7 ms·

Google Redefines Disruption: The “Less Than Free” Business Model

111 points by ypavan 17y ago

mooism2 17y ago
I don't think consumers will see it as being cheaper than free. I think they'll see it as something that's part of the phone (service) they pay for.
- DrJokepu 17y ago
  I think by 'less than free' the writer of the article meant 'subsidized by Google searches' - that is, not only Google gives away Android for free, it also pays a share on the income on Google ads clicked on the devices to carriers.
  - mooism2 17y ago
    I was reacting to the last paragraph: > Another perhaps even more important factor is that when a product is completely free, consumer expectations are low and consumer patience is high. Customers seem to really like free as a price point. I suspect they will love “less than free.” I don't see how customers will see stuff from Google on their Google phone as "less than free". The carriers will get subsidies, but they're not the ones who will need "patience". So I don't see how the writer can justify that last paragraph. Am I missing something?
- mcxx 17y ago
  By "less than free" he meant that Google is actually giving away money to phone producers, if they decide to build an Android based phone.
oliverkofoed 17y ago
"Less than free" sounds a lot like what i would normally just call "revenue share".
- fizx 17y ago
  As easy as it is to be cynical about this sort of thing, coining a new phrase brings a fresh perspective, and additional abstraction. Whereas before I thought of service pricing and revenue share as two separate things, now I see them as part of a coherent strategy.
iamwil 17y ago
Thought it was a rather insightful read, even if it gives new names to old things. It also makes me wonder what the next thing will be to marginalize the internet, just as the internet marginalized the OS. A lot of this strategy hinges on people using google as a default search, and advertisers using it to perform targeted advertising. I think when you see another way that people find out about things they want to use (and pay for), that'll be a time when the tides turn. (saying it now, it sounds obvious)
pierrefar 17y ago
So when MS bundled Internet Explorer, that was bad because it was using its profits from selling Windows and Office to subsidize its entry into a new market. Now that Google is using its ad revenue to build a mobile operating system (not its core business) and bundle really good value-add, that's good? Details: http://en.wikipedia.org/wiki/United_States_v._Microsoft http://en.wikipedia.org/wiki/United_States_v._Microsoft Is our memory really that bad?
- rationalbeaver 17y ago
  When Windows bundled IE, it had 90+% OS market share. Google currently accounts for about 3% of the smart phone market. It's okay to fight dirty when you're coming from behind.
  - gaius 17y ago
    You have to compare like with like. At the time MS decided to bundle IE, what was its percentage of browsers?
    - rortian 17y ago
      Anti-trust is an interesting area of law and I recommend studying it if given the opportunity. In the 90s Microsoft abused its desktop OS monopoly to destroy another companies product. Right now, Google is leveraging its map data to help its smart phone OS. This could be a legal problem in the future if: Google becomes the dominate provider of such data. Android dominates smart phones and they change the license.
      - gaius 17y ago
        I think that people have forgotten that Netscape also gave their browser away for free. Google is not leveraging its data in this case so much as it it leveraging its pile of cash made from its dominance in search. The situations are analogous.
        17y ago
robryan 17y ago
It's going to be really hard to compete with Google on these offerings as a 3rd party mobile platform provider or a GPS software provider when there main product is up against a quality product given away to improve the overall advertising business.
chasingsparks 17y ago
Couldn't you argue that they already have used this model before -- with FireFox? Stretching it a bit further, couldn't you say PayPal used the "less-than-free" model by giving their customers money for joining and for sending joins in its early days?
jbellis 17y ago
Dumb question: why is turn-by-turn so hard if you already have map data?
- zaphar 17y ago
  map data just shows where the roads are. Turn by Turn data shows which roads are one way, which side of the road the exit for that interstate is, and other such detail that you would need to know besides just the lines on the map.
  - jrockway 17y ago
    But Google Maps has had that data for years.
  - jrockway 17y ago
    But Google Maps has had that data for years. I assume they just signed something saying they wouldn't use that data for turn-by-turn navigation. (Remember, Google Maps has had driving directions forever. It just showed you all the turns at once, instead of as you were driving.)
    - spc476 17y ago
      It isn't 100% accurate though. For instance, these driving directions: http://maps.google.com/maps?f=d&source=s_d&saddr=NW+51st+St&daddr=26.390832,-80.087961&hl=en&geocode=FTC_kgEd3OQ5-w%3B&mra=dme&mrcr=0&mrsp=1&sz=17&sll=26.393129,-80.090553&sspn=0.007208,0.007242&ie=UTF8&ll=26.392869,-80.089978&spn=0.007208,0.007242&z=17 http://maps.google.com/maps?f=d&source=s_d&saddr=NW+... are not correct. While 4th Ave is bi-directional, the segment between NW 51st St and NW 50th Pl is one way, north only (towards NW 51st St). I don't know if other GPS systems get this correct or not (I don't have a GPS system to check).
    - zaphar 17y ago
      I'm assuming that's true. Using the data they had from a third-party for turn-by-turn would have cost them extra. Thus the decision to build their own.
msg 17y ago
Naysayers to these assertions will likely have the same retort – quality is key. They will argue that Google’s turn-by-turn apps are inferior to their well honed market leading products. ... I don't think this is credible just from watching the demo. The GPS devices aren't connected to the internet. Satellite data, street view, and maps search with voice are pretty killer. They're ahead of my Garmin on features. More videos here: http://www.google.com/mobile/navigation/index.html#p=default http://www.google.com/mobile/navigation/index.html#p=default
- richardw 17y ago
  And traffic data with alternative routes to use. The connection makes it easy to report congestion and get updates.
chipsy 17y ago
The point about Chrome OS also being a revenue-sharing OS is a very perceptive one. Existing Linux distributions already get significant revenue by shipping a customized Firefox with a Google search box. Giving a share to the manufacturer is the logical next step. Revenue sharing seems to be a common evolution for many business models, where the infrastructure exists to support it.
tolmasky 17y ago
At this rate everything will be made free and supported by advertising, at which point there will be nothing left to advertise.
- sahaj 17y ago
  i don't get it? please clarify!

111 points by ypavan 17y ago

I don't think consumers will see it as being cheaper than free. I think they'll see it as something that's part of the phone (service) they pay for.

DrJokepu 17y ago
I think by 'less than free' the writer of the article meant 'subsidized by Google searches' - that is, not only Google gives away Android for free, it also pays a share on the income on Google ads clicked on the devices to carriers.
- mooism2 17y ago
  I was reacting to the last paragraph: > Another perhaps even more important factor is that when a product is completely free, consumer expectations are low and consumer patience is high. Customers seem to really like free as a price point. I suspect they will love “less than free.” I don't see how customers will see stuff from Google on their Google phone as "less than free". The carriers will get subsidies, but they're not the ones who will need "patience". So I don't see how the writer can justify that last paragraph. Am I missing something?
mcxx 17y ago
By "less than free" he meant that Google is actually giving away money to phone producers, if they decide to build an Android based phone.

oliverkofoed 17y ago

"Less than free" sounds a lot like what i would normally just call "revenue share".

fizx 17y ago
As easy as it is to be cynical about this sort of thing, coining a new phrase brings a fresh perspective, and additional abstraction. Whereas before I thought of service pricing and revenue share as two separate things, now I see them as part of a coherent strategy.

iamwil 17y ago

Thought it was a rather insightful read, even if it gives new names to old things. It also makes me wonder what the next thing will be to marginalize the internet, just as the internet marginalized the OS. A lot of this strategy hinges on people using google as a default search, and advertisers using it to perform targeted advertising. I think when you see another way that people find out about things they want to use (and pay for), that'll be a time when the tides turn. (saying it now, it sounds obvious)

pierrefar 17y ago

So when MS bundled Internet Explorer, that was bad because it was using its profits from selling Windows and Office to subsidize its entry into a new market. Now that Google is using its ad revenue to build a mobile operating system (not its core business) and bundle really good value-add, that's good? Details: http://en.wikipedia.org/wiki/United_States_v._Microsoft http://en.wikipedia.org/wiki/United_States_v._Microsoft Is our memory really that bad?

rationalbeaver 17y ago
When Windows bundled IE, it had 90+% OS market share. Google currently accounts for about 3% of the smart phone market. It's okay to fight dirty when you're coming from behind.
- gaius 17y ago
  You have to compare like with like. At the time MS decided to bundle IE, what was its percentage of browsers?
  - rortian 17y ago
    Anti-trust is an interesting area of law and I recommend studying it if given the opportunity. In the 90s Microsoft abused its desktop OS monopoly to destroy another companies product. Right now, Google is leveraging its map data to help its smart phone OS. This could be a legal problem in the future if: Google becomes the dominate provider of such data. Android dominates smart phones and they change the license.
    - gaius 17y ago
      I think that people have forgotten that Netscape also gave their browser away for free. Google is not leveraging its data in this case so much as it it leveraging its pile of cash made from its dominance in search. The situations are analogous.
      - 17y ago

robryan 17y ago

It's going to be really hard to compete with Google on these offerings as a 3rd party mobile platform provider or a GPS software provider when there main product is up against a quality product given away to improve the overall advertising business.

chasingsparks 17y ago

Couldn't you argue that they already have used this model before -- with FireFox? Stretching it a bit further, couldn't you say PayPal used the "less-than-free" model by giving their customers money for joining and for sending joins in its early days?

jbellis 17y ago

Dumb question: why is turn-by-turn so hard if you already have map data?

zaphar 17y ago
map data just shows where the roads are. Turn by Turn data shows which roads are one way, which side of the road the exit for that interstate is, and other such detail that you would need to know besides just the lines on the map.
- jrockway 17y ago
  But Google Maps has had that data for years.
- jrockway 17y ago
  But Google Maps has had that data for years. I assume they just signed something saying they wouldn't use that data for turn-by-turn navigation. (Remember, Google Maps has had driving directions forever. It just showed you all the turns at once, instead of as you were driving.)
  - spc476 17y ago
    It isn't 100% accurate though. For instance, these driving directions: http://maps.google.com/maps?f=d&source=s_d&saddr=NW+51st+St&daddr=26.390832,-80.087961&hl=en&geocode=FTC_kgEd3OQ5-w%3B&mra=dme&mrcr=0&mrsp=1&sz=17&sll=26.393129,-80.090553&sspn=0.007208,0.007242&ie=UTF8&ll=26.392869,-80.089978&spn=0.007208,0.007242&z=17 http://maps.google.com/maps?f=d&source=s_d&saddr=NW+... are not correct. While 4th Ave is bi-directional, the segment between NW 51st St and NW 50th Pl is one way, north only (towards NW 51st St). I don't know if other GPS systems get this correct or not (I don't have a GPS system to check).
  - zaphar 17y ago
    I'm assuming that's true. Using the data they had from a third-party for turn-by-turn would have cost them extra. Thus the decision to build their own.

msg 17y ago

Naysayers to these assertions will likely have the same retort – quality is key. They will argue that Google’s turn-by-turn apps are inferior to their well honed market leading products. ... I don't think this is credible just from watching the demo. The GPS devices aren't connected to the internet. Satellite data, street view, and maps search with voice are pretty killer. They're ahead of my Garmin on features. More videos here: http://www.google.com/mobile/navigation/index.html#p=default http://www.google.com/mobile/navigation/index.html#p=default

richardw 17y ago
And traffic data with alternative routes to use. The connection makes it easy to report congestion and get updates.

chipsy 17y ago

The point about Chrome OS also being a revenue-sharing OS is a very perceptive one. Existing Linux distributions already get significant revenue by shipping a customized Firefox with a Google search box. Giving a share to the manufacturer is the logical next step. Revenue sharing seems to be a common evolution for many business models, where the infrastructure exists to support it.

tolmasky 17y ago

At this rate everything will be made free and supported by advertising, at which point there will be nothing left to advertise.

sahaj 17y ago
i don't get it? please clarify!