Google is planning to end charges for data usage on Android apps in developing countries, according to a report from The Information. It’s in keeping with what we know of Google’s long-term strategy for dominance.
The practice of waiving data charges is called a “zero rating.” It’s a policy adopted by some big tech companies to make accessing their services free for the user. Wikipedia, for example, operates Wikipedia Zero — a text-only version of the encyclopedia that people in the developing world can access without restriction and without paying data charges.
The Information says that Google’s plans would entail the search giant acting as a “middle man” between mobile carriers and the app companies — making it easier for smaller companies to arrange zero-ratings than is currently feasible. “When someone is downloading or using, say, the Ola Cabs app, Google can recognise that data traffic through Android and pay the carrier for the data charge associated with it,” writes The Information’s Amir Efrati. “The third-party developer would then be expected to pay some or all of the charge.”
This strategy is the classic Google playbook. First, it provided free search tools to everyone in the world. Then, it built an advanced, customisable mobile operating system — and gave that away for free too. Google Books is another: It tried to digitialise the world’s knowledge and put it all online (although ran into opposition from publishers and copyright-holders).
Google identifies a need, and provides the service for free, scalable for billions of users — tying users into its ecosystem in the process. It then makes money by charging advertisers for access to all those users and their valuable demographic data.
Zero-rating for apps is the next logical step: Providing Internet access itself to users, free of charge.
(It’s also working on Google Loon, a project to provide Internet to remote areas by balloon, as well as a rumoured mobile wireless carrier service in the US. These likely won’t be free, however.)
Zero-ratings, if implemented, will undoubtedly see Internet-enabled app usage skyrocket. And with that, Google’s revenues — predominantly generated by online advertising — will also jump. But this move isn’t just a new avenue for profit: It’s a strategic move.
Let’s just look at where Android stands. It’s a free OS and comes bundled onto some of the cheapest smartphones out there. It has a massive majority market share globally — around 80%. And the price of Android handsets is actually continuing to drop as iPhones rise, making them more affordable than ever for those on limited incomes. Google should stand to benefit massively as the next billion people come online in the developing world.
And yet last year in Q4, the number of Android devices sold actually dropped — for the first time ever.
Because much of Android is open-source, anyone can take the source code and develop their own version. These are called “forks,” diverging from Google’s control. Forked versions of Android now have more marketshare than ever before.
This week, new figures showed Chinese smartphone manufacturer Xiaomi became the single-largest smartphone vendor in China. It runs a forked version of Android, and overtook Samsung, which runs “classic” Android. Samsung — along with much of the high-end smartphone market — has been badly burned by the runaway success of the iPhone 6 and 6 Plus. Android’s slipping grip on the high-end makes it that much more reliant on the low-end — where forks like Xiaomi are doing so well.
Cyanogen is another of these forks. It promises it will “take Android away from Google,” and just raised $US70 million to make that vision a reality.
As these alternatives become increasingly viewed as viable alternatives in the low-end market to Android, Google desperately needs to find a way to differentiate its products.
Leveraging its enormous size to offer free Internet on certain apps will be an incredibly attractive prospect to consumers — especially, as The Information notes, the cost of data in emerging markets can be “three to seven times higher than in the U.S.”