Last Updated Nov 10, 2009 9:46 AM EST
This isn't a feature slug-out where only the well-positioned survives. The mobile space fight more resembles the personal computer space in the early years, where IBM established a category and both Microsoft and Digital Research wrestled to create the default operating system. At the same time, Apple had a closed system, hardware and software all under its thumb. I think we're seeing a similar scenario play out today.
There are some significant differences. For example, Apple is out in the lead early in the race. But in the long run, that isn't going to be enough. The issues are economics and scalability. There are too many people in the world who will want units without having to pay a premium price. That's why the openly available platform is going to win. It's too cheap and well-developed for the hardware manufacturers, who, as one expert in cost management for consumer electronics companies told me, work on shaving fractions of a cent off per-unit costs.
And how can a company like Google afford this economic advantage? Online ads. When I mentioned the other day about Eric Schmidt saying that the company wanted to avoid Microsoft's mistakes, I failed to mention something else he said in the Fox Business interview: Google can give away Android because "we make money, and lots of it, it turns out, from advertising on mobile phones." Not will make money, but do make money. Google can infinitely leverage its development over many handset manufacturers and carriers without worrying about maintaining margins or overexposing itself. The more places Android is, the more money Google will make.
I also realized that Google has a tremendous advantage in the way it reports revenue. Ad revenue is all in one bucket, with no differentiation among platforms. As its numbers have shown at least a little growth during tough economic times, many -- myself included -- have assumed that they were doing a bit better than keeping par on search ads. But what if they weren't? What if that had gone down and the "lots" of mobile advertising dollars have more than backfilled the drop? You can tell what the iPhone means to Apple, but Android's fiscal importance to Google is like the Purloined Letter: invisible and in plain sight, all at the same time.
More manufacturers will turn to Google -- or maybe a competitor like Intel or Symbian, though they don't seem to be keeping pace at the moment -- and eventually it will win the handset wars because, as happened in the PC wars, Apple cannot and will not be everywhere.
Image via stock.xchng user rubenam, site standard license.