{"id":14103,"date":"2009-11-02T02:38:39","date_gmt":"2009-11-02T01:38:39","guid":{"rendered":"http:\/\/www.pasteris.it\/blog\/?p=14103"},"modified":"2009-11-02T02:39:14","modified_gmt":"2009-11-02T01:39:14","slug":"il-modello-meno-che-free-di-googlee","status":"publish","type":"post","link":"https:\/\/www.pasteris.it\/blog\/2009\/11\/02\/il-modello-meno-che-free-di-googlee\/","title":{"rendered":"Il modello meno che free di Google"},"content":{"rendered":"

Via Bill Curley<\/a><\/p>\n

Google has long had an interest in maps. Early in its history, the company added \u201cMaps\u201d as one of the coveted tab alternatives offered at the top of the screen above its famed search box. At that time, Google did what many others did to enter the mapping business \u2013 they licensed data from the two duopolists that ruled the mapping business \u2013\u00a0Tele Atlas and NavTeq. Over the years, as these two companies gained more and more power, and larger and larger market capitalizations, Google\u2019s ambitions were growing too. Google wanted to spread its maps across the web, and to allow others to build on top of its mapping API.\u00a0 The duopolists, recognizing a fox in the henhouse, were apprehensive to allow such activity.<\/p>\n

In the summer of 2007, excitement regarding the criticality of map data (specifically turn-by-turn navigation data) reached a fever pitch.\u00a0 On July 23, 2007, TomTom, the leading portable GPS device maker, agreed to buy Tele Atlas for US$2.7 billion<\/a>. Shortly thereafter, on October 1, Nokia agreed to buy NavTeq for a cool US$8.1 billion<\/a>. Meanwhile Google was still evolving its strategy and no longer wanted to be limited by the terms of its two contracts. As such, they informed Tele Atlas and NavTeq that they wanted to modify their license terms to allow more liberty with respect to syndication and proliferation. NavTeq balked, and in September of 2008 Google quietly dropped NavTeq<\/a>, moving to just one partner for its core mapping data. Tele Atlas eventually agreed to the term modifications, but perhaps they should have sensed something bigger at play.<\/p>\n

<\/p>\n

Rumors abound about just how many cars Google has on the roads building it own turn-by-turn mapping data as well as its unique \u201cGoogle Streetview\u201d database. Whatever it is, it must be huge. This October 13th, just over one year after dropping NavTeq, the other shoe dropped as well. Google disconnected from Tele Atlas<\/a> and began to offer maps that were free and clear of either license. They would based on a combination of their own data as well as freely available data. Two weeks after this, Google announces free turn-by-turn directions<\/a> for all Android phones. This couldn\u2019t have been a great day for the deal teams that worked on the respective Tele Atlas and NavTeq acquisitions.<\/p>\n

Too understand just how disruptive this is to the GPS data market, you must first understand that \u201cturn-by-turn\u201d data was the lynchpin that held the duopoly together. Anyone could get map data (there are many free sources), but turn-by-turn data was remarkably expensive to build and maintain. As a result, no one could really duplicate it. The duopolists had price leverage and demanded remarkably high royalties, and the GPS device makers (TomTom, Garmin, Nokia) were forced to be price takers. You can see evidence of this price umbrella in the uniquely high $99.99 price point<\/a> TomTom now charges for its iPhone application. When TomTom bought Tele Atlas, the die was cast.\u00a0 Eat or be eaten. If you didn\u2019t control your own data, how could you compete in the GPS market?\u00a0 This is what prompted the Nokia-NavTeq deal.<\/p>\n

Google\u2019s free navigation feature announcement dealt a crushing blow to the GPS stocks<\/a>. Garmin fell 16%. TomTom fell 21%. Imagine trying to maintain high royalty rates against this strategic move by Google. Android is not only a phone OS, it\u2019s a CE OS. If Ford or BMW want to build an in-dash Android GPS, guess what? Google will give it to them for free. As we noted in our take on the free business model, \u201cif a disruptive competitor can offer a product or service similar to yours for \u2018free,\u2019 and if they can make enough money to keep the lights on, then you likely have a problem<\/a><\/em>.\u201d It would be one thing if this were merely a mean-spirited play by Google to put an end to the GPS data duopoly. But it is not. There are multiple facets to this remarkably disruptive move.<\/p>\n

While it is obvious that this maneuver creates a problem for the multi-billion dollar GPS market, it also poses real challenges for the leading smart phone players \u2013 RIM\u2019s Blackberry and Apple\u2019s iPhone. Without access to their own mapping data, these vendors now face an interesting dilemma. Do you risk flying naked without free navigation or do you suck it up and swallow the above average royalty fee for each and every handset? Neither option is stellar. This problem isn\u2019t nearly as daunting as the one now faced by the Windows Mobile and Symbian teams.\u00a0 As software providers, they are lucky to get a per unit royalty equal to that extracted by the GPS data guys. If they are now forced to integrate this data merely to keep their product competitive, their gross margin just went negative. Ouch!<\/p>\n

This is not just incredible defense. Google is apt to believe that the geographic taxonomy is a wonderful skeleton for a geo-based ad network.\u00a0 If your maps are distributed everywhere on the Internet and in every mobile device, you control that framework. Cash starved startups, building interesting and innovative mobile apps, will undoubtedly build on Google\u2019s map API.\u00a0 Its rich, it is easy to use, and quite frankly the price is right. In the future, if you want to advertise your local business to people with an interest in your local market, chances are you will look to Google for that access.<\/p>\n

Google\u2019s brilliance doesn\u2019t stop there. It is hard not to have been surprised by the rapid rise in recent buzz surrounding the Google Android Smartphone OS. When I asked a mobile industry veteran why carriers were so willing to dance with Google, a company they once feared, he suggested that Google was the \u201clesser of two evils.\u201d With Blackberry and iPhone grabbing more and more subs, the carriers were losing control of the customer UI, which undoubtedly represents power and future monetization opportunities. With Android, carriers could re-claim their customer \u201cdeck.\u201d<\/a> Additionally, because Google has created an open source version of Android, carriers believe they have an \u201cout\u201d if they part ways with Google in the future.<\/p>\n

I then asked my friend, \u201cso why would they ever use the Google (non open source) license version.\u201d\u00a0 Here was the big punch line \u2013 because Google will give you ad splits on search if you use that version!\u00a0 That\u2019s right; Google will pay you to use their mobile OS. I like to call this the \u201cless than free\u201d business model. This is a remarkable card to play. Because of its dominance in search, Google has ad rates that blow away the competition. To compete at an equally \u201cless than free\u201d price point, Symbian or windows mobile would need to subsidize. Double ouch!!<\/p>\n

\u201cLess than free\u201d may not stop with the mobile phone. Google\u2019s CEO Eric Schmidt has been quite outspoken<\/a> about his support for the Google Chrome OS. And there is no reason to believe that the \u201cless than free\u201d business model will not be used here as well. If Sony or HP or Dell builds a netbook based on Chrome OS, they will make money on every search each user initiates. Google, eager to protect its search share and market volume, will gladly pay the ad splits. Microsoft, who already was forced to lower Windows netbook pricing to fend off Linux, will be dancing with a business model inversion of epic proportion \u2013 from \u201cyou pay me\u201d to \u201cI pay you.\u201d\u00a0 It\u2019s really hard to build a compensation package for your sales team on those economics.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Via Bill Curley Google has long had an interest in maps. Early in its history, the company added \u201cMaps\u201d as one of the coveted tab alternatives offered at the top of the screen above its famed search box. At that time, Google did what many others did to enter the mapping business \u2013 they licensed … Leggi tutto<\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17,6],"tags":[162,1142],"class_list":["post-14103","post","type-post","status-publish","format-standard","hentry","category-economia","category-internet","tag-google","tag-gps"],"_links":{"self":[{"href":"https:\/\/www.pasteris.it\/blog\/wp-json\/wp\/v2\/posts\/14103","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pasteris.it\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pasteris.it\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pasteris.it\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pasteris.it\/blog\/wp-json\/wp\/v2\/comments?post=14103"}],"version-history":[{"count":3,"href":"https:\/\/www.pasteris.it\/blog\/wp-json\/wp\/v2\/posts\/14103\/revisions"}],"predecessor-version":[{"id":14106,"href":"https:\/\/www.pasteris.it\/blog\/wp-json\/wp\/v2\/posts\/14103\/revisions\/14106"}],"wp:attachment":[{"href":"https:\/\/www.pasteris.it\/blog\/wp-json\/wp\/v2\/media?parent=14103"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pasteris.it\/blog\/wp-json\/wp\/v2\/categories?post=14103"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pasteris.it\/blog\/wp-json\/wp\/v2\/tags?post=14103"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}