MocoNews opines about Bill Gate’s comments regarding Google products in the smartphone space in the NY Times. The quote of interest from Mr. Gates:

“How many products, of all the Google products that have been introduced, how many of them are profit-making products?”

That quote is really quite interesting because it illustrates how an “old school” company can fail to react to a disruptive company when it continues to play with using the old rules.   Mr. Gates is measuring (or trying to get the industry to measure) Google based on the profits of any one product.  Google, on the other hand, is operating their business under a completely different set of rules.  Google has a “cash cow” in their advertising business and is willing to enter new markets with loss-leader products to simply acquire new customers.

Before Google had a profitable advertising business, they spent investor’s money to build out a distribution network on the backs of search.  They are effectively pursuing the same strategy with mobile — spend the money to get the eyeballs.  If you have enough eyeballs, you will find a way to monetize.

Having spent my formative years in the early Windows PC era (at Gateway, AST, and Tandy), I don’t have a lot of sympathy for Microsoft.  They were quite adept at bundling “less than great” software into the operating system, making it all but impossible for third parties to create viable PC software businesses.

But herein lies my anxiety about Google’s approach.  By entering these markets with zero-cost solutions, they make it difficult for non-Google companies to offer innovative solutions with a viable business model.

I am all for lowering the cost of mobile data services.  As I have lamented frequently in this blog, I believe that the total cost of mobile data (TCMD) is the biggest barrier to adoption.  But I don’t think its healthy for a marketplace when a gorilla “dumps” products below market costs.

From my perspective, this borders on predatory pricing — selling a product below cost with the objective of driving other firms out of the market and then raising the price to monopoly levels.