix, on a very practical level, adds complexity to achieving uplift. Facebook by nature is both personal and business for many users. Think about training requirements, dress code, policy on harassment, legal exposure, and bandwidth consumption. On the strategic side, how do you leverage the video component to uplift service in the context of a social platform? Draw pictures? The value for now will come from the intimacy of the interaction, and brand uplift from embracing a cutting-edge service. While both have intrinsic value, they don’t necessarily provide the hard ROI necessary for capital or operating investment.

For now, both Facebook and Google have viable roadmaps for video. Both organizations are extremely nimble and I would expect refinements to video features from both organizations. How consumers and enterprise adopt the functionality, since they are community-driven, depends on one simple question: who do you want to talk to?

“All but death can be adjusted” – Does RIM have the desire to win?

Emily Dickinson eloquently portrayed how dynasties can be repaired – and the only thing exempt from change is ultimate demise. For many years, RIM was the undisputed leader in mobile email and messaging. They set the industry standard and created the performance benchmark, and helped propel mobility into the mainstream of business. Unfortunately, recent media almost exclusively focuses on their diminishing market share, bad management, poor tablet strategy, and how the Blackberry brand is entangled in a downward spiral of obsolescence.

These observations have strong elements of truth – RIM is being taken to task by hungry, agile competitors with a clear vision for the global mobile ecosystem. It needs to reengineer its brand, product portfolio and go to market strategy in its entirety to compete. Nothing can be left “as is”, since this is honestly how they arrived in their current state.

As early as 2006, before the formal launch of the iPhone, RIM had already buried its head in the sands of arrogant market leadership. Whimsical quotes about the challenges of typing on a glass screen, security issues, carrier-friendly efficiencies and other “obstacles” for iPhone adoption were launched from the RIM marketing machine. When the iPhone did launch, it garnered nearly 20% domestic market share in less than six months. Soon after, Apple was selling more iPhones monthly than RIM moved in an entire quarter. Alarms were sounding. Apple had, for all intents and purposes, completely reset expectations of the smartphone experience. RIM missed this crucial point, focusing instead on historical demand patterns and accomplishments.

Instead of taking tangible action to address new competition, the market was treated to more quotes on elusive strategies yielding little result.

“I wouldn’t underestimate the amount of research we’ve done on user interfaces and technologies. We are not afraid to reinvent ourselves.”

We’re still waiting for reinvention, and it may be too late. Apple and Google are nimble, cash-rich and willing to innovate rapidly. They are well positioned in adjacent markets to fully exploit opportunities far beyond handsets and the OS. Paramount to their success, they understand clearly the role of the product, consumers, developers, and the larger revenue-generating ecosystem surrounding their platforms. Even Microsoft is posturing for a strong re-entry into the marketplace and is slowly building credibility through enhancements to Windows Mobile. It’s next release due this fall, Mango, integrates multiple points in the Microsoft product portfolio – and represents a giant leap forward in Microsoft’s global approach.

RIM needs to follow a similar path.

The road to recovery starts with changes at the top, most notably the RIM leaders we see publicly every day portraying a reality that is well removed from the truth. No one can dispute Mike Lazaridis and Jim Basille played key roles in building RIM to fantastic levels of success. Unfortunately, given at least four years of public miscues and product challenges, it is time for change. Rebuilding the brand and creating a new organization will require fresh leadership, signaling acknowledgement of the issues and potentially slowing the downward pressure on RIM’s stock.

RIM also needs to quickly hit a “product home run”, developing a handset or tablet that creates genuine emotion and loyalty. The PlayBook is not that device. Historically, RIM has been part of the all star team in terms of game-changing handsets that push the industry forward: the StarTac, BlackBerry 957, RAZR, Nokia 9000, the “Blueberry”, iPhone and others. All of these products were surrounded by stellar marketing that created fanatical consumers. More important, they were products that worked well, delivered as promised, and were surrounded by organizations with vision and focus.

Ironically, the biggest opportunity for RIM to recover may lie in the Blackberry suite of software and infrastructure services. Blackberry Enterprise Server, MVS, Pushcast, hosted infrastructure and even Blackberry messenger represent a massive installed base of touch points to be monetized. This could be the saving grace, if they aggressively pursue interoperability and invest in their developer community with strong corporate commitment. Enterprises are ready to open the door to app stores and secure consumerization, unified communications is poised for critical mass, and messaging continues to grow at hockey-stick trajectories. RIM is uniquely positioned to be disruptive, and it’s time to take the restraints off the employees who see the opportunity and can make it happen.

Time is running short for course-correction, as the organization grows more attractive every day for acquisition. It would be healthy for the marketplace, and beneficial to consumers, to have a strong RIM competing for business globally. It would also be good to see a world-class organization regain its culture of innovation and succeed.

Android Grows Market Share, Others Drop in Popularity

Google’s Android was the only smart phone platform to grow its U.S. market share during the three months ended in May, according to a study released July 8 by Reston, Va.-based comScore, a digital marketing intelligence firm.

As many as 234 million Americans age 13 and older used mobile devices as of May. More than 49 million of those mobile devices were smart phones – an 8.1% increase from the previous three-month period, comScore finds.

Android’s market share increased to 13% from 9% in the prior period.

The open-source platform was developed by the Open Handset Alliance, a group of 71 technology and mobile companies that includes Google, HTC, Sprint and Motorola.

The recently announced Android 2.2 (code named “Froyo,” short for frozen yogurt), features updates like portable hotspot functionality, support for Adobe Flash within the Android Browser and improvements to Android Market.

RIM remained the smart phone platform market leader in comScore’s study (with 41.7% of the market), followed by Apple (24.4%) and Microsoft (13.2%). Palm trailed with 4.8% market share.

Aside from Android, each smart phone platform lost between 0.4% (RIM) and 1.9% (Microsoft) of its market share. But the declines don’t reflect a shrinking of the market; comScore says the smart phone market overall continues to grow.

comScore notes its data doesn’t reflect the impact of Apple’s iPhone 4, which launched in June. (Click here to read Telwares’ analysis of iPhone 4.)

Samsung is the top handset manufacturer in comScore’s study (22.4% market share), followed by LG (21.5%), Motorola (21.2%), RIM (8.7%) and Nokia (8.1%).

NTP Sues Apple, Google, HTC, LG, Microsoft and Motorola

The company that sued BlackBerry maker RIM for patent violation and incited enterprise panic in 2005 is at it again.

Richmond, Va.-based NTP Inc. filed suit July 8 against Apple Inc., Google Inc., HTC Corp., LG Electronics Inc., Microsoft Corporation and Motorola Inc. in federal court. NTP alleges the six companies infringed on eight of its wireless e-mail delivery patents and wants the companies to pay licensing fees for using the technology.

There’s precedent from NTP’s suit against RIM: The BlackBerry maker was found to have willfully infringed NTP’s patents and the verdict was affirmed on appeal. RIM paid NTP $612.5 million to settle its patent infringement lawsuit in March 2006, which included a perpetual, fully paid license going forward.

If the court finds NTP’s new claims to be valid, the six manufacturers and developers named in the suit must pay the fees or cease use of the technology.

Telwares believes settlements and fees are the most likely outcome. As in the RIM case, NTP has little interest in stifling smart phone sales or use; its revenue will come from licensing fees.

So enterprises shouldn’t worry about losing their iPhones, Android handsets or Windows Mobile phones. The real question is whether licensing fees will increase device and service costs for enterprises, according to Telwares experts.

NTP is a privately held intellectual property firm and claims its founder, the late Thomas Campana Jr., invented wireless e-mail in 1990. NTP already has licensing agreements with RIM, Good Technology Inc., Nokia Inc. and Visto Corporation.

“Use of NTP’s intellectual property without a license is just plain unfair to NTP and its licensees,” says Donald Stout, NTP’s cofounder, in the company’s press release. “Unfortunately, litigation is our only means of ensuring the inventor of the fundamental technology on which wireless e-mail is based, Tom Campana, and NTP shareholders are recognized, and are fairly and reasonably compensated for their innovative work and investment. We took the necessary action to protect our intellectual property.”

Google buying mobile advertising firm AdMob for $750M in stock

Mobile advertising may be in the early stages in terms of the mobile ecosystem, but Google is investing. In one of their largest deals ever, they are acquiring mobile advertising firm AdMob for $750M in stock. AdMob is most well known for iPhone campaigns, but the acquisition will position Google to invest and shape the market in this emerging area of opportunity. For more on this story, see:

 

http://news.cnet.com/8301-17939_109-10393271-2.html

 

http://www.intomobile.com/2009/11/10/google-acquires-admob-and-gizmo5.html

Google Chrome-based OS for Netbooks

Google has announced its entry into the Netbook operating system world, via a Chrome-based OS. While this move seems centered on taking market share from Microsoft, there is momentum building around netbooks, their capabilities, and more importantly the subsidy-type model for provisioning these devices. Best Buy and Sprint announced a 99 cent netbook, with a two year agreement for data services. This eliminates the capital question for consumers, but opens the gates for a broader penetration of the market for service providers. It’s early in the adoption curve, but should provide interesting market metrics for the next year in terms of adoption, and real revenue impact for the carriers.

More on Google from Rethink Wireless (http://www.rethink-wireless.com/?article_id=1651):

Google’s hesitancy about Android appearing on netbooks becomes clearer now – the firm is developing a separate, though related, operating system for this platform, which could be extended to take on Microsoft head-on in the PC market. Based on the Chrome browser, the OS, optimized for web services, will be targeted initially at netbooks, said the search giant.

This move is partly to strengthen Google’s play for Microsoft’s enterprise market dominance, which it has previously attacked from the sidelines with applications like Gmail. But it is also a bolder quest to put Google in a Microsoft-style position across all client platforms, dominating the cloud computing era – and, as PCs and phones converge, the netbook holds a key strategic position as the first example of a new wave of highly mobile, web-oriented devices.

http://www.rethink-wireless.com/?article_id=1651