Google – One Purpose

Android One’s sole purpose is to push Google’s ecosystem into the lower tiers.

• Google has announced a new reference design for low cost Android called Android One at an event in India.
• The launch of this design goes hand in hand with availability of three devices from Micromax, Spice and Karbonn which will sell for around $105.
• MediaTek is also a central piece of this initiative as the initial designs are all based on the MT6582 which is a big factor in the reasonable specifications being able to hit the $105 price point.
• This reference design specifies stock Android meaning that it will come with the full suite of Google services as well as Google Play.
• There is no scope for OEM or operator customisation but Google has allowed their apps to be installed alongside its own.
• I can be certain that these devices are first and foremost Google devices and its own services will be front and centre.
• Importantly, it is Google that will control the updating of these devices meaning that Google will have almost total control of these devices.
• Google is the biggest ecosystem but it really only has a strong presence in developed markets and on higher prices devices.
• In emerging markets it is a fragmented free for all where the vast majority of devices are forked versions of Android where Google is not present.
• About these users Google learns virtually nothing and therefore its ability to earn revenues from advertising is non-existent.
• These users will be of much lower interest to advertisers and the marketing spend per device is going to be just a fraction of what it is in developed markets.
• However, these markets are so big in terms of the number of users that the revenue opportunity is very substantial even at a tiny spend per device.
• Furthermore, this is where most of the growth will come from in smartphones making this space a must from Google’s perspective.
• For example there are 30% more people in India alone than there are activated Android devices in the world today.
• In order for Google to monetise this opportunity it must push its services into the lower tiers which to date has been dominated by others.
• This is because it is much cheaper and easier to make a non-Google compliant device and the maker can do whatever it likes in terms of software and services.
• The main issue as I see it is that in the history of the handset industry, reference designs have never been successful.
• The logic for using them is undeniable as it makes it much easier and cheaper to make a smartphone but in practice no one has been able to stick to the design.
• This has had the effect of substantially increasing the cost of the devices making them uncompetitive and undesirable to users.
• This case may be different as these manufacturers will have all agreed not to deviate from the platform for these devices putting the onus for success on their appeal to users.
• If these devices prove popular, I can see Google meaningfully expanding its reach into emerging markets (with the exception of China that has its own plans).
• History is not on its side, but the right elements are in place for it to be different this time around.