> One example is using Android to prevent a monopoly on the smartphone side.
yeah, good point. i think it helps us understand the Android ecosystem, its SDK, its user base, etc.
it doesn't seem like Google, a search and advertising company, had a natural reason to enter the mobile phone OS market. and they didn't set out to create an "insanely great" mobile OS experience, either for the users or for the developers.
instead, the strategy was apparently to just shoehorn a camera OS into the mobile phone market, offer it for free, grab as many users as possible, and thereby disrupt/restrain Apple.
and it has worked quite well for Google. but Android has subjected users and developers to a pretty bumpy ride. a lot of people went along for that ride because the upfront costs appeared to be lower than Apple/iOS. i don't know about the longer term costs though.
Yep, one strategy analysis that I (sadly) rarely see being done is evaluating the value chain.
Essentially, you look at all the links on a value chain and look at how competitive each one of those markets are. The links with the least competition will capture most of the excess profits in the chain, and the links with the most competition tend to be commoditized and have zero economic profits (which are different from financial profits).
Taking Google's online ads value chain, for example:
(You could rearrange this in a few different, but still valid, ways)
What would happen if there was a single device maker? Or a single OS maker? Those would be able to yield monopoly pricing, capturing most of the profits in the value chain.
Now look at those links: in how many of them Google operates now in a strong way?
- Device makers (Pixel)
- OS makers (Android, ChromeOS)
- Browser makers (Chrome)
- ISP/carriers (Fi, Fiber)
- Online platforms (YT, Blogger, G+, sites, etc.)
- Content creators (indirectly, sponsoring)
- Ad platform (Adsense & Doubleclick)
Now look at where it makes money:
- Ad platform (Adsense & Doubleclick)
All those other businesses exist to protect the revenue-generating business.
one of those links i personally find interesting is "content creators."
on the top end, it appears that a handful of the apps in the Google Play Store make the lion's share of the revenue (e.g. Facebook, Google itself, and some really strong game companies).
at the same time, i've heard estimates that 50% of the independent app creators earn less than $500 per month. and it's getting worse.
in short, the android app market was quickly populated by a huge number of independent app creators (who presumably thought it would be a good, durable, new line of business). but, for the most part, these app creators became a low-income-neighborhood/swamp around the top app creators.
but Google still (indirectly) benefits from this arrangement because it offers the appearance of a free, open, lucrative, land of opportunity -- a healthy marketplace.
> who presumably thought it would be a good, durable, new line of business
Building an app isn't any different from starting a company. If you're a self-employed app developer, there's a strong chance that your app will just be yet another random app with not key differentiation.
Apps are just as competitive as other markets, and often even more as the barriers to entry to creating an app go down. This is the same with content: when creating content became almost free (hosting is free, you have a camera in your phone already, basic video editing is free) that lowered the barriers to entry, dramatically increasing competition and therefore reducing the available profits.
So, by reducing the cost of creating content, Google made its store and the ad business more profitable.
Now on some of the "monopoly" arguments being thrown around: people usually define monopoly in two ways:
1) Causes harm to consumers
2) No harm to consumers (usually benefits) but drives other companies out of business
If you're proposing (2), you're arguing that the government should be protecting less efficient companies.
yeah, good point. i think it helps us understand the Android ecosystem, its SDK, its user base, etc.
it doesn't seem like Google, a search and advertising company, had a natural reason to enter the mobile phone OS market. and they didn't set out to create an "insanely great" mobile OS experience, either for the users or for the developers.
instead, the strategy was apparently to just shoehorn a camera OS into the mobile phone market, offer it for free, grab as many users as possible, and thereby disrupt/restrain Apple.
and it has worked quite well for Google. but Android has subjected users and developers to a pretty bumpy ride. a lot of people went along for that ride because the upfront costs appeared to be lower than Apple/iOS. i don't know about the longer term costs though.