There has been a lot written about Google purchasing Motorola Mobility for $12.5 billion (U.S.). They feel pretty confident that the deal will go through as there’s a $2.5 billion breakup fee. Included in the deal are handsets, thousands of patents and a pretty good TV set-top box. There are many reasons why this is a good buy but my take is that it’s really all about Google’s strategy of owning the customer with some very good value-add. Part of the deal involves Google being protected on the patent front. Google is the subject of hundreds of patent infringement cases worldwide. With Motorola Mobility’s patent chest – which includes many key pieces of intellectual property dating back almost 80 years – Google now has a means of settling at least some of the cases against Android by offering to license some of its own patents. In addition to Motorola Mobility phones, the software runs handsets made by companies such as Samsung Electronics Co. and HTC Corp. Undoubtedly the patents will help Google, but this deal gives them even more.
Motorola Mobility also makes television set-top boxes, which can help Google increase adoption of its Google TV service and the use of Android and its Chrome browser on devices that connect televisions to the Internet. Google can now go after the TV room with a vengeance, not only Apple but Microsoft as well. This in itself is a huge market opportunity. But the deal is even more than this.
This deal with Motorola strategically is significant on two levels. One, it takes Google's mobile business to a different level. From a mobility perspective, it means that the people at Google/ Motorola who decide what happens when you push a button on your smartphone will now also decide where that button goes. The same way Apple does. And RIM with QNX. It's a step toward making mobile devices synonymous with their operating systems. You say "I have an iPhone" not "I have an iPhone running iOS." With Google's purchase of Motorola Mobility, "I have a Google phone” can be right up there along with the iPhone with better optimization and a more tightly controlled user experience versus how Android works now.
Second- and here’s where it becomes very strategic- Google will not be hampered by manufacturer services. For example, Gmail and Google Search and Google Maps work very well on iPhones and Windows. But a platform owner (e.g. Apple or Microsoft) can "turn off" Google services on a whim. By distributing its own platform, Google can thus ensure that its services will have unhindered access to users. Strategically, they gain distribution. With Motorola, Google now has the vehicle through which it can create and sell integrated products. It’s really more about ensuring that their revenue-generating services are properly delivered to the end users. And owning the customer interface means having control over future monetization opportunities. Search, maps, and Google Wallet alone would give the company a treasure trove of data including personal, location and shopping data. And when you know the customer and value gets delivered properly, people will pay. This is the essence of Google’s business strategy and this purchase of Motorola helps ensure they deliver on their strategy.
In poker terms, Google has just doubled down. With a business model that relies on advertising and being able to deliver value via mobile devices, this is a great bet.
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