Brandon Tanner

... then I don't know what is!

Wow... and I was amazed when they dropped 1.6B for YouTube. But this is almost 8 times the price-point of the YouTube buy! That is just mind-boggling.

Google buys Motorola, completing its biggest-ever takeover - May. 22, 2012

Where do you guys think they're heading with this? Even for one of the biggest tech companies ever... 12.5B is an unbelievably huge investment!

Tim Dini

Motorola gives Google exactly what it needs to ramp up their home devices platform code named Project Tungsten (Andriod@home)
Google to make lightbulbs and dishwashers - Telegraph

Apple has been moving toward home device integration and this sets Andriod@home in direct competition with the ability to product physical devices.

Incredible days ahead indeed.

beeswarn

Smart people make dumb mistakes all the time.

Tim Dini

I agree as that seems to be the only way for Google to find a positive ROI on this 12.5b investment.

Right now, the Android operating system is given away to device manufacturers for free. The profit model being to beat Apple in mobile OS market share (which they did in Q2 of 2011). The idea was to promote the Google search platforms on the new mobile internet (the future of internet for as far as we can see) and gain revenue from the mobile ad space.

While the above business model has been successful in terms of OS market share, it came at a cost.

1) Lack of quality control and continuity across the platform. There are now hundreds of low quality Andriod devices, and manufactures have free reign over the user interface. So the user experience is inconsistant and sometimes maddening as each device can require a new learning curve. This is unlike the Apple mobile products which are of the highest physical quality with a consistent interface across all their mobile devices.

2) Google doesn't make one penny on the physical device, relying instead on the 'backend' advertising revenue which was reported to be around $6 profit per Andriod user per year. Considering their market share, that equates to around 1 billion in revenue per year. By comparison, Apple is estimated to make $370 per iPhone per year. (2011 statistics)

The Motorola purchase allows Google to immediately seize control of the quality issues by issuing minimum standards in quality and interface specifications. If manufacturers of Andriod devices don't follow the new requirements, Google can now threaten to release Android updates and upgrades within the Motorola device inventory exclusively. This will raise the quality and the prices of the Android devices, and will ultimately increase Google's profit.

With this 12.5b in investment, it seems clear to me that Google must now compete in the physical device market, if only to recoup this investment. Even with substantial growth, the current $1 billion annual revenue stream could take more than 8-10 years to recoup - not a typical Google investment strategy.

Yes, the above scenario will cause a decrease in Google's mobile market share, but the addition of device sales revenue will more than make up for any difference.

Of course, all of this is wild speculation. But Google's history suggests this to be a well calculated investment that could turn what is a record breaking investment into record breaking profits for Googorola.

thetaspark

Clearly Google wants to rule the world, just like you seem to feel ordinary without an iDevice, we now have better phones at lower prices.
This takeover may just be heads up for manufacturers that Google intends to control all areas of the Android market share...