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Less Than Free 330

VC Bill Gurley has up an insightful piece on the strategy behind Google's releasing turn-by-turn mapping for free. He calls it the "Less Than Free" business model, and it is beyond disruptive. On the day that Google announced its new service, the stock in the two companies that had controlled the market for map data, Garmin and TomTom, dropped by 16% and 21%, respectively. (Those companies had bought Google's erstwhile map-data suppliers, Tele Atlas and NavTeq, in 2007.) "When I asked a mobile industry veteran why carriers were so willing to dance with Google, a company they once feared, he suggested that Google was the 'lesser of two evils.' With Blackberry and iPhone grabbing more and more subs, the carriers were losing control of the customer UI... With Android, carriers could re-claim their customer 'deck.' Additionally, because Google has created an open source version of Android, carriers believe they have an 'out' if they part ways with Google in the future. I then asked my friend, 'So why would they ever use the Google (non open source) license version?' ... Here was the big punch line — because Google will give you ad splits on search if you use that version! That's right; Google will pay you to use their mobile OS. I like to call this the 'less than free' business model. This is a remarkable card to play. Because of its dominance in search, Google has ad rates that blow away the competition. To compete at an equally 'less than free' price point, Symbian or Windows Mobile would need to subsidize." Gurley speculates that the company may broaden "less than free" to include the Google Chrome OS.

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