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The Samsung Problem [Opinion]

Samsung Logo (GS3)

When Google purchased Android, their goal was to fight Microsoft and topple Windows Mobile’s dominance. Instead, Google has found itself fighting off Apple as companies like Palm (now HP), RIM (now Blackberry), and Microsoft fell by the wayside. Instead of asking for a licensing fee from OEMs, Google decided to make Android free to use. Little did Google know, Apple would make a huge play in the mobile space that would forever change the market. Back in 2008, Samsung was nothing in the mobile space. It wasn’t until 2010 when Samsung released the Galaxy S worldwide that the Korean company began to find success in the market. Flash forward to today and the company claims about 40% of the worldwide smartphone market. In many ways, Samsung is the hero in Android’s war against iOS.

The Wall Street Journal’s Amir Efrati is claiming┬áthat Google is becoming increasingly concerned about the possibility of Samsung demanding more money from Google because of Samsung’s unrivaled dominance in the market as an Android OEM. Efrati also speculates that Samsung could use its market share to leverage getting access to the newest version of Android regardless of if it is the Nexus partner, putting other OEMs at a severe disadvantage. While Efrati doesn’t come out and say it, the threat of Samsung leaving Google hangs over his article. If Samsung demands more money and Google refuses, Samsung could fork Android, leaving Google to fend for itself with a myriad of relatively unsuccessful manufacturers. If Google agrees to give Samsung more of a share in revenues from mobile advertising, other OEMs could respond to their favoritism by forking Android or focusing only on Windows Phone.

To preemptively deal with the situation, Google is allegedly working with Android OEMs, especially Motorola, to keep Samsung in check. Efrati’s sources alleged that Rubin heralded Motorola as an insurance policy against a manufacturer like Samsung gaining too much traction in the market. The irony, of course, is that Google likely bought Motorola to ensure that the company wouldn’t use its heavy patent portfolio against other Android manufacturers.

The notion that Google could use Motorola to push back against Samsung seems comical at this point. I do not want to rule out Motorola making a comeback with some fantastic hardware, superior software, and support on all major carriers, but at this point both Motorola and Google have a lot to prove. Motorola has spent the last couple years pumping out Droid RAZR variants while Google has yet to get a Nexus devices on every carrier (much less reliably available on their own store). Should the two companies get their act together, it would be possible for them to fight back against the Korean giant, but they would be the underdog in a very dangerous game.

The reality of the situation is that if Google lost Samsung, Google would face the possibility of becoming the next Blackberry or Windows Phone. Without Samsung, Google would be a distant third in an ever-shrinking mobile market. Google would be forced to rely on Motorola, HTC, HP, LG, Sony, Huawei, ZTE, and others to fight back against Samsung. Samsung, Apple, Microsoft, Blackberry, HP, and others currently make up 70% of the smartphone market. 30% of the market isn’t a small piece, but none of those individual companies have been successful in the mobile space in any meaningful way. HTC has reported one terrible quarter after another, HP purchased webOS only to do nothing with it for two years while it bled talented developers, Sony has essentially no presence in the US phone market, and the other companies have little to no presence in the US thanks to concerns from American politicians about Chinese manufacturers using their Android devices to spy on Americans. Worse yet, the only other theoretical contenders that would be left to join Google to fight Samsung, Apple, and potentially Microsoft would be Nokia and Blackberry, both of which have not been especially successful in the mobile space for the past five years. In this situation, Google would probably be forced to expand the Nexus program (something that has been rumored for several months) to ensure that several OEMs have an edge on Samsung.

Of course, that doomsday situation assumes that Samsung could maintain the same dominance in the mobile space without Google’s services, including Gmail, Google Maps, and Google Play. Samsung could try to turn to Amazon for an app ecosystem and Microsoft for mail, maps, and search, but if they had the gall to leave Google then Samsung may not be quick to jump into bed with two completely separate companies to deal with more of the same negotiations. If Samsung wanted to maintain their dominance in the mobile space without Google, Microsoft, or Amazon, they would be forced to make or expand a separate app market, content store, mapping application and database, all while continuing to be dependent on Google for the base of their operating system.

samsung logo

Because of all those obstacles, Samsung would be much, much more likely to stick it out with Google or turn to Microsoft and Amazon. Microsoft might jump at the possibility of having its services running on a much larger sample of the market at Samsung’s price and Amazon (whose two goals seem to be to make as little money as possible and never announce sales numbers) would probably give Samsung access to their Appstore as long as Samsung used their music and video services. Samsung is undoubtedly talking with both Microsoft and Amazon about these possibilities should they determine that Google is more of a burden than a blessing.

Either of those solutions comes with a huge caveat, however: Samsung’s users have paid into Google Play for apps and content. To encourage users to stick with Samsung devices, Samsung would have to ensure that the majority of apps that their users use were in their/Amazon’s app store and possibly offer refunds for apps that users paid Google for. These issues could be surmounted, but they would be a PR nightmare and Samsung would undoubtedly lose market share in the process.

The crux of the issue centers around whether or not Google and Samsung’s relationship will fall into disrepair. Both companies have a ton of money at stake without each other. Samsung isn’t necessarily in the wrong to ask more of Google, but it’s not like Samsung had done well for itself with its Omnia line of Windows Mobile phones. It wasn’t until Google started giving away Android that Samsung was able to become the monster in mobile that it is today.

Regardless of if you see Google as being stingy towards Samsung or Samsung as ungrateful, the reality of the situation is that Samsung has been working hard at ensuring that they can leave Google if they need to. Samsung has continued to not only change how Android looks and works on their devices, but it has also continued to push its own versions of products and services that compete with Google’s, including S Voice, Samsung Wallet, ChatOn, Media Hub, and Samsung Apps. Google has every right to be concerned about Samsung, but I think Google has more to lose than Samsung does. Google may not owe Samsung anything, but Google cannot afford to lose Samsung just yet. The most likely result of the tension between the two companies is that Google will give Samsung more of a share of its mobile advertising revenue while investing heavily in Motorola and others to lessen Samsung’s dominance.

The irony of the situation is surely not lost on Google’s executives; such a move would be appeasing the war-hero-turned-enemy. Samsung may not be Google’s enemy now, but the threat of Samsung being able to leave Google is a threat that Google needs to be able to respond to. The question is, will Google and its OEMs be able to diminish Samsung’s market share without alienating the company that is making Android succeed?

  • wmyers4u

    I have a Motorola Triumph……….absolutely no updates offered..and the ROM communityI don’t think ever produced a fully functional aftermarket one. This will likely be my last Motorola phone because of the lack of product support.

  • socalrailroader

    Google should have seen this coming, they wanted an open and free os, now that it’s flourishing they are just ticked they might not get all the profit, reminds me of Apple, greedy greedy. That’s what this comes down to, money, Google doesn’t care a bit about saving anything, except their incoming profits.

  • MttFrog13

    The only plausible scenario where I see Samsung leaving android is if they partner with Facebook. Facebook has the brand, power, and ecosystem to help Samsung separate from Android.

  • raini

    agree. I buy my phone for android, not the other way around.

  • everettedl

    What really needs to happen is these other OEMs need to take notes and really step their marketing/branding game up to offer some real competition to Samsung. Right now, Samsung is the only one doing it right and it’s possibly turning into a bad thing for both Samsung and Google. Oh the irony…

    Honestly I think Samsung’s in a better position, because they can continue on their current path of success with Android while developing their own on the side. I don’t even think Samsung would completely abandon Android because it would ruin the Galaxy brand name and hurt faith in Samsung, but having a plan B is definitely good for them.

    And even if Samsung left Android, we’ll be having this same discussion a few years from now about company X who’s taken Samsung’s place and has Google worried.

  • MKader17

    Simple, Google just changes its policy and says that they will only provide android for free if you use the play store (or for non-profit). If you use a forked version of android for revenue then you must pay.

    • http://ronoffringa.wordpress.com Ron Offringa

      After Google bought Motorola they agreed to keep Android free to use for another five years, so that isn’t an option for a while.

  • Alexander Garcia

    Great write-up you have here Ron. Keep ‘em coming. Love your opinions even though I don’t always agree with them. Keep up the great work. =)

    • Alexander Garcia

      …and I will just add…
      Enter Motorola!

  • Daistaar

    I think the bigger issue with Samsung’s size, influence and popularity is that people will unknowingly think that Samsung and Touchwiz is what Android is; the whole UI and feature set. People will think the Android experience is a Galaxy device with TW. Google’s experience will only be known by Nexus users and die-hards of the pre-S3 era.

  • Bryan Ivie

    I disagree w/ you assertion as to why Google got in the phone business. I believe it was because Apple refused to leave AT&T. They were enjoying their fat subsidy and wouldn’t take the party elsewhere, meanwhile the world was realizing what a smartphone could be, but many couldn’t justify joining AT&T and losing the “phone” part of the equation due to their terrible service. Google gets paid from web searches, so they wanted people on every carrier doing that. Hence, they developed Android and made it free to manufacturers. If Apple would have spread their love, no one would’ve bought into other ecosystems in a major way. But like always, they lost the lead in an entire product division that they invented: just like pc’s and tablets.

    • http://ronoffringa.wordpress.com Ron Offringa

      Google acquired Android in 2005, two years before the iPhone was announced. At that time Microsoft was the king of mobile with Palm in second. Google certainly took advantage of Apple’s alliance with AT&T with the DROID on Verizon, but that was not their original plan.

  • Mallahet

    Nice article. Many good points brought up, and it will be interesting to see how it all ends up!

  • Epell

    Personally, I think Motorola will do just fine.
    I would have preferred to buy Motorola phone over Samsung phones in the past.
    The only reason I got Samsung phone is because Motorola locks bootloader.
    Otherwise I think Moto makes solid phones.

  • http://brgulker.wordpress.com/ brgulker

    Hard to imagine Samsung being as dominant without Google Apps and Google Play.

  • Michael

    Samsung deserves its success, with the exception of copying iPhone back in 2007, which cost them literally. Overall, Samsung not only knows how to market themselves, but executes beautiful and polished interface and hardware.

    So google should make a deal with Sammy if they want to continue their success, but I personally would prefer Sammy to come up with their own OS (which is currently in process) cause I am not a fan of Android OS.

  • KruseLudsMobile

    How did Google BUY Android? Didn’t Google INVENT AND CREATE Android? This author doesn’t even know what he is talking about!

    • bakdroid

      …….wow…

      • RicoDelicioso

        …….wow….. and I raise you one more palm.

    • http://ronoffringa.wordpress.com Ron Offringa
    • MikeKorby

      Android was an up-and-coming project by Rubin, Miner, Sears, and White in 2003. It essentially began as a spinoff of Danger, the company originally responsible for the sidekick (which was eventually bought out I believe by Microsoft and murdered by the Kin). Rubin was a co-founder of Danger, and that is where he decided to spin off this project to begin building a mobile operating system. In 2005, Google purchased the Android project, and it formally became a licensed unit/subsidiary of Google.

    • Facepalm

      Apparently YOU don’t know what you’re talking about. Google bought Android and started to develop it as a Blackberry substitute, and then when the iPhone became popular, began making it similar to iOS.

  • fanboy1974

    I’ve been saying it for years. We can’t have all of our eggs in one basket. But it’s not Samsung’s fault because their not holding back and their doing what their suppose to be doing; can’t blame them. It’s time for Motorola/Google to release a Nexus phone on all carriers and not load bloatware or lock bootloaders at the request of the carriers. The Nexus 4 is a solid attempt but it’s not available on every major US carrier including Verizon. I would buy a HTC One but yet again, it’s not on Verizon because we have the watered down version aka the DNA.
    The Samsung S3 and Note 2 are available on every major carrier physically unchanged. Don’t Motorola, HTC, Sony and LG understand the freaking concept already? Apple’s been doing it for years and Samsung figured that crap out a year ago. HTC/Verizon should just release the HTC One on Verizon for $200 and make the DNA $100. HTC One could be a great competitor if it’s on all the carriers. Pisses me off that Verizon would release the crappy LG Intuition but pass on the HTC One; mind freaking nuts. And no, I don’t want some Super DNA phone. I want the original HTC One.

    Concerned Note 2 owner.

    • William

      You’re completely right about that strategy.

      Only thing though, the Htc one looks like a poor man’s version of the iPhone 5. Yes it uses a nice material, but that doesn’t excuse bad design. Looks repulsive. Not to mention straight up copying Microsoft’s metro feel and live tiles.

  • http://twitter.com/UVAMike456 Michael Werling

    They both need each other very much right now! Samsung needs the operating system WITH G APPS or their incredible Market Value collapses and Google needs a device maker who KNOWS HOW TO SELL DEVICES!

    But as many other people have commented, the TOP DOG can change within a few months to a few years without anyone seeing it coming.

    This is where the Moto Acquisition comes into play! I believe, like many others, that Motorola has had some sensational hardware even after the OG Droid but product launches and marketing in the company were an absolute disaster!

    If Google takes the hardware that Motorola truly knows how to make and provides a decent software team that completely redesigns (or scraps) BLUR…A phone even greater than the OG Droid can come out of it (YES the X-PHONE)

    Combine this with sensational marketing on ALL CARRIERS and google will be able to steal some market share away from Sammy and into THEIR OWN subsidiary.

    This will help level the playing field for all OEMs and create a less hostile environment for all android manufacturers!

  • poeddroiduser

    “Google bought Android to fight Microsoft’s mobile dominance”…. Is this some JJ Abrams alternative time line article?

  • Jeffrey

    What’s with all these ridiculous FUD articles the last few days about these two companies? I wouldn’t be surprised if Apple or Apple fanboys had a hand in spreading such bs and trying to cause problems where there is none. After failing to directly attack Samsung, Apple’s strategy now seems to be to cause internal strife between Samsung and their partners.

    Every Android manufacturer wants to be in the same position as Samsung. If Samsung disappears, there’s just going to be another company who will fill that spot and “threaten” Google. So there’s nothing inherently wrong with what Samsung, or any other manufacturer, is aspiring for.

    Samsung deserves all their success because they actually give kick ass hardware with useful software for the general crowd. Every other Android manufacturer had the same chance as Samsung to be successful.

    Samsung has tremendously helped Google gain a large foothold in the mobile space. Without Samsung, only Apple would be the cool brand, so I’m thankful for that.

    I appreciate what Samsung accomplished, and I would continue to support a company that cares about us more than any other Android manufacturer.

  • Akashshr

    I am sorry, Samsung will be dead if not almost dead if they leave on android. Thats point blank the truth.

    About Samsung and it demanding from google more cut of the pie in the Ads business, sounds preposterous to me. I think we are giving samsung way to much power than it actually has. They can probably demand if they are more than say 50% of the android ever sold. Google will tell them to take a hike if thats what happens. They Will supercharge the rest of the OEMS, just like they did with the Nexus 4, giving it to LG…LG was insignificant in the android race, people have a brand problem with LG. But look at how it sold…Cause it has a “Nexus” tag. Imagine another Motorola Nexus, then again an HTC nexus and a Sony Nexus. Thats really what google needs to do.

    Samsung will look this position at the same pace as they got it, if they do ANY possibility discussed in this article. Samsung will loose share..And the next best android OEM will take samsungs share. ‘Android’ is MUCH MUCH bigger than ‘Samsung’ and people are forgetting that.

  • dsignori

    The bottom line in all of this is that without Google apps, Samsung cannot be nearly as successful. It was mentioned, but very understated.

    Seriously, are you gonna buy a phone with no native Gmail, Maps(including Navigator), Google Now, Google Play store- not to mention Drive, Google Plus, Calendar, Google Talk, etc..

    They would lose huge market share without Google, absolutely no question.

  • roy69

    Google is in a Damned if you do Damned if you don’t position!

  • rruready

    It’s obvious that Samsung COULD try to leverage for more from Google (because of their current market share), but how much of this “forking” threat would be a bluff? I love my Galaxy S3 for a multitude of reasons, but would I have bought it if they forked from Android? Absolutely not. How many others feel that way? That’s the question that Samsung needs to ask itself before threatening to look elsewhere.

  • Dorian Brooks

    If Moto, LG, & HTC ACTUALLY did some advertising I don’t see why they couldn’t come up. No one’s gonna buy your product if they’ve (general public) never heard of it. They have to go after the ignorant masses!!!!

  • BrianT

    Samsung’s core competency is hardware, they make some of the finest tech in the world. Google’s core competency is software; they are probably the premiere software company at the moment. Google bought Motorola, an excellent hardware manufacturer, as good as Samsung if not better in quality. Whom will Samsung buy for software development that can compete with Google? CyangenMod?