Three Longs & Three Shorts

How Google bought Android

How Google built and retains its monopoly in search and uses the cashflows from search to expand into adjacencies is a case study in technology and business acumen alike. One such story is its acquisition of Android, the open source mobile operating system when Google had little to show in terms of its interest in mobiles and much before Apple launched the iPhone. This is an excerpt from a new book by Chet Haase, a long time Android engineer, which gives a behind-the-scenes look at the Android story. The excerpt is from the chapters specifically discussing the period between Jan 2005 when Android was pivoting from its camera OS to an open source mobile OS and struggling for funds and ended up being bought by Google by mid-2005. As the Android team hit the road to raise funds, their pitch mainly comprised of:
The impeding boom in smartphones:
“In 2004, there were 178 million shipments of PCs worldwide. During the same period, there were 675 million phones shipped; nearly four times as many units as PCs, but with processors and memory that were as capable as PCs were in 1998.
This potential in mobile hardware was a point that Dianne Hackborn, then at PalmSource and eventually on the Android team, was also thinking about. The mobile industry was ready to pop because there was finally enough power for there to be a real, capable computing platform: Dianne said, “You could see the writing on the wall. The hardware was getting more powerful, and the market was already bigger than PCs.”
The opportunity:
“…there was a gap, and an opportunity, in the market for an open platform. That is, Android would be an operating system that was free and available to manufacturers through open source. Companies would be able to use and distribute this OS on their own phones, without being beholden to a software provider and without having to build it themselves. This open approach was something that was simply not available at that time.
Microsoft provided a proprietary OS that manufacturers could license and then port to their hardware. Symbian was primarily used by Nokia, with some uptake from Sony and Motorola. RIM had its own platform, which it used only for its own BlackBerry devices. But there was no alternative out there for manufacturers that wanted a capable smartphone without either building their own OS, putting significant effort into customizing an existing one, and/or paying a high licensing fee.”
The product proposition:
“Android wanted to provide the world’s first complete open handset platform solution. It would be built on Linux, like TI’s offering, but would also provide all of the necessary pieces so that manufacturers would have only one system to adopt in order to build and ship their devices. Android would also provide a single programming model to application developers, so that their apps would work the same across all devices on which the platform ran. By having a single platform that worked across all devices using it, Android would simplify phones for both manufacturers and developers.”
The pitch deck also had a section which most of us would consider the most important bit – monetisation, especially given this was an open source platform. But Larry Page’s response to that section says a lot about how Google looks at things:
 “We showed the demo we had. Andy was running through the deck. I remember when he got to the monetization thing, Larry cut him off and said ‘Don’t worry about that. I want you guys to build the best possible phone and we’ll figure out the rest later.’”