Given how many elements Google Android has clearly lifted from iPhone, I am not surprised that Google’s semi-secretive xPhone project has a name so similar to iPhone. But, in fact, the xPhone is more an attack on Google’s own partner, Samsung.
First, what is the xPhone?
Last week, both Reuters and the Wall Street Journal broke the story – almost certainly deliberately leaked by Google itself – that Google was overseeing a project within its Motorola division to create an “X-Phone”.
How is this different than the Nexus phone which Google oversees with a pre-selected partner?
The fundamental difference is that with xPhone, Google has complete control over the development, distribution and marketing of this device. Consider that the most recent Nexus smartphone, built cooperatively by Google and LG, received rather middling reviews. Google, once the champion of “open”, clearly is no longer interested in working with a partner that can’t compete against the top smartphone makers in the world, Apple and Samsung. They want to build a smartphone that is at par with iPhone and the Samsung Galaxy. Perhaps they will do even better, leveraging the latest R&D from Motorola, particularly the company’s work with multi-core processors and mobile battery technology. This will certainly be a boon for users.
But make no mistake, first and foremost, the xPhone is an attack on Samsung, not Apple, not the iPhone.
To date, Android has been a massive cost sink for Google. They spent over $10 billion to acquire Motorola, which continues to bleed money. They have spent untold billions to market Android, develop products and services for Android, and to pay sales and other fees to giant carriers to distribute Android devices. From a business standpoint – and Google is first and foremost a business – Android has been a failure. Google continues to make far more money off iPhone and iPad than from Android or their high-end Nexus line. This cannot continue.
Since I wrote that late last year, Samsung has become even more dominant within Android. Indeed, if not for Samsung, Google Android sales might collapse. As has been well documented, nearly *all* profits from selling Android handsets flow to Samsung. Samsung sold more than 200 million Android devices in 2012 – four times more than the nearest competitor. Samsung has confidently stated they intend to sell more than 300 million Android devices in 2013. There is an old saying: if you owe the bank a million dollars, you have a problem. If you owe the bank a billion dollars, the bank has a problem. In this case, the bank is Google.
Samsung has simply become too powerful within the Android ecosystem. What if Samsung were to ‘fork’ Android? What if they were to cut a global deal with Microsoft, say, and make Bing and Bing Maps the defaults? This is not far-fetched. Notice that in every Samsung advertisement, the focus is on “Samsung” and “Galaxy” and Galaxy-optimized services. No Google service or Android brand is ever stated.
Google makes more money, much more, from their services on iPhone than from their services on every single Android device. True, while Apple has made its Safari browser and Apple Maps the defaults, Apple has in no way prevented Google from placing every one of its mobile services on the iOS ecosystem. YouTube, Maps, Gmail, search, et al. Can Google be sure of the same from Samsung? No.
Samsung happily takes the free Android OS. They happily take the latest Google applications. But they offer nothing in return. They do not promote the Android brand, nor any Google services. They make billions off Android but deliver paltry revenues back to Google. They are responsible for approximately half of all new Android device sales, sucking out nearly all the Android device profits and thus limiting the appeal of the OS for other handset makers.
Plainly put, Samsung is a bigger threat to Google Android than Apple. The xPhone is a logical attempt to limit Samsung’s growing dominance. It’s no wonder Google is working on this semi-secret “xPhone” project. Their entire ecosystem is under threat. Only, not by Apple or Microsoft, not by Amazon or Facebook, but by their own partner.
Bottom-line: yes, the xPhone is Google’s attempt to full-on copy the Apple ecosystem, hardware plus software plus app store, all fully controlled by one company. This has proven extremely profitable for Apple. I think the xPhone is also an attempt by Google to squeeze any value it can from its extremely costly Motorola acquisition. But, I also believe that the xPhone is a long-term hedge against the rising power that Samsung has within Google’s own Android ecosystem. In the smartphone wars, friends and enemies can shift frequently. Google understands this.