I’ve reblogged Bill Gurley a couple of times already and here’s another on the smartphone platform. I enjoy his analyses because they are rooted in a deep understanding of tech marketing strategy and economics. For the most part, I agree with his assessment. The new bit of info for me is this rumor that Google is subsidizing carriers and handset vendors.
“Recent support for Android-based devices appears to be correlated with significant up-front financial incventives paid by Google to both carriuer and handset vendors.” FBR goes on to suggest that these incentives may be as high as $25-50 per device. This is simply an offer that no carrier can refuse, particularly when U.S. carriers are currently in the habit of paying $50-150 per handset sold in subsidies.
If you read my past posts, I was all about subsidizing the app developers. But it’s clear why Google is subsidizing this side– because these partners still hold a lot of power in the value chain.
I just read that Palm announced that they’re subsidizing app development by awarding prizes for high priority apps. I wonder if Google’s approach would’ve been a better approach for them when they first launched.
Finally, I often wonder whether Apple will become the “Apple” of the smartphone market. At this point, it doesn’t have to be, but I fear that it might because Apple knows no other way. In the 90s, Apple survived because Steve Jobs came back and positioned the company to NOT compete against Microsoft. Apple’s core competency is in thriving by not playing by the rules of technology platform economics. That means there are three other quadrants of the mobile market that haven’t filled up yet and Apple might only end up dominating one of them.