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Steve Ballmer Pretends Not To Understand Google Android Pricing Strategy

ballmerhands.jpgWe don't fault Steve Ballmer for thinking like a software executive -- that's what he is. But of course the Windows model isn't necessarily going to translate to every industry.

Take the smartphone business, for example, which Microsoft's (MSFT) rival Google recently entered. Unlike Microsoft's Windows Mobile, which carries a modest license fee, Google (GOOG) is offering its OS to operators and gadget makers for free.

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Now, free's not a bad price, at least from the perspective of a mobile phone operator. From Microsoft's perspective, however, it's terrifying. Which is probably why Steve is happy to pretend that, instead of threatening Microsoft's core business model, Google's Android strategy is just confusing:

"I don't really understand their strategy," he said in Australia today. "Maybe somebody else does. If I went to my shareholder meeting, my analyst meeting and said, hey, we've just launched a new product that has no revenue model!"

"Yeah. Cheer for me. I'm not sure that my investors would take that very well. But that's kind of what Google's telling their investors about Android," he said.

Well, that's not really what Google is telling its investors about Android.  It's not about generating chicken feed a few hundred million dollars of revenue a year in license fees. It's about getting the billions of people out there with mobile phones to do something relatively few are doing with them today -- using the Web on their phones. And, perhaps, someday, getting them clicking on Google ads:

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  • In the U.S., only 16% of mobile subscribers use the Web on their phone, according to comScore M:Metrics. This makes sense, given the small screens, horrible Web browsers, and bad user interfaces on most phones.
  • On Microsoft's Windows Mobile phones, some 53% of people use the Web -- better.
  • But on Apple's (AAPL) iPhone, which has the best Web browser, operating system, and user interface of any phone, 84% of people use the mobile Web -- five times more than the industry average, and 58% more than Windows Mobile users do.
  • Google's Android browser uses the same "Webkit" browser guts as the iPhone, with a different, less elegant user interface. But it's still better than anything Microsoft offers. And Google could easily make improvements.

So, what's the point?

  • Google is an advertising company with a massive search market share.
  • Google wants to help create a big market in mobile advertising someday.
  • For that to happen, more people need to use the mobile Web.
  • For that to happen, people need to be able to buy better cellphones with better Web browsers. 
  • Mobile phone makers and operators want to maximize their margins, while offering the best phones they can.
  • Consumers want to buy the best phones they can for the money.
  • With Android, Google could get more consumers using the mobile Web faster than Microsoft is with Windows Mobile.

To be sure, it's possible that mobile advertising will never become a big market. But Google's bet isn't stupid.

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More bad news for Steve: Google is already dominating the mobile search market the same way it's dominating Web search. Some 63% of U.S. mobile Web searchers use Google, versus 35% for Yahoo -- and less for Microsoft, according to comScore.

See Also:
Motorola: No Google Android 'GPhones' Til Next Christmas
Motorola Betting Big On Google's Android To Take On Apple, Rivals
Will Apple Sell A $99 iPhone Next Year? Yes

On February 28, Axel Springer, Business Insider's parent company, joined 31 other media groups and filed a $2.3 billion suit against Google in Dutch court, alleging losses suffered due to the company's advertising practices.

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