The Staggering Android Business Failure

Moneybox
A blog about business and economics.
Oct. 18 2012 3:08 PM

The Staggering Android Business Failure

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Google's Product Management Director Hugo Barra during a press event at Google headquarters in 2011 in Mountain View, Calif.

Photo by Justin Sullivan/Getty Images

There are so many plotlines to choose from in today's Google fiasco that it's hard to know which to choose. But long story short, they released their earnings report hours too early by accident, the numbers are bad, and the stock is tanking. The numbers are bad in part because ad revenue numbers were weaker than expected but the most interesting news is about Motorola:

Google, which has been struggling to turn around loss-making cellphone maker Motorola Mobility that it bought for $12.5 billion, reported a 20 percent dive in net income to $2.18 billion. Excluding certain items, it earned $9.03 a share, vastly underperforming the $10.65 analysts had expected, on average.

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There's a fascinating lesson here because the extremely costly Motorola acquisition was directly linked to Google's decision to launch Android as a major business venture. And it's pretty clear that when you account for the costs of the Motorola purchase, Android has been a pretty epic failure. And yet as a product it's an enormous success—the most popular smartphone OS on the planet and even more than that a huge driver of smartphone adoption.

We conventionally think of useful business innovations as coming about because smart or lucky businesspeople come up with clever ideas to make money. Lots of people got lots of use out of Microsoft Office over the years and Microsoft also made a boatload of money. Android's not like that. It's been a boon to its many users and has helped Apple fans by reducing its monopoly pricing power, but it doesn't seem to have been a particularly wise investment. And at times unwise investments can be the ones that do the most good for the world. If I were a Softbank shareholder, I'd be mad about this plan to pour money into Sprint and if I were a Google shareholder I'd be mad about this Motorola/Android fiasco. But as just a guy who buys smartphones and data plans, I'm reaping the benefits.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.