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Google Swings for the Fences and Tries to Knock Apple, Microsoft, IPhones and Office Apps Out of the Park!!!
This is an excerpt from part two of a multi-part series on the companies vying for
dominance during the 3rd major paradigm shift in personal and enterprise
technology over the last 30 years. This one will be a biggie (not
smalls) and promises to create an investment behemoth out of the winner
and relegate the losers to relatively niche markets. This is saying a
lot considering the size of the companies participating in the battle
for the pole position. I created this series to provide a truly
objective, truly informed, and truly analytical (from an empirical
perspective) knowledge source on this very important intersection in
personal computing and distributed media. This series will end
with a full BoomBustBlog style forensic report on the company we feel
has the most to gain from these wars from an investor’s
perspective.Those who are not familiar with my hard-edged, yet objective
analytical work should reference past performance and media appearances for a quick background.
It is imperative that readers first review “There
Is Another Paradigm Shift Coming in Technology and Media: Apple,
Microsoft and Google Know its Winner Takes All” before moving on so
as to get a thorough background as to what is at stake, who the players
are, and what mobile technologies are being released into the consumer
and enterprise realm. This is a lengthy, meaty, objective and
information packed post that was initially intended to go out to
subscribers only (click here to subscribe to our research services). I
welcome you to compare it to the research you find available from
technology, financial and strategic advisory firms, including and
particularly Goldman Sachs (click
here to see what I mean) and let me know whose analysis is more
accurate, in depth and thorough (not to mention less expensive).
Google is Giant, Online Ad Agency Cum Enterprise Software Developer and consumer electronics and media giant! WTF! That's right...
At the end of 2009, Google earned $22.9 billion or 96.8% of its total
revenues through advertising, out of which $15.7 billion was related to
its own websites, with the remaining $7.2 billion related to other
network websites.
Licensing and other revenues accounted for only 3.2% (or $761.8
million) of the total $23.7 billion revenues, at the end of 2009.
Amongst the technology companies, Google’s business model is highly
dependent on traffic as compared to traditional technological businesses
like that of Microsoft which are more dependent on deriving revenues
through products.
As you can see, Google is basically a giant web-based ad agency. They
are smartly modifying their strategy to become much more, using the
healthy and ubiquitous ad agency cash flows to finance high risk/high
reward ventures in a diverse, myriad array of ventures. Google may very
well be the world’s most prolific venture fund as well as its most
profitably ad agency.
For Google:
· Advertising is not a market but a business model
· Any market that can attract advertising is a target for Google :
This is clear with the Google’s latest launch of Nexus One phone (to
capture mobile advertising, development and marketing partners) and
plans of launching Google TV (to capture the television advertising
market)
Google recognized Apple as its main competitor as far back as 2006 and has carefully orchestrated its downfall with the best laid plans. Those plans are now coming to fruition...
Notice how Google has directly funded all of the technologies that have
converged to threaten to topple Apple’s smartphone hegemony? Sprint’s 4G
Wimax tech, HTC’s collaborative use of the Android OS and the
customization of the interface through HTC Sense! Google is, and has
been for at least the last three years (since the launch of the IPhone), Apples biggest threat.
Most prominent sell side analysts still do not understand the Google business model and stratey, yet proffer buy ratings as if they are going out of style!
o Goldman Sachs: “We do not
view Google’s new device as a near-term threat to the iPhone 3GS as: 1)
the price tag of the Nexus One does not seem aggressive enough to entice
potential iPhone buyers 2) Apple’s AppStore, which has over 115K
applications and over 3 [billion] cumulative downloads to date, remains
far ahead of competing app platforms; and 3) internationally, Nexus
One’s availability seems limited at this point, with the unlocked
version only available in three countries and Vodafone’s UK subsidy not
starting for a few months.”
Reggie Middleton begin_of_the_skype_highlighting end_of_the_skype_highlighting’s
View
Goldman’s analysts have COMPLETELY struck out on this one. They
absolutely failed to grasp both the strategic implications and the
successes stemming from the strategy behind the Nexus One, which I will
explain shortly. This is also not the first time that
Goldman has been so wrong on so important a topic to their retail and
institutional clients. See Reggie
Middleton begin_of_the_skype_highlighting end_of_the_skype_highlighting vs
Goldman Sachs, part 1 and “Blog
vs. Broker, whom do you trust!”.
Though the Nexus One
cell phone (launched towards the beginning of 2010) which debuted a
new, web-based distribution model that didn’t gather the expected
acceptance from consumers (most likely because it skirted both the
influence and the marketing power of the telcos), the Company has
continued to launch newer technologies and service offerings based upon
the template pioneered by the relatively high end Nexus One. In
addition, its open source Android OS mobile phone operating system continues to gain market acceptance and
has been a key milestone so far – beating Apple, RIMM. Microsoft, Nokia
and Palm in handset activations for the last quarter – and the HTC EVO
handset distributed by Sprint is widely accepted as the best all around
handset available as well as the first handset to offer any credible
challenge to Apple’s IPhone series – including the brand new, sexy but
problem-riddled IPhone 4G.
The full 20 page+ analysis is available to peruse for free from the BoomBustblog: The Mobile Computing and Content Wars: Part 2, the Google Response
to the Paradigm Shift
- advertisements -
Product trajetory and momentum............Those are key words with Google. It isn't what they have on the shelf today, it is what they are planning on tomorrow. Revenue stream allows the planning for the next line of products.
Mitchman: Bill Fleckenstein publicly was shorting RIMM within the past few months perhaps 20 points higher. I don't know if he's covered.
Thank you. I would like to ride that stock all the way down.
Oops, another one who does not understand Apple: Apple is not a computer or media company or anything else. It is a "lifestyle company", or what used to be called a "fashion house".
Yes, it has fanboiz. That is the point of a fashion house. The core of a fashion/lifestyle company is the Alpha Designer. The AD knows what you want before you do. The AD must have total and complete control. The AD can say, "this is not good enough, try again" with no interference from them bean-counters. (Or in Steve Jobs's case, scream and throw it against wall.) That is why the iPhone is so damn nice: he made it gestate for the full 9 months.
This is why Apple foundered in The Interregnum between Sculley kicking out Jobs and (as an Apple engineer said) "when Daddy came back". The company was run by a series of perfectly competent corpo types: the marketing guy, the manufacturing guy, and then Andropov. It was not ruled by an Alpha Designer with an iron fist in an iron glove.
The Android was originally done by Apple types (Andy Rubin et. al) who really do understand design, but has been surrendered to people who have no taste. Open source types will make it the Linux of shrunken computers: functional and clunky, competing solely on cost. Now, Apple has gone beyond a fashion house to a 50/50 design + strategic marketing shop. It's not clear to me that Jobs can handle this.
Jobs can handle Randall at at&t and that is why they are going down.............Or Randall will surprise everyone in less than 24 months.
Functional technology is REALLY hard-to-find. This is a very good feature. Used to be taken for granted -- now it is rare.
How much longer can RIMM stay in business? The company's products stink and it has been living off its corporate franchise way too long. Isn't this a perfect shorting opportunity?
both are loaded with spyware. can anyone guess the privacy orientated alternative?
Good old Linux:
http://www.google.com/search?q=linux+phone
ex.:
http://www.linuxfordevices.com/c/a/Linux-For-Devices-Articles/Linux-Mobi...
http://tuxmobil.org/phones_linux.html
A very uneducated guess: Blackberry?
My knowledge on such matters is shamefully small, but I detest spyware.
Do you have a reccomendation for privacy oriented travelers?
As a retiree/investor who barely knows how to text and retrieve messages on a plain old cheapo LG cellphone, I love this discussion. For now, AAPL's chart so crushes GOOG's, and it appears earnings ests are going to be easy to beat. So in the long run, maybe Reggie is right, but we're all dead in the long run. Is AAPL the equiv of Mr. Softee circa 1996 or 2000? (Or better than that . . .)
EQUIV? More like Apples and Ice Cream. ;)
Maybe you're comparing a chart contour when you see the similarity?
Cloud Computing is an explicit waiver of 4th and 5th Amendment Rights in the United States. Add that in with the new subpoena powers in the Financial Regulation Bill, and no corporation with a nexus in the United States will shift over to the cloud computing and smartphone/PDA as dumb terminal paradigm any time this century. The upcoming Google Chrome OS based tablets/dual screens/large PDAs will not be acceptable to most competent IT departments in the USA ( and Japan and China and UK and most of EU) because of this legal pitfall.
Talk amongst yourselves....
Second point, I use an unlocked Windows 6.5 HTC PDA, which allows me to edit the HOSTS file, blocking a good 95% of English language advertisements and banners on my phone. Blackberry in combo with Opera minibrowser has similar option. Similar app is available for Android 1.5 which I'm sure is available on current build of Android OS.
I don't see how advertising as a business model will survive unless as some websites do (ft.com for example), they force a java applet or flash layer on top of content that requires a click through to reach media content.
Very nice report Mr. Middleton.
Thanks. The cell phone for Google is a driver of license fees. Cloud computing can either be outsourced or brought in house. IF you are concerned about security, simply host your own servers. Your point in custom ROMs is exactly the weak point in Apple's business model.
Oh, and don't get me started on the iPad which is now taking Enterprise companies by storm in a very early phase of its launch. It is the perfect device for Sales reps, etc.
I am sure RobotTrader or the Solar Guy could find some hot Pharma babes to post.
Finally, Macs. They are still growing! Huge upside there.
just saying.
I have the initial Apple report in front of me now, putting in some of the fine tuned touches. You are not totally correct in your estimations but I do see your point. Apple has come no where near matching Google with the mere announcement of IAd and $60 million of commitments (compared to $23 billion of actual revenue from Google).
The Android experience and technology is simply superior to that of the IPhone, but the IPhone has the "fanboi" effect which is getting a serious knocking due to the quality issues of trying to rush the devce out of the door in order to match the release of Android 2.1 and 2.2 devices. These quality issues will continue for Apple is not an experience cell phone manufacturer, HTC and Motorola are. There is no way in the world Apple will be able to match the pace of the prolific, low cost HTC PLUS the 2 million plus developers hacking aways at Android OS code under the shepherding of Google.
The superiority of the HTC Evo over the IPhone 4 is proof of this, and this is before taking into consideration the substantial OS upgrade coming up in the next couple of months (Froyo/Android 2.2), which is akin to Apple releasing an IPhone 4Gs 70 days after v4 product launch - Which they may have to do to remedy the many technical and performance glitches being reported upon throughout the new media and the blogs combined with blundering PR responses to them, ex. users are holding the phone the wrong way, or "we have been reporting signal strenght incorrectly, but now its fixed - look at the extra bars!"
Boys, boys, don't fight - there's plenty of faulty business model to go around!
I say, they are both making optimistic bets on customer spending (Google on advertising, Apple on gizmos), in a depression. Both will get down side suprises. Apple has a bigger cahs hoard, but also has a more expensive development cycle (historically).
I say, short 'em both.
The user experience might be arguably superior (they need to figure out ways to simplify the experience for non-technical users), but the developer experience on the business angle is significantly worse. Technically-savvy users can pirate either from the Apple AppStore or Android Store without problems.
However, the AppStore makes it difficult for non-technical users to pirate apps, while the Android Store allows non-technical users to easily "return" an app while still retaining use of it. The Android backers need to address this business issue, or they aren't going to attract sufficient developer interest over the long haul, as the normal economics of piracy in the mobile app space make casual pirating a much bigger factor due to the embedded expectation for lower prices on mobile apps for the time being. See the following discussion for details.
http://www.reddit.com/r/IAmA/comments/caq8f/iama_developer_who_sells_the...
You apparently didn't read the whole analysis on my site. developer interest for the Android platform has already surpassed that of Apple, msft and all other platforms.
That's not surprising nor in my view anything to write home about. Google employs 5,000+ software engineers, they have their marching orders. Don't forget the near psycho-sycophant crowd, slashdot junkies and such.
Apple fans are the antithesis of goog fans, they want their tech "inuitive", GUI baby, the prettier the better.
HAHA
+100
Some classic lines in that vid, in case anybody hasn't seen it yet some comedy at the iphone4's expense
HTC EVO versus Iphone4
http://www.youtube.com/watch?v=FL7yD-0pqZg
The proof is in the Freudian slip: "hacking" Android is just what everyone is doing right now. Open-source OS + no real centralized control over distribution = virus-writer's wet dream.
Apple will be content to let Android become the Windows of mobile devices if it wants to.
Uh-huh. Who told you that? They are not your friend.
"Apple will be content to let Android become the Windows of mobile devices if it wants to."
Man, I just got done reconfiging 10,000 Windoze workstations in the GPO on the W2K8 server when I read this. I think Google'd be quite happy with that result.
You consider Googe corporate to be "no real centralized control over distribution". Thus far HTC, Samsung and Motorola (the three largest handsent makers in this country and 3 or the top 4 or 5 in the world) disagree with you.
Well, we will see. Apple has successfully countered Google with iAd and now there is no ad revenue in that large segment of mobile. Let's now look at the growth of HTML 5, and sophisticated browsers (which Apple has been spearheading), and we can see another threat... disabled advertising. I inadvertently do this on my Mac with Click-To-Flash, which stops all flash unless I select it. This has given my computer new life, a cooler operating temperature and a much faster browser experience.
So, this leaves Google with about a 30% share max on mobile advertising. They are literally one or two big deals away from decline if Bing (Microsoft) and Apple (iAd) and other third parties start inking exclusive deals for search.
Next lets go onto innovation. What has Google really invented? Search? NO. Advertising? (No they bought Overture), simplistic cloud services?! What they are as you correctly surmised is a venture fund. We will see how far that takes them.
Next, Android. Being a mobile developer, iPhone and now some Android, the Apple marketplace and device targeting is sooooo much simpler, easier and profitable than the Android which has so many different configurations, quality issues, and lack of really "selling" apps vs free.
Be careful with Google at this point.
But then, since when has Apple innovated (recently)? All its products are (way) overpriced versions of existing things but in a "smooth" package. Apple or Google? I choose neither...
People still don't realize that the Nexus One is mostly for developers who want the latest and greatest Android phone for development purposes but without having to go to a wireless company.
Google never planned on getting rich off trying to sell a $600 phone. It was merely releasing a vanilla version of the "2nd" generation Android devices. The major wireless telcos took the Nexus One and now brand it as "Droid Incredible" and the HTC EVO 4g.
But it looks like the Google bulls are out in full force this week after the stock dropped 13 days in a row.
You're absolutely correct (I think that's what I said in the analysis excerpt above). If any product will knock Apple off of the smartphone perch, it will most likely be an HTC/Android or (to a lesser probability) Samsung/Android combo. It can be said that the little recieved Nexus One sowed the seeds for the next generations of smart phones - the convergence of the smartphone and tablet, ala the Dell Streak or the HTC Evo.
First of all, Blackberry still reigns supreme in terms of market share, apple is a distant second. In terms of platforms, google is the antithesis of apple. It's not about 1 specific superphone knocking bb and apple off of their perches, it's about an open platform, running on devices on every carrier and from almost every manufacturer taking over the market. Apple is insanely profitable, they make nice shiny things and market them very well, but apple's extreme locked down nature could hurt them in the end. The open plaftorm of the PC is what destroyed apple in the 80's and early 90's. While the android platform has pretty low numbers right now in terms of market share, they're the ONLY platform that has actually gained market share this last quarter.
http://www.comscore.com/Press_Events/Press_Releases/2010/7/comScore_Repo...
Not quite. RIM will probably ship just under 50M phones this year; Apple just under 40M phones. But look under the hood, RIM is underperforming in 3G, offset by upside on 2G. Carriers are using models like the Pearl as the give-away text&twitter phone. RIM is getting crushed by Apple and Android in 3G.
Keep your eye on Android. My guys were recently in China -- every single handset maker is developing an Android handset on industry standard 3G chipsets (as opposed to Apple and RIM's inferior radio chipset guts). The China handset complex is responsible for roughly 1/3 of the world's cellphone volume. We don't see it in the US, but these guys do serious market share in 2G feature phones in China, India, Lat Am, C/E Europe, etc.
Smartphone prices will be coming down, device choices will be going up, lots of stuff is going to be thrown at the Android wall and we will see what sticks.
Most obvious loser right now is Nokia (late on Symbian 3, and they probably need Symbian 4 to be competitive with Apple/Android; getting mega pressure from the low end by China Inc). RIM will probably hang in there longer, but they are definitely fighting strategic headwinds.
just like the 80s, Apple owns hardware and software on nicely designed devices but have higher end price, closed system...IBM and others sold the machines, clones of IBM made Wintel machines cheap, and Microsoft ended up with all the money and marketshare....now Apple owns hardware and software on nicely designed machines, are a bit higher priced and are a closed system...Nokia, Motorola, Samsung, RIMM sell the machines...and Google/Android will end up with all the money and marketshare on mobile devices...which will be most of future computing between smart phones, tablets and laptops.
In the 80s, MS made money from the beginning and market share was captured by IBM clones carrying DOS and Windows for MS, this time Google has to give away for free to get market share, but has surplus from ad business to fund this path to standards dominance and will have ads and licensing to generate income.....remember when desktops PCs squeezed out the middle-powered computers, caught up to them in processing power at less cost because all the competition and growth...will same happen with phones and tablets?
Google is in leauge with the Devil...............this company is EVIL.
Personally I think they are an arm of the Globalist Squids.
30-40% of goog revenue is fraudulent. Advertisers are catching on to this and I don't expect google to be able to "manufacture" top line numbers for much longer. I have seen scant coverage of this issue in mainstream, they only like to cover "whoo, google has a new logo" PR drivel, of course they have the boot on most "publishers" necks as they are the revenue source.
Google is much more evil than most think, a global taxing authority and a generator of "revenue" by virtue of manipulating click fraud filters. They can always beat the street, until they can't.
I suggest a look here for a quick click fraud overview:
http://www.anchorintelligence.com/ai/resources/category/traffic_quality_...