Google – Toothless in Europe.

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EU’s biggest impact could be in Africa.

• It looks like Google is about to receive a record breaking fine, but the EU has spent so long deliberating that its opportunity to rectify Google’s dominance of Android in Europe has long since passed.
• The whole issue is based around what is known as the Mobile Applications Distribution Agreement (MADA) which needs to be signed before Google will let handset makers get their hands on its Google Play.
• The MADA requires handset makers to put certain Google services front and centre on their devices and crucially to set them as default.
• It has long been established that being installed at the factory and set as default confers a massive advantage.
• For example, Apple Maps is inferior to HERE maps, Mapbox and Google maps but when it was launched it was installed on every iPhone and set as default.
• The result is that Apple Maps still generates far more usage than I am sure it otherwise would if it was competing on a level playing field.
• Consequently, Google Apps installed on Android devices and set by default have a big advantage over any competing proposition that has to be downloaded from the store.
• Handset makers have had very little choice in this matter as Google Play (Google’s app store) is so popular that it has been almost impossible to sell an Android device that does not have this installed.
• This is how Google has managed to ensure that all Android handsets carrying the Google Play are effectively Google ecosystem devices with the key services that generate revenues for Google at the front and centre and set by default.
• I think that this is a major reason why Android handset makers are unable to make any money.
• Android users have come to care about Google Play and now Google services meaning that there is very little to separate one Android handset from another as they all carry the same Google software.
• This is how Google, like Microsoft before it, has managed to drain the Android hardware industry of its profitability
• At the same time competing offerings have really struggled to get any traction which has caused a series of complaints and following those, the interest of the EU competition authorities.
• Even if the EU levies the massive $11bn fine that has been estimated (see here), it still only amounts to 90 days cash flow or 11% of cash on hand meaning that it will go almost unnoticed in Google’s accounts or by its shareholders.
• I have long been of the opinion that if the EU really wanted to stop Google in its tracks then it should demand that it unbundles Google Play from the rest of its ecosystem services.
• This would give handset makers a free reign to offer whatever search, email, video, browsing or mapping services they want thereby restoring some badly needed differentiation.
• Unfortunately, I think that this opportunity has now passed.
• This is because users in the EU are now completely accustomed to using Google services and have come to prefer them.
• Hence, I think separating Google Play from the rest of Google’s Digital Life services would have very little impact as users would simply download and install them from the store.
• Hence, I think that Google has already conquered the European market and there is very little that the EU can do about it other than make a bit of extra revenue.
• However, I do not think that the same is true for Africa where many people have yet to try a smartphone and are unaccustomed to Google services.
• Here, a forced unbundling by the EU could open the market in Africa for those that wish to create Africa specific digital life services and offer them to people who are not yet hooked on Google.
• Users would still be able to get access to the Google Play store but other search, email, video, browsing or mapping services could be installed on the device at the factory and set by default.
• Africa is pretty much the last major continent yet where the Apple / Google duopoly has yet to really take hold, but this will not last for very long.