Now that Google is a Phone Company…

Will it also become a tablet company? Google plans to buy Motorola Mobility, the mobile phone part of Motorola, for $12.5 Billion and a $2.5 Billion breakup fee (what Google has to pay Motorola if the deal does not go through). Shrewd comments on the strategic reasons for the acquisition are coming from MG Siegler and Florian Mueller.

This is a big deal — a lot of money, and a lot of employees and mind-share. Google says that they are going to run Motorola as a separate business, but they are going to own one of the big phone makers and it will condition the way that they and all their competitors and collaborators look at Android. One of the interesting consequences of such a big shift is that it will lead to everyone in the technology space re-assessing their position in relation to Google and to other competitors. The wash from this wave will be felt even in the shallows of the digital magazine space. I offer three predictions from this perspective:

  1. This deal makes it more likely that there will soon be a competitive Android tablet. Soon means “not very soon”, but one year to eighteen months from now there will be a much better successor to the Motorola Xoom, which was one of the better Android devices but nothing like good enough.
  2. The first good-enough competitor for an iPad that comes from this alliance will be a low-end Google tablet, one that is very good with all standard Google stuff (Maps, Gmail, Google+, Picassa etc) but it will not be strong with consumer media. Google is too far behind to develop a decent competitor for iTunes in the next two years. So Google will increasingly push for free media and web apps for paid stuff, their development and engineering talent will focus on the hardware integration for a device that is brilliant with web services, web apps and the web. Google/Motorola will be in a good position to produce a competitor to the iPad which is not like the iPad, and which is not dependent on media licensing and app developers. A tablet for commodities and utilities at $99. Digital magazines will work well on this device as web apps, but the tablet(s) will not be tied to an e-commerce solution or an app store. This deal does nothing to remedy Google’s weakness in retail and support and direct consumer experience.
  3. So this makes it less likely that iTunes will face an effective Android competitor for media consumption. The wild card here is the strongly rumoured Amazon Android tablet. Amazon need this as a replacement for their eInk Kindle, but I wonder whether Amazon regard Google’s embrace of Motorola as a helpful step or an increased threat? Is there still scope for a Google/Amazon alliance against the Apple dominant media player?

About one thing I am sure: Apple are happy. Apple will not see the Google move as a significant threat; Apple strategists will be thinking that Google is boxing itself into a challenging situation and undergoing an identity crisis: running a manufacturer, trying to align developers, losing existing allies, facing increasing regulatory concerns, channel conflict and patent wars. Google now has a lot of problems that Apple has largely solved.

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