Sunday, July 28, 2013, 11:37 pm PT (02:37 am ET) Google appears ready to ditch Android over its intellectual property issues
By Daniel Eran Dilger
The discovery that Google's new Chromecast web streaming device is based on Google TV code stripped of Android features provides additional evidence that Google is working to distance itself from the Android platform that the company developed under the management of Andy Rubin.
Branded Chrome, not Android despite being Android not Chrome
Google's Chrome-related branding for the new device makes sense, now that Android is under the direction of Pichai rather than Rubin. But it also signals the beginning of an even more significant shift, one that explains why Google put Rubin's prototype Android TV product on ice in favor of a much cheaper (and more strategic than profitable) web streaming dongle, and why the company replaced Rubin himself as the leader of Android with Pichai, who represents Google's other platform: Chrome OS.
Chrome OS leads to further split between Apple and Google in 2009
Android's increasing competition with iOS began forcing Google's chairman Eric Schmidt to recuse himself from attending any Apple board meetings that discussed the company's mobile strategies. Schmidt had been a member of Apple's board since August 2006.
In mid 2009, Google unveiled its plans to enter the netbook market with Chrome OS, with the expectation that the first batch of devices would ship by the middle of 2010.
Shortly after that announcement, Apple's chief executive Steve Jobs released a statement saying, "as Google enters more of Apple's core businesses, with Android and now Chrome OS, Eric's effectiveness as an Apple Board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest. Therefore, we have mutually decided that now is the right time for Eric to resign his position on Apple's Board."
Schmidt had apparently not been included in any of Apple's internal discussions related to iPad, which launched at the beginning of 2010. Its success essentially destroyed the once booming netbook category that Google's Chrome OS had originally targeted.
Google postponed the launch of Chrome OS netbooks to the end of 2010 and then again to the middle of 2011, when the first Chromebooks finally began appearing, initially from Samsung.
While Android was growing so widespread in smartphones to the point of outnumbering the installed base of iPhones, the only company that seemed to be benefitting financially from that was Samsung. A series of Google's own Nexus-branded phones had failed to gain much traction in the market and the Open Handset Alliance was increasingly populated by companies that were actively losing lots of money on smartphones.
Meanwhile, Apple's lawsuit against Samsung began revealing facts including the testimony that Google had only earned a total of $550 million from Android from its start in 2008 through 2011, effectively nothing at all compared to its existing web and network services.
Google was also earning relatively little from Android Market, bringing in less than 7 percent of what Apple had earned over the same period in the App Store.
Third party developers were already aware that Android Market wasn't performing well, as Google previously addressed "anxious app developers" early in 2011 assuring them that it was working to address the problem and that it was "not happy" with the slow app sales itself.
Major problems for Android in 2012: losing Apple
Despite Android's vast distribution, Google was still earning 80 percent of its mobile revenues from iOS. But the friction Android was generating between Google and Apple was endangering even that.
Apple launched its own iAd mobile advertising platform in 2011 and began blocking by default web cookies "from third parties and advertisers" in Safari on the desktop, a move that threatened Google's core advertising business.
When Google attempted to secretly work around the block, it was hit with negative publicity and the largest fine in the history of the Federal Trade Commission.
Apple also began efforts to work with Google's search competitors, partnering with Baidu in China and adding Microsoft Bing and Yahoo search options to the Safari browser. At the end of 2011, Apple launched Siri, taking on Google web search and the company's voice-based services at the same time. For iOS 7, Apple has further outlined plans to have Siri provide users with Bing results by default.
In 2012 Apple hit Google again with the surprise launch of its own Maps, the culmination of years of work and mapping-related acquisitions. Next year, Apple plans to roll out iOS in the Car, combining Siri and Maps to deliver an automotive product that, had Android never existed, would otherwise likely have been a huge partnership opportunity between Apple and Google.
Google now has to enter the automotive market on its own. After failed attempts to bring Android into tablets, home automation and TV, that would appear to be a difficult task.
Industry observers have also described the Motorola purchase as an effort to prevent Android's only exclusive licensee from joining Microsoft in a Nokia-like licensing deal to adopt Windows Phone, and a way to prevent Motorola from using its patents against other Android licensees. Motorola's executives threatened to do both prior to being bought out by Google.
In addition, Google presented its $12.5 billion acquisition plan as a way for Google to gain its own hardware expertise, stating that the deal would "supercharge Android, enhance competition, and offer wonderful user experiences."
Shortly after the deal went through, Rubin told reporters he had "nothing to do with" Motorola and that, "I don't even know who's running it."
Rubin also added, "I don't even know anything about their products, I haven't seen anything," and that, "they're going to continue building Motorola branded devices and it's going to be the same team doing it," and, "they're separate from me, and I'm going to continue to do my thing."
Additionally, this February The Verge cited Google's Chief Financial Officer Patrick Pichette as saying that products in Motorola's pipeline were "not really to the standards that what Google would say is 'wow,' innovative, transformative." Android's tainted intellectual property issues
And before that, Rubin had served as a low-level engineer at Apple from 1989 to 1992, where he worked on on technology that Apple now asserts was illegitimately appropriated for use in Google's Android, including the "'263 patent" (unrelated to H.263) it brought against HTC.
U.S. Patent No. 6,343,263, entitled "Real-time signal processing system for serially transmitted data," describes "the use of real-time application programming interfaces (APIs) interposed between application software or driver software and the real-time processing subsystem."
Patent expert Florian Mueller initially described the technology as foundational to Android and "extremely hard" to work around.
Nearly a year after the patent was interpreted in court in Apple's favor at the beginning of 2012, HTC decided to stop fighting and settle, signing a ten-year patent licensing agreement with Apple last November over its use of Android.While Google contributes most of the efforts required to develop and support Android, it makes very little from it.
Apple now appears to be making more money on sales of HTC's Android smartphones than HTC does. Microsoft and Nokia have also brought claims against Android licensees; Microsoft now appears to be making more money on its Android licensing agreements than it makes selling its own Windows Phone platform.
While Google contributes most of the efforts required to develop and support Android, it makes very little from it, almost certainly less than Microsoft does from licensing its IP to Android hardware makers. It clearly benefits less from Android than Samsung, even as it serves as essentially a free software development volunteer for the company. Protecting Android's tainted intellectual property gets expensive
Google's own plan to monetize or at least defensively leverage Motorola patents has collapsed over the past year, leaving it with an unproductive subsidiary that's actively losing money: $342 million in the last quarter alone.
Google also recorded another $116 million in "amortization expenses of acquisition-related intangible assets" related to Motorola against its own ledger. In other words, it counted that much additional depreciation of Motorola assets (such as expiring intellectual property) as a loss against its own income.
Even ignoring those hits to Google's reported income, the company has recorded regular quarterly losses of $271 million, $353 million, $527 million and $233 million from its Motorola subsidiary since acquiring the company to "protect" Android. That's over $1.7 billion in total losses across just five quarters, on top of the $12.5 billion acquisition price.
It's also not particularly helpful that so much of the growth occurring for Android is happening in China, where Google doesn't even really benefit from the web search traffic that its platform generates. Deceleration of Android releases
Perhaps due to fragmentation concerns, Google has also dramatically slowed the pace of new Android development. Google chowed though four desert named releases in its first year, followed by two years of two major releases, but has spent the entire last year stuck on Jelly Bean.
The next major release, Android 5.0 Key Lime Pie, was rumored to appear last fall, then earlier this year, and now later this year, a release date slipping further than Chrome OS did back in 2009.
The last minor update of Jelly Bean wasn't even released in time to show at the company's IO developer convention this summer, which regularly scheduled more sessions on Chrome than Android every day of the event.
Slipping releases are never a good sign; just ask Apple about Copland and Gershwin in its beleaguered era of the 1990s, or Microsoft about Longhorn in the 2000s. Out with Rubin, back to the web
The most substantial evidence supporting the idea Google doesn't plan to perpetually maintain two different operating environments is that it appointed the head of Chrome OS to replace the head of Android. Chrome OS is also philosophically closer to everything else Google does because its based on web standards; Rubin's rejiggered Java VM platform is an oddball product that simply doesn't mesh with everything else the company does, on top of having exposed Google to intellectual property infringement liabilities and inciting its closest partners to become competitors.
In introducing Chromecast, Google also highlighted that it can work with any platform, rather than being tied to a specific device platform like Rubin's Nexus Q, which required an Android 2.x device. Google is certain to reaffirm its commitments to Android whenever necessary, but the writing on the wall appears very clear: Android's days appear to be numbered at Google. Google appears ready to ditch Android over its intellectual property issues