Forks in the Road Ahead?

by jeremy on July 17, 2012

Two interesting pieces in the past 24 hours that, almost in passing, look at a growing conundrum for Google: how to cope with the fact that Android is largely a profit center for Samsung and nobody else.

Horace Dediu at Asymco (From bad to worse and from good to great) looks mainly at how the mobile world’s value is mostly going to Apple. Samsung is the only other one making any money out of the whole thing:

In absolute terms the iPhone franchise created $244 billion in value while Samsung created $83 billion. The others destroyed $37 billion.

Elsewhere Horace has looked at Android economics (The Android Income Statement among others) and concludes that “Google’s benefit from the platform is modest. He concludes:

In contrast, Samsung, and Samsung alone, is benefitting greatly. It could even be said that today Samsung is the only Android profit engine.

This seems to be the case. Which prompts several questions, some of them addressed in the comments. Is Samsung likely to continue merely taking another person’s operating system, free though it is, and adding a skin or two? How does Samsung feel about sharing a brand — Nexus — with competitors like Asus?

Jean-Louis Gassée in his weekly column for the Monday Note takes a look at this (Business Model Dances). Google, he argues, have not necessarily followed Microsoft by extending vertically with the Nexus 7, but he does believe that “the gentle folks at Samsung are not going to take this with a smile and a quick genuflection.”

If they’re not cowed by Apple, they certainly aren’t going to let Google eat into their tablet business. As for phones, there’s Google’s $12.5B subsidiary, Motorola Mobility, another irritant for Samsung and other Android smartphone makers.

It’s interesting to consider whether Samsung think that the Nexus 7 is a challenger. I tend to think they’re more worried about what’s behind it: lots of content.

As Jean-Louis says, it’s going to be interesting.

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