Last month, I e-mailed Eric Schmidt with a question on the smartphone patent wars. Mr. Schmidt, Google‘s executive chairman, sidestepped my particular question, but he emphasized the broader context for the intellectual property disputes - the high-stakes competition between Google's Android software and Apple‘s iOS.
“That competition, in my opinion,†Mr. Schmidt wrote, “is the defining competition in the industry today.â€
The battle in smartphone and tablet technology - to build so-called platform ecosystems of partners, developers and users - is the underlying theme in not only Google's seemingly disappointing quarterly performance reported on Thursday, but also in a string of recent tech company and industry reports.
The once-dominant personal computer platform is in retreat. The quarterly results this week from Microsoft, Intel and Advanced Micro Devices all point in that direction. Yes, there is a product-transition issue as the mainstrea m PC world pauses while waiting for the upcoming release of Windows 8, Microsoft's new operating system. But the report from IDC last week showed that even Apple's shipments of Macintosh computers were off 7 percent in the third quarter.
Still, people buying fewer personal computers and more smartphones and tablets is a trend that warms the hearts in Cupertino, Calif., Apple's headquarters. That is a tradeoff the company will take gladly, given Apple's lofty profit margins on iPhones and iPads.
The other mobile technology heavyweight, Google, is making a tradeoff of its own. Yes, its profit margins are slipping a bit as more people increasingly use its search and other services on smartphones and tablets. The price paid by advertisers per click is less on mobile devices than on the bigger screens of PCs.
But the mobile ad market is embryonic, although growing rapidly. The business models haven't been figured out yet. Recall, though, that Google was founded and well underway before it figured out the search ad model that made the company an Internet cash register.
The first rule of building a dominant technology platform is to, well, build it fast and build it big. That is what gets that self-reinforcing ecosystem rolling - more users attract more industry partners, more advertisers and more software developers. And the lucrative snowball rolls on.
Larry Page, Google's chief executive, went out of his way to point out on the conference call that 500 million people are now carrying around mobile devices powered by its Android software. That army of Android users is growing daily.
“Scale is Google's performance-enhancing drug,†observed Timothy Wu, a professor at Columbia Law School and author of The Master Switch: The Rise and Fall of Information Empires.â€
