Last Updated Sep 15, 2010 3:13 PM EDT
What Verizon is trying to do is create a walled garden -- like Apple (AAPL) has with iOS apps -- and snag a chunk of revenue for itself. The move hits Google in a few ways. First, because Verizon is such a large carrier, this has the potential to drive app business away from Google's marketplace and into its own pocket, so the search company loses an important revenue opportunity.
Next, it helps further the fragmentation of the Android platform. Google wants developers to be able to write one set of apps and then sell to everyone. That's been a pipe dream, given the number of Android versions that various manufacturers support. This would add another type of fragmentation: where developers can go to market. Third, Verizon's move is about market control and helps put Google in its place.
There's a long-standing tension between handset manufacturers and wireless carriers. The latter want to expand their businesses by controlling all spending by consumers. Apple (APPL) has made inroads by keeping tight controls on which carriers could sell the iPhone and by directing all ancillary sales through its own online stores. Google (GOOG) tried a related move by selling the Nexus One, though it completely flubbed the attempt, eventually following its path of "celebrating" utter failure.
Momentum is currently with the carriers. All of them are jealous of Apple's ability to keep making money off customers, but they haven't a prayer of getting a finger into that pie. Instead, they have an eye on Google, and why not? Under CEO Eric Schmidt, company growth has slowed to a crawl and most of its attempts to break out of ads as its main revenue source have fallen. That's because the company, in its arrogance, has failed to learn how to understand another business.
For example, it decided to create, with partner HTC, the Nexus One. Customer relations and service were disasters. Google had to drop the product and HTC ended up a defendant of an Apple patent infringement lawsuit. Granted, customer service at the carriers is no great shakes, but Google is one of the few companies that can make them look like masters.
The Android marketplace has received a great deal of criticism, so Verizon decided to kill two birds with one stone by creating a possible revenue stream for itself by taking many of the smarter features of the Apple App Store and adding some of its own:
- no testing fees
- 70 percent developer revenue share
- an app approval process to (hopefully) build customer confidence
- billing through Verizon, so credit card authorization is unnecessary, which potentially means easier transactions for and more spending by customers
- continuity across an app store for BlackBerry as well
- detailed submission guides, with presumably less guesswork for developers
- future subscription billing
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