Google Unbundled

Google Unbundled

What has Google announced?

The European Union had ordered Google to stop forcing phone manufacturers to pre-install its engine and the Chrome Web browser if they want to pre-install Google’s Play store. So Google is dropping the restrictions it imposed on Android device manufacturers following a clash with EU, but it will start charging those phone manufacturers. Device makers will no longer have to bundle Google’s apps, but if they do they’ll pay for the privilege. Device makers will have to license Google apps and then license Search and Chrome separately to get the whole bundle of apps. Nothing much has been revealed about the fees that might be charged, but the Android ecosystem will change dramatically as a result of this action.

What is the case?

Android is free to developers, but has allowed Google to provide its search engine on to tens of millions of smart phones and provide itself a major share of the mobile advertising market. This was something that the European Commission did not like. It fined Google $5 billion for “illegal practices” with Android, which required Google stop mandatory bundling of its apps. The commission wrote that Google denied users “access to further innovation and smart mobile devices based on alternative versions of the Android operating system” and “closed off an important channel for competitors to introduce apps and services” in the process.

The European Commission announced the penalty in July, after ruling that the US Company had been using Android to illegally “cement its dominant position” in search. It argued that Google’s bundling of its search and browser apps reduced the incentive for manufacturers to pre-install competing search apps. Google has hit back saying it is appealing: “Android has created more choice for everyone, not less. A vibrant ecosystem, rapid innovation, and lower prices are classic hallmarks of robust competition. We will appeal the Commission’s decision.” As of now Google has agreed to allow some of its services to be pre-installed without others. But it continues to appeal against a related €4.3bn fine.

The Google – EU lawsuit is somewhat reminiscent of the EU’s protracted battle with Microsoft 20 years ago over the bundling of Internet Explorer with Windows 95. Ironically, that alleged browser monopoly lawsuit helped nurture the conditions for the rise of Google’s Chrome. The EC won its battle then but set the scene for an even bigger one with a less certain outcome.

New Rules?

Google says the new licensing arrangements would come into effect on 29 October and apply to devices that will be shipped to the European Economic Area (EEA). This will be applicable in Norway, Iceland, and Liechtenstein in addition to the EU. Until now, Google gave the rationale that if Smartphone and tablet manufactures could pre-install some apps, they could also pre install Chrome and Search apps. This will change now. According to Google, the pre-installed apps allowed them to fund the development and free distribution of Android. Since the apps will no longer be pre installed, it needs to come up with a new source of income. To cover up the costs, Google will introduce a new paid licensing agreement for smartphones and tablets shipped into the EEA. Though an executive assured that Android will remain free and open-source, not much was revealed about how much the new fees will be or whether consumers should expect a significant rise to device prices as a consequence.

Consequences

  • Until now, many manufacturers have focused on adding their own “skins”, which involves making changes in the user interface but not deeper alterations. A change in the current ecosystem will allow smartphone manufacturers to develop a ‘forked’ version of Android which will give users a more pure experience of Android.  Such a major shift in Google’s business model and has the potential to loosen the company’s grip on the search and browser market.
  • If manufacturers will try doing it, a significantly different market for Android phones can develop some years down the road. On the other hand, abandoning Google would mean abandoning the Play Store, which would also abandoning significant apps like Facebook, Snapchat, Instagram, etc which have become a staple of smartphone experience. Device makers would have to rely on an alternative app stores and convince developers to distribute their apps on it.
  • There could also be an unintended breach of security. A matter of concern is that, having battled fragmentation for years, the Android ecosystem will now have even more fragmentation to deal with. The simplest scenario is that device makers will pay up and pass that cost on to everyone buying an Android phone.
  • There is a risk that diverging versions of Android will lead to devices where apps don’t work for users. Developers may also need to do costly rewrites of apps for multiple incompatible versions. In many cases they might have to reconfigure those apps to make them compatible on smartphones without Google services, too. While big players or the well established companies might do it easily, the new players in the market will still rely on Google for its app stores. This is mainly because it requires a great deal of time and money to develop new, compatible apps.
  • Many analysts wonder if this is a good idea because it could be a mess for developers and confusing for consumers. The transition would be ugly, and it could weaken the already rough state of premium Android apps.

New Trajectories

Barring Google from bundling services in Android will make much more room for competitors. Without cornerstone apps like Google Maps and YouTube built in, the competitive landscape in Europe might just open up for domestic companies to edge in directly with consumers. Resourceful users might also find a way to access Google services somehow, as they do in China through a VPN. Or perhaps device makers will simply pony up the fee knowing that there aren’t yet viable local alternatives to YouTube, the Play Store, and Google Maps.

A possibility is that device makers will switch to third-party apps in place of the Google versions. Those stores could offer better terms for developers and do a better job enforcing privacy requirements to protect users, leading to a better ecosystem for everyone. On the other hand there could be increase in instances of data breach owing to under developed or inefficient apps.

But companies make money off Google search referrals, and customers want Google’s apps. Both these groups want to stick to the current system of working. As much as some resent Google’s domination of Android, the EC’s action could end up annoying the one group the data economy still depends on – developers.

The Case of China

Since Google is banned in China, we already have an example how the smartphone ecosystem will function without the hegemony of Google. Each smartphone company runs its own version of Android. Play Store is available in China but via a VPN. So the Chinese citizens have to manually download Google’s Apps if they want to. Google manages to hold just 3% of the market share and 10 different companies dominate the market. This backs the EU’s proposition that Google will not dominate the market and even deters its competitors by its apps bundling practices.

In China there are over 400 app stores in China in place of the Google Play Store. Such a fragmented app store ecosystem creates multiple ground realities. Each app store has a different working, user interface, rating system and different community of users reviewing an app.  Different stores also present apps in a different order, with their own ways of prioritizing which apps to highlight or show in search results.
Android OS has turned 10 and as per a Statista report, it now operates on over 88 percent of all existing smartphones. This statistic is not surprising considering that Android is an open source and also is a versatile operating system. Any change in the current ecosystem will bring about a ripple effect in the whole Android ecosystem. For now we can only anticipate the trajectory this change will follow.


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