Free phones are a dime a dozen. Sign up for a long-term contract, and most cell phone companies have a phone that won’t cost you a dime. It may not do much more than phone calls, and confuse you otherwise, but it’s free. You get what you pay for. How about if you could get a world class smart phone for free? No. Strings. Attached.
Google And Motorola Equals Free Phones
Steven Levy was on the news, pushing his book and talking up the Google buyout of Motorola. He’s the author of In The Plex, everything you don’t really want to know about Google. He talked about market disruption, something both Google and Apple are good at, and Motorola stinks at.
Disruption is what happens when a company messes up the marketplace with a unique new product or service. Apple did with the iPod, the iPhone, and the iPad. Google did it to the smart phone arena with Android-based phones.
Levy intimated that Google might use Motorola to build a free phone. A really free smart phone that would compete favorably against all comers; Apple, Microsoft, Nokia, Samsung, HTC, and anybody else that doesn’t yet understand that thinking different is what creates new opportunities.
Google, with the purchase of a manufacturing arm in Motorola, is thinking different.
Defense? Or, Offense?
Motorola’s 17,000 patents might be worth $12.5-billion dollars, but I think there’s more to the purchase than patents (which may or may not help Google against Microsoft, Nokia, and Apple). With Motorola’s patents, Google is playing defense. With a free phone, Google is playing offense and disrupting the market. Again.
A seamless relationship between what Google wants a smart phone to be and Motorola’s ability to build that dream, might mean we see free Google Android phones within a year. Free. Google could say something like:
Here’s our phone. It’s free. Use it anywhere you want. Any cell phone carrier. But use it. It may not be Microsoft, or Apple, or RIM, or even another Android-based phone, but it’s free. Use it anywhere, for as long as you want.
The manufacturing cost of bare-bones smart phones (those running Android) continues to be driven down, thanks to competition between cell phone makers stuck with Android. There’s only one level beyond free, and that’s when Google pays you to use the phone.
How does Google make money by giving away a free smart phone? Advertising. Well over 95-percent of Google’s revenue comes from advertising and data, information you provide by using Google’s products, including Android-based smart phones.
Advertising is a numbers game. And Google needs more numbers. Mobile device advertising revenue hasn’t been a darling for Google so far (competition from Apple, Android users don’t browse the web like iPhone users), so Google can only make up for the shortfall with more numbers. More Android-based phones. Free is a compelling price tag.
Backlash, We Hardly Knew Ye
Cell phone carriers would be happy to give away a decent, competitive smart phone for free. Many cell phone companies subsidize their higher priced phones (like the iPhone) already. A free phone from Google would mean fewer subsidized phones by the carriers. A free Google phone would be perfect for the pre-paid cell phone market.
Customers get a free phone that, more or less, works like an iPhone, but without the iPhone price. Cell phone carriers get a free phone to give to customers so they don’t need to provide a subsidized phone to low end customers.
Who won’t like a free Motorola phone from Google?
Cell phone manufacturers won’t like it. They make money selling phones to customers and cell phone carriers. Sure, Android OS and Android phones are not as smooth and polished as an iPhone. It’s tough to compete against free when free is good enough. Apple and Microsoft won’t like it, either.
I’m not saying Google will use Motorola to build a free Android phone, but it could happen. Only Google knows how much revenue they can bring in per Android phone user. Google makes money by stripping information from customers, which could cause a backlash. They need and feed on that information. Apple, Microsoft, RIM, et al, may find that privacy on their devices is worth a premium.
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