One of the more interesting themes of the online world has been its role as a disruptive technology for incumbent businesses. As bookstore chains, music providers, video companies, and newspapers have all experienced, their businesses can be disrupted when a competitor changes the rules of the game so severely that the only possible choice is to gut yourself. Bookstore chains suddenly had a competitor with an endless catalog they couldn’t match. Music providers had song-by-song purchasing and digital delivery. And newspapers, which specialized in presenting yesterday’s news for a price, couldn’t compete with the Internet relaying today’s news today at no cost.
In a fascinating post by Bill Gurley on abovethecrowd.com, Google’s aspirations in the mapping, GPS, smartphone, and OS areas are analyzed. Taken together, the moves Google is making add up to disruption for mapping, smartphone, software, and advertising — all nearly simultaneously.
How will Google accomplish this astounding feat?
- End reliance on third-party turn-by-turn GPS mapping companies by deploying vehicles to recreate the maps and thereby own them. CHECK.
- Create an open-source smartphone operating system that providers prefer, and which eliminates expensive royalties to third-party mapping companies. CHECK.
- Create an advertising model based on geo-location to supplement a hugely successful advertising model based on search terms. UNDERWAY.
- Create revenue-shares with smartphone providers so that they actually make money off the phones from advertising in addition to subscriber fees for connectivity and data services. UNDERWAY.
- Deploy the same revenue-share model for a computer operating system (Google Chrome) for netbooks first, other computers later. LIKELY PLANNED.
So while Chris Anderson has been waxing philosophic about “free” as a “radical price,” Google has been busy creating a disruptive approach based on “less than free.” They are reaching “free” with their turn-by-turn mapping data, then plan to insinuate their technologies into devices using a disruptive model that rewards providers and manufacturers with revenue sharing.
The likely effects of this could be huge. For consumer, it could mean lower prices for technology since onerous GPS charges would be negated and device sales and usage would drive profitability, incentivizing manufacturers to cut prices to ensure adoption.
This is how disruption occurs. To match Google, Apple or Nokia or Palm would have to deploy their own cars across the world to generate turn-by-turn data. And that’s just to match the “free” portion of Google’s plan. To match the “less than free” portion, they’d each have to create a version of AdSense. And by the time they could do any of this, the game would likely be over.
Catching Google will be too expensive and time-consuming. Yet what Google’s competitors will chasing is a value currently described as “less than free.”