This seems ominous for Google, which spent $12.5bn for Motorola to stake a shaky claim in mobile and lord knows how much on G+; after this, what's left for them to do to stake a claim on social mobile? Buy Twitter? What else do people do socially with their phones?
Totally possible for Google to sink tens of billions into mobile and still wind up on the bottom of the value chain, commoditized along one axis by Facebook and utterly outmarketed by Apple (with its extraordinary profit margins and increasing domination of supply chains) on another.
Or maybe GOOG/Twitter is in the air, and Facebook is reacting defensively?
The game is scored in profit. Revenue and market share matters only as a means to the end of securing profits. Android has a huge market share (and, dearly bought), but even 1st & Goal doesn't matter unless you actually score.
I don't keep super close track, so maybe Apple's commanding profit share lead is eroding sharply. Last I checked, "commanding" was indeed the word for it.
Again, all I'm saying is that you can spend a lot of money for a huge footprint in the market and still find yourself at the bottom of the value chain: you can be the guys facilitating a lot of commerce for other people without taking a significant cut.
If you don't believe Google cares about that, why are they wasting their time with G+? Facebook isn't going to be a search engine. Nobody believes that. The worry is that Facebook is going to commoditize search by moving the profits it generates somewhere else.
I'm all for capitalism, but that statement strikes me as particularly narrow-sighted -- with due respect for tptacek (since I always find your comments insightful). Plenty of people and corporations are not purely motivated by profits. For example, kudos to GOOG for making a cheap smartphone OS available to the 3rd world.
The game is scored in total value of the ecosystem. Apple captures a higher % of iOS ecosystem value because it's the only device manufacturer. Google captures a lower % of a larger ecosystem, leaving value on the table for OEM partners. The latter is a stronger long term strategy.
No, the game is not scored in "total value of the ecosystem". The total value of the ecosystem is only relevant if you control the whole ecosystem. Google is making far less profit on mobile than Apple is. If its strategy of growing the ecosystem out and skimming less profit from it is a good one, we should see it in their bottom line. We aren't, nor do we seem to be trending that way.
Maybe someday soon Google's strategy of letting a thousand Android devices bloom will pay off. But that is still a "maybe". Apple has tens of billions of "definitely's" to counter that maybe.
Meanwhile: I think people are getting hung up on this whole Apple vs. Google point, and getting away from my real point, which is that:
(i) Google's bids for a stake in mobile have been hugely expensive and not particularly profitable,
(ii) Apple's bids for a stake in mobile have been hugely expensive and hugely profitable, and
(iii) Facebook's bids for a stake in mobile have been expensive but orders of magnitude cheaper than Google's or Apples, and could end up hugely profitable in the long term.
Facebook will end up looking pretty smart if that's what happens. They didn't even have to buy a cell phone manufacturer or write their own OS!
But after the first quarter would you rather be the team winning 2-0 thanks to a safety, or the team who have dominated the game and somehow are yet to get any points on the board?
I'm not saying Apple have only scored the safety, or that Google have dominated, just that we're no-where near the end of the game and given Google's game plan is a long one we can't say that it's worse, not right now - we can only predict that we think it is.
Android is selling faster, but it has yet to have a larger installed base. It will likely happen soon, but iOS had a large lead in terms of start time and the iPad is killing in the tablet market.
Obviously there are many factors which will adjust the true installed base (broken devices, devices no longer update-able, etc.).
Utterly outmarketed by Apple? What a curious take that is, though it is a natural statement when you're so desperate to try to drag Google into this.
Instagram is a tool that has a limited shelf-life, with a userbase that is almost certainly already on Facebook. Declaring this some sort of coup for Facebook seems weird, given that the overwhelming sentiment is that Facebook has more net worth than brains at this point.
I was replying directly to the undercurrent of your message which is rather hard to miss.
"This seems ominous for Google...a shaky claim in mobile....what's left for them...sink tens of billions into mobile and still wind up on the bottom of the value chain...utterly outmarketed"
That's the TLDR version of you pulling Google into a relatively small acquisition of a largely irrelevant tool that a subset of one relatively small platform is even engaged in. Most people reading this story quite rightly react "Instawho?", whereas you see it as a clanging bell of doom for Google. And I'm the emotional one?
I don't see anyone reacting "Instawho?", let alone doing so "quite rightly". Instagram is extremely popular. Stories about how Instagram's backend works have been at the top of the front page on HN for weeks.
I think you think this is some kind of Jets/Eagles thing here, and I'm wearing the green jersey. No. I don't have a side, and I don't think the competitive battle happening here is rational; I just acknowledge that it is happening.
Small point: Your Jets Eagles analogy is really opaque. I'm still not even sure if you realize they both wear green jerseys. (I assume that was the point, but it's most unclear.)
Totally possible for Google to sink tens of billions into mobile and still wind up on the bottom of the value chain, commoditized along one axis by Facebook and utterly outmarketed by Apple (with its extraordinary profit margins and increasing domination of supply chains) on another.
Or maybe GOOG/Twitter is in the air, and Facebook is reacting defensively?