Google plans to focus more on mobile advertising and search, key revenue generators that industry-watchers said could be behind the move to put Sundar Pichai, senior vice president of Chrome, in charge of the Android project.
Analysts said Android’s stability as a platform, coupled with Google’s plans to better monetize its mobile ecosystem, were reasons why Android creator Andy Rubin recently handed over the reins to Pichai, who has been responsible for Google’s Chrome browser and apps. Pichai will now lead both divisions at Google.
There may actually be a myriad of internal things at Google that led to this move, but analysts said that the changes indicate one positive thing: Google views Android as a stable platform now. “Android is internally perceived to be a stable platform where high-risk innovation is no longer the norm,” said Michael Facemire, senior analyst of application development and delivery at Forrester Research. “Instead, it has moved into more traditional product cycles.”
Andy Rubin “was” Android during its innovation cycle, both pre- and post-acquisition by Google, according to Facemire. “I think this is more of a statement about the maturity of the Android OS that Andy has moved on,” he explained. “He has had a history of moving on when innovation turned to productization.”
Boris Metodiev, senior analyst of mobile and connected devices at analyst firm Yankee Group, predicted that Rubin “will continue to work on other development projects at Google. An entrepreneur and a developer by heart, he probably felt that there wasn’t much for him to contribute to a mature platform like Android.”
“If Andy Rubin’s past is a predictor of the future, he’ll come up with some project that will have wings,” added John Jackson, research VP of mobile and connected platforms at analyst firm IDC.
Analysts said they are not shocked to hear that it is Pichai who is taking over the Android project. “The move is not that unusual at all,” said Metodiev. “For example, Craig Federighi [senior VP of software engineering] leads both the Mac OS and iOS divisions in Apple.”
J. Gerry Purdy, principal analyst at MobileTrax, agreed that this move is not unusual in the industry. “If you’ll recall, Apple made a similar move to put all user experiences under Jonathan Ive [Apple’s senior VP of industrial design],” he said.
There are some strategic reasons for the Chrome lead to be taking over Android, according to analysts. “I think that Rubin did what he was supposed to, which was develop a strong platform that was able to drive uptake quickly and across markets to provide a platform to transition Google key revenue generators—advertising and search—to mobile,” said Carolina Milanesi, research VP of consumer technologies and markets at Gartner. “Now it is time to better monetize from the ecosystem, and this is what Pichai’s job is.”
Milanesi said the move is also about creating more synergy between the Chrome OS and Android “as Android alone keeps users in apps and, therefore, [does] not promote search.” Because of this, one of Pichai’s possible first moves in his new role will be to “pull together resources to establish one common platform with different environments,” according to Purdy.
This will, ultimately, also positively affect mobile application developers’ lives, Purdy said, because “it will make it easier for developers to build for the Chrome OS and Android.”
Jackson also thought it makes sense that Google appointed Pichai to head up Android. “It is logical if you think about where Google makes most of its money,” he said. “It makes most of its money from the conventional Internet domains.
“I’m sure [Pichai] deserves it on his own merits as a manager, as an engineer, and as a strategic thinker. But it’s worth keeping in mind that the Chrome browser and OS are organic Google projects, and Android is an acquisition that was, arguably, in the right place at the right time and caught fire. But the vision behind Chrome reflects the initial vision that Google had for all computing—mobile, fixed, whatever. So it may be that Android, for all its success in terms of market share, forestalled execution against the real vision.”
Great, but could be greater
As successful as Android has become, analysts said that Google may not be deriving the value it had hoped for from it. “If you think about what Google has been able to achieve with Android, it really is remarkable. It just has this massive, global footprint,” said Jackson. “But for all its presence in the marketplace, it’s not clear at all that it is creating significant value for Google or for a broader ecosystem.
“If you look at what Google has said over the years, they indicated in 2010 that they made US$1 billion from all mobile activities. They didn’t specify what those activities were. In 2011, it was U$2.5 billion. In 2012, about $8 billion or so for mobile. It’s quite significant, the revenue they’re getting from mobile.”
But Google also said something that was very telling, Jackson said. “The overwhelming majority of that revenue comes from search ads and not from anything else—not from app downloads, for example,” he said. He thinks Google has found itself in a situation where Android has been “tremendously successful in going from zero to dominant market share in a space of few short years,” but that Android has not necessarily “become a value engine” in the way that he suspected Google would have hoped.
“To my point about Android perhaps not throwing off a lot of ecosystem of value,” Jackson said, “there’s an argument that Google’s core search revenue stream is going to come under increasing pressure because the world’s computing experiences are going mobile. The margins on an ad in the mobile environment are lower than they are in the desktop environment.”
Google’s executive chairman Eric Schmidt was recently quoted as saying that Google is not replacing Android with Chrome. However, analysts see a stronger interaction between the two products as inevitable. Since both Android and the Chrome OS are mobile and can be found working on the same device, it only makes sense for them to be more aligned between each other, according to Metodiev. “But Google is not combining them,” he said.
“They will probably be positioned directly against their competitors’ platforms: Android against Windows Phone 8 and iOS, and the Chrome OS against Windows and Mac OS.”
Purdy said the underlying rationale for having the head of Chrome development take over the Android project could be so that Google has a common codebase between Chrome OS and Android. “I’m sure that, even if the overall platforms remain the same, they will want to have one engineering group,” said Purdy. “This is just like Microsoft wanting to put Windows Phone within the OS group.”
“I suspect what you may see over time is a sort of Web tech layer go horizontally over the Android kernel,” said Jackson. “In other words, I suspect what you may see over time is Web technologies [becoming] the application development, enablement, distribution, management, and monetization environment in a way that Android tries to be today.”
Chris Hazelton, research director of mobile and wireless at 451 Research, said that Google will be trying to synchronize efforts across all the platforms so that it’s easier to target advertisers. He said that Google has a very strong foothold into the mobile smartphone market, but not in the tablet market. “I think there is interest in not necessarily combining code, but syncing efforts for how Google wants to approach tablets and smartphones,” he said.
“With the smartphone, they have the native operating system footprint. However, with tablets, the dominant operating system is not controlled by Google, but you’re starting to see some movement into iOS through the Chrome browser. So, regardless of whether it’s on Android or another operating system, Chrome mobile browser will be the new beachhead for Google to push services onto other devices.”