Google Redefines Disruption with the “Less Than Free” Business Model
If you are wondering why Google has become so dominant… read this article from Bill Gurley (Gurley is a VC at Benchmark Capital).
Bill discusses the case where Google is not only offering the mobile OS (Android) for free, but they will be paying carriers. This is an incredibly difficult proposition for companies who are a forced to show revenue directly for their product.
To Google, everything is a numbers game. It is all about the math. They are able to monetize in a rather indirect way. It is in a way that the consumer doesn’t mind. They aren’t splashing my screen with ads on every product or forcing me to watch a commercial prior to viewing a mobile video, they are simply building on what I am already used to… seeing an ad when I search for something. On top of that, they do their best job to be sure that it is a relevant ad. I actually appreciate the result and look for the ads to provide guidance.
The GPS companies have a big deal on their hands here. Google is not dependent. When I was able to get GPS on a phone, I wondered why there would still be a need for the GPS providers. Ahhh… the data. Google just got around that.
There is another player here. Microsoft could do something interesting with their “birds eye” data. I really appreciate the service at Bing Maps. I can get a real good sense of where I am with this imagery. I wonder if MSFT will be able to bring it to a handset near you. We shall see.
This is an interesting game.
PS: If you like reading about VC’s or the startup culture and want to follow a few great startup stories (including Ebay) check out the book eBoys
Excerpt…
I then asked my friend, “so why would they ever use the Google (non open source) license version.” (EDIT: One of the commenters below pointed out that all Android is open source, and the Google apps pack, including the GPS, is licensed on top. Doesn’t change the argument, but wanted the correct data included here.) Here was the big punch line – because Google will give you ad splits on search if you use that version! That’s right; Google will pay you to use their mobile OS. I like to call this the “less than free” business model. This is a remarkable card to play. Because of its dominance in search, Google has ad rates that blow away the competition. To compete at an equally “less than free” price point, Symbian or windows mobile would need to subsidize. Double ouch!!
via Google Redefines Disruption: The “Less Than Free” Business Model « abovethecrowd.com.
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