I’m back from holiday today (Majorca, very nice, thank you…) and have been enjoying catching up on reading and looking forward to getting back into the routine of posting every workday. Perusing my usual sources for inspiration (amongst which Viewsflow is becoming increasingly important) I hit on this wonderful post from Bill Gurley about Google and the ‘Less Than Free’ business model.
Bill’s first point is that this is VERY BAD NEWS for TomTom/Tele Atlas and Nokia/Navteq as Android now includes turn by turn navigation for free based on Google’s data (after they dropped Tele Atlas in October).
His second point, and this is where ‘less than free’ comes in, is that Google will effectively be paying mobile OEMs to use its Android OS by offering them a share of the search ad revenues that come with it. This presents a tough choice for Apple and RIM who must choose to either not match the competitive offering of free turn by turn navigation or pay royalties to Tele Atlas or Navteq on every device sold, threatening already tight margins.
It is worse news for mobile OS vendors Microsoft and Symbian who will face the same choice but will have few other dimensions on which to compete with Android and lower revenues per handset to soak up the cost of a license to Tele Atlas/Navteq.
Bill’s final point is that Google can make the same ‘less than free’ offer to PC OEMs who might choose to use Chrome instead of Windows or another open source alternative.
All this adds up to a very powerful set of moves from Google and have the potential to significantly increase their stranglehold on the search market – which will be bad news for most of us. I have been impressed by Microsoft’s latest efforts with Bing, but it is hard to even dream about a search feature set which would compete with the structural competitive advantages that Google is building.
Afterword: naysayers on ‘free’ in general take note.