The Googlephone's missing business model

Now that we all understand that there will be no Googlephone, what are we to make of the laughable "industry initiative" Google has come up with in its place? The most notable thing about it is not who's in the Open Handset Alliance group, but who's out: Microsoft and Nokia. And why are they out? Because they already make cell-phone operating systems. Much has been made of the notion that Google will license its new cell-phone OS, Android, for free. And much has been made of the possibility that Google will introduce compelling new mobile apps. But will either promise amount to much?

No. Decidedly not. How do I know this? Just ask Andy Rubin, Google's director of mobile platforms:

We recognize that many among the multitude of mobile users around the world do not and may never have an Android-based phone. Our goals must be independent of device or even platform. For this reason, Android will complement, but not replace, our longstanding mobile strategy of developing useful and compelling mobile services and driving adoption of these products through partnerships with handset manufacturers and mobile operators around the world.
Translation: Google will keep building mobile versions of its apps — Gmail, YouTube, and the like — for real phones that people actually use today, not the mythical Googlephone, or the handsets Google's partners may release next year. And everyone, not just Googlephone users, will benefit from those apps. Just like I said months ago: You already have a Googlephone. It's in your pocket.

As for a Google OS? Unlike PC operating systems, cell-phone software is already dirt cheap. Handset makers pay $8 to $15 for Windows Mobile, and as little as $2.50 a phone for Symbian, the Nokia-controlled OS. As a percentage of a cell phone's cost, that's minuscule. So it's not likely that a Google phone OS will make phones noticeably cheaper; if anything, cell-phone makers will use that minor savings to fatten their profit margins.

In short, consumers won't get cheaper phones or better apps. And they won't get a Googlephone, either. Have I mentioned that?

I realize that faithful Valleywag readers are tired of hearing this. But this drum needs beating. Three times — three times! — on its conference call today, mainstream-media reporters asked, "So there's no Googlephone today?" No Googlephone today. No Googlephone ever. There's no money to be made, and believe you me, the Google of today is all about making money.

So why bother? Google wants to be a player in wireless. And without the credible threat of a phone, Google just doesn't have much clout. It's one thing for Google to go around badmouthing Windows Mobile — quite another to offer handset makers a compelling substitute. Google's Android doesn't have to be a moneymaker in its own right — it just has to stop Microsoft from having a profitable cell-phone OS.

None of this, of course, has anything to do with consumers. It's all about Google, and the games people play when they have more money than they know what to do with.