Thursday, February 25, 2010

Google's "Free" Strategy In the Mobile Market Means It Makes More Money

I fully expect smartphones to trickle down to the point where it is possible to for carriers to give them out for free.

It'll start with Android phones from a whole host of manufacturers and brands trying to compete for the same consumer, effectively cutting margin in order to get as much of their own devices into our hands.

That is exactly what's happening now in the Android segment of the mobile market.  More importantly, this could be exactly what Google is looking for.  And I'm betting that they foresee thing years ago when they planned the moves with Android, and later in the year, with Chrome OS.

After all, Google is giving away Android and Chrome OS.  The tough part for Google is already over.  Android is gaining a wider mindshare and acceptance.  And riding the Android wave will be Chrome OS.  Once that happens, though there's no guarantee of success, Google implements addtional cloud-based services that keep mobile users hooked.

The more time you and I are on Google's network, the more ads they make.  The more searches we make, that means more money for Google.  It's an incredible strategy.  No one has managed to give something away for free and make money.

ISP and the early startups of the Internet bubble all tried and failed.  So what is making Google's strategy a success where others have failed? It's a complicated matter.

The Android devices aren't free.  They are free or sold to us at a reduced price because of the subsidies provided by wireless providers in order to lock us into lucrative multi-year contracts.

But what of Chrome OS?  Not all netbooks or tablets installed with Chrome OS will be subsidized.  And this also includes the coming flood of Android tablets that will be on the market soon.  I'm betting that Google has this worked out.  Part of the solution will be white spaces networks that Google is supporting.

Also, Google can reduce cost of providing cloud services through other means than scale.  It recently applied and was granted permission to be an energy trader.  I'm betting that figure big into Google strategy.  And speaking of energy, Google is also a backer of many green energy initiatives.  Think down the road for a second.  Free energy from the elements, sun and wind.  If Google is able to reduce its electrical bill, that will only add to its bottomline.

Futhermore, Google is also moving into markets dominated by others.  Music, video, and ebooks quickly come to mind.

If you're willing to see a future with Google's services permeating nearly every aspect of your online life, things are looking bright.  Today, the EU is looking at Google's dominant position.  Apparently, some aren't comfortable with.

More About Android price drops at On Android.

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