If any of you sat down for John Gruber’s 60 minute “10 things Apple needs to fix” presentation he gave at this year’s Macworld, you probably noticed a particularly interesting item on the list, “Arch Rivals.” Gruber discusses Microsoft’s, Palm’s, and most notably, Google’s rivalries encourage innovation. The problem competing companies face when butting heads with Google is in reality Google doesn’t need many of their products to succeed.
Google is in the advertising business. In the third quarter of 2009, 97% of Google’s total revenue was generated through advertising. Google serves ads through searches, through AdSense, through their Google services like Gmail, and nearly every other sector they can get a foot in. Google’s ability to pull in an unbelievably high profit through these ads allows them to enter foreign markets like GPS navigation, giving the end product away for free. It’s hard to compete when you’ve got a product that customers are normally willing to pay for be given away for free by the competition.
Android and Chrome OS, for example, are both open source and given away for free. Google knows that users who adopt products with Google services built in will keep them coming back to the services that they can generate revenue through ads. It’s a vicious cycle. They give you free products that you end up using because they’re free and they pull you into yet another source of ad revenue which, in turn, allows them to offer more free products. It’s really quite hard to escape and Google’s got the idea down to a science. If one of their “experimental” products fails, everything’s just as dandy and they’ll try their hand at something new.
Ultimately, Google doesn’t care if Chrome or Android succeeds so long as consumers are doing hundreds of millions of Google searches a day, using Google Maps, checking their Gmail, or any other Google service that serves ads. They’re a force to be reckoned with a revenue model nobody else can compete with. What do you think? Do you think Google lives or dies by the success of Android? Let us know in the comments.