What Google has done with Android is amazing. The mobile operating system is now 44% of the smartphone market and its rise, along with iOS, has contributed to the utter destruction of both
RIM (peak market cap of almost $80B, down to $8B today) and Nokia (peak market cap of $158B, down to $19.5B today).
I spent some time the other day standing in a cell phone store running the support gauntlet with my provider. While waiting on a staff member to help me, I was browsing all the latest phones and noticed something remarkable: every single phone in the main display area was an Android device. New devices from HTC, Motorola, Samsung, etc. indistinguishable from each other in many ways, but all running the Google mobile operating system.
Apple had a full two-year head start over Android. The iPhone was an absolute success and iOS now makes up for a majority of Apple revenue. Yet Android has overtaken it in market share and is growing faster in taking what is left of the Blackberry and Symbian share. It was only when Google announced last year that over 200,000 new Android devices were being activated each day that most took notice of what Android was becoming: a dominant mobile platform, a Microsoft-beater, and an Empire.
Android almost didn't happen. All of it. From Google releasing a their own device, through to Microsoft being crushed and Google now holding a near-majority of the ultra-competitive smartphone market. This is because Google's purchase of Android was carried out on a whim. The two co-founders went around Eric Schmidt, then CEO, and purchased the small Palo Alto-based startup for a around $50 Million – Schmidt knew nothing about it at the time.
I had heard this story some time ago, but it came back to me as I was standing in the store and seeing first hand the dominance of Android. I found out about what happen with the Android acquisition during an otherwise routine press briefing in October of 2009. Eric Schmidt and Sergey Brin held an open press event in New York. Most of the event revolved around the controversies Google were involved in at the time: Google Books, antitrust investigations, Android lagging behind iPhone.
In answering a question about mobile and enterprise strategy, and potential acquisition targets, Schmidt revealed that he was not involved in the Android acquisition. He said that he didn't even know that Larry and Sergey had purchased the company. There is a transcript of the briefing at Techcrunch, the relevant part is:
Question: What are the most attractive areas for acquisitions?
Schmidt: we turned off M&A down, we didn’t want an additional expense streams without [additional revenues] We’ve turned it back on again. One day Larry and Sergey bought what became Android, and I didn’t even know about this. They said this is really interesting. I didn’t think about that, but now think about the strategic opportunities that created.
Nobody in a room full of journalists seemed to recognize the significance of this statement at the time. They moved onto the next question, and none of the summaries or stories about the press event that day in New York made mention of what Schmidt said about Android, or indeed the implications of the decision making process.
This says a lot about how Google work. Keyhole Software, which went on to become Google Earth, was also acquired in a similar manner. By being flexible and daring, Google has established itself as a leader in one of the fastest growing technology markets in the world. They beat out established industry leaders by taking a chance.
I find the story of how Android was acquired to be an interesting piece of technology folklore – like how Bill Gates sold DOS to IBM without actually having an operating system, or how Steve Jobs visited Xerox PARC and was inspired to create the Macintosh. You can now add the story of how a leading smartphone platform was acquired for comparatively little money, established Google in a new and important market, and how it created an empire almost accidentally.