I largely agree with Bill Gurley’s post on how Google Adwords is the castle and how products like Android are the moat that protects it.
I don’t think Google uses this Warren Buffett castle analogy and am quite sure they are using a value chain/value net model instead to do these analyses. I think it’s a much cleaner model with lots of case studies–
For example, Intel spending money to increase the market for computing. Or Microsoft creating more reasons to need a personal computer at home. Which jibes well with Google getting more people connected online.
The really interesting part is that oftentimes, a lot of tension arises along the value chain because your partners can screw up your strategic initiatives (so you are actually competing with your partners). For example, at one point Microsoft was upset at Intel because Intel was charging too much for CPUs and limiting the market size for computers since prices were higher than where Microsoft wanted them to be.
That’s more or less happening to Google right now with Android. In an ideal world, Android would have enabled very cheap but competent phones sold with cheap data plans but carriers are not allowing that. Instead, they are are extracting all the value from the chain. That’s why Android handset prices are similar to iPhone prices.
Android has no doubt improved Google’s strategic situation and widened their moats, but it has been a failure when you evaluate Google’s objective and grade their performance along the mobile value chain. They have in most cases, lost to their carrier partners.
It’s not entirely Google’s fault though. Remember, they initially tried to dis-intermediate the carriers by selling the Nexus One on their own and creating their own value chain. That failure pretty much relegated Google to supporting an existing model where carriers are king.
Now that Google has more experience, perhaps it’s time to try revisiting their initial strategy.