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Browse: Home / Google’s Disruption Leads to Commoditization

Google’s Disruption Leads to Commoditization

By Guest Authors on November 2, 2009

googlemapsnav Bill Gurly wrote up a great piece on Google’s disruption in the navigation market. It is a great read to understand the impact Google’s new navigation ‘feature’ will have in that market.

That’s right; Google will pay you to use their mobile OS. I like to call this the “less than free” 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 “less than free” price point, Symbian or windows mobile would need to subsidize. Double ouch!!

When you have a hugely profitable business, it is relatively easy to disrupt adjacent businesses which will hugely impact other players focused in that market. Google’s model is not new. We have seen this before. Microsoft disrupted Netscape by simply offering the browser for free and even included it in their OS, essentially killing Netscape whose business model was to sell a browser. When the oxygen supply of a vendor is cut, their business has to change quickly or it eventually dies, as we have seen with Netscape. For Microsoft, Windows & Office is their cash cow. They can afford to give away a browser with no impact to their bottom line. But in the marketplace, it commoditizes the browser and kills other vendors whose sole business is selling the browser (like Netscape). This is petty much what Google is doing in the Maps/Navigation market. As Bill mentioned, it will have a significant impact on vendors like Garmin, Tom Tom.

When you have one profitable business, it is not uncommon to give away something to disrupt adjacent markets. Apple, for example, focuses on selling hardware with software as a value-add to sell more hardware. When software is the value add, it can be cheaper than the other guys up north who solely rely on selling software. This kind of explains why the cost of Windows 7 is so high compared to Snow Leopard.

Google cannot continue disrupting all markets it enters. It needs to find alternative money making markets apart from search. If the search market gets very competitive (Bing?), it could spell disaster for Google’s core, cutting its oxygen supply. According to Eric Schmidt, Google Apps is the next big thing for Google. How significant will Google Apps be to their bottom line is yet to be seen – especially considering how low the margins are for business vendors compared to vendors serving the consumer market.

This disruption game is interesting. Microsoft makes money from Office & Windows and is trying to disrupt(?) search. Google is doing the opposite to Microsoft trying to disrupt(?) Microsoft with Google Apps & Chrome OS. These are just two companies. When we look at the bigger picture, we see many companies disrupting each other to establish their presense with consumers and businesses.

No matter who disrupts whom, it is only good news for the end user.

Update – talk about commoditization:

  • Microsoft chops prices of its hosted enterprise cloud offerings
  • Microsoft Trims Price of E-Mail Service, Aiming to Block Google’s Inroads
Related articles by Zemanta
  • Microsoft, Google and the Bear (bits.blogs.nytimes.com)
  • Microsoft Destabilized by Google (arnoldit.com)
  • More (Too Much?) Free from Google: Turn-By-Turn (myventurepad.com)
  • GPS makers jubilant as Google “validates” their market with Google Maps Navigation (fakesteve.net)
  • The Meaning of Droid (mondaynote.com)

 

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Posted in Analysis | Tagged android, commoditization, disruption, droid, google, google apps, gps, microsoft, navigation | 2 Responses

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