Oracle vs. Google – The merry-go-round pt. II.

Reply to this post

It might have been better for Google if it had lost.

• The jury has found that Google’s use of Oracle’s APIs fitted the definition of fair use meaning that it will not have to pay Oracle anything for copyright infringement.
• Oracle will now appeal but in order to get this verdict overturned it will have to convince the appeals court that the judge’s instructions to the jury were biased and unfair.
• Given the history of the judge in question and what the appeals court said about him last time around, this will be less difficult than one would expect given the precedent.
• Oracle went into this case with a significant advantage (see here), but now the shoe is on the other foot meaning that Google is off the hook for now.
• However, considering the bigger picture, I think that a heavy loss and a massive punitive fine might have worked in Google’s favour in the long term.
• This is because at the root of all Google’s most pressing problems is the fact $11bn of its fastest growing mobile revenues is supported by open source software.
• Open source has shown to be very effective in the fixed world as when the code branches, the less effective branches die off leaving a single master code line.
• In mobile, the branches don’t die but continue to grow and multiply meaning that there are thousands of different implementations of Android running smartphones today.
• This results in the endemic fragmentation that hampers the user experience on Android, creates havoc with security and makes life very difficult for developers.
• I think that this is the major reason (demographics is a factor but less so) why Google generates less than half the revenue per user from an Android device compared to a user on iOS.
• This lower usage also erodes loyalty and the loss of high end users to iOS following the launch of the iPhone 6 is evidence of how little loyalty users have to Android.
• To make matters worse, Google is also unable to update the Android software on almost every Android device that runs its services meaning that its R&D is benefitting the competition more than itself.
• This is because when Google releases Android innovations at I/O, its competition can copy them and update their devices years before Google can.
• These issues hamper the appeal of any ecosystem based on Android unless its owner creates its own closed, forked version like Amazon, Alibaba and Tencent have done.
• I have long believed that Google will have to do the same thing and I am currently expecting this to begin happening in earnest in 2017.
• However, it is easier said than done as Google has long been an advocate for open source software and the backlash it will receive from developers when it moves in this direction will be severe.
• Consequently, I think that if it can point the finger at Oracle as the architect of its woes (see here) forcing it to close Android down, things will be much easier.
• Even if Oracle had won everything it was after, it still would have cost Alphabet only 4 months cash flow, which is probably cheap compared to what it will lose in the long run if it does not bring Android under control.
• My preferences remain with Microsoft and Samsung for the immediate term, Facebook once it has corrected in H2 2016, and Apple for long term income investors.