Google – Warning shot.

A chink appears in Google’s iron control of Android.

• For the first time, there is a real threat to the dominance of the Google Play store on Android devices which may eventually undermine Google’s ability to control Android.
• Fortnite is currently by far the biggest thing in gaming with well over 100m regular players and over $300m in monthly turnover.
• The next step in its evolution is to grow its reach on mobile and while it is already number 1 on the Apple App Store in terms of revenue generation, it is nowhere to be seen on Android.
• This is because Epic decided to bypass Google Play altogether and only make the game available via its website.
• Android’s openness makes this possible, but Apple has completely locked this functionality down in iOS.
• This makes the acquisition of the game a little more complex as users have to be aware of how to get the games as well as enable installations from unknown sources.
• This immediately raises the problem of fake websites claiming to be Fortnite and offering malware downloads.
• Epic has already taken down 47 fake websites and is fully engaged in the inevitable game of whack-a-mole that always ensues from these sorts of situations.
• However, given that the game is so cash generative, this looks like a worthy cross to bear given that Epic is not paying away 30% of its turnover to Google.
• Despite these difficulties, Fortnite already has achieved 15m installations in 21 days (see here) from outside of Google Play.
• This is particularly impressive given that the game is still in the invite-only phase and I suspect that almost all of them are on Samsung devices.
• This is because the endemic fragmentation of Android means that guaranteeing a consistent experience from one device to another becomes a real problem.
• Hence, Epic has been working in depth with Samsung to ensure that Fortnite works optimally on its devices.
• This makes complete sense because Samsung is dominant in Android meaning that with one version of the app, Epic can ensure the highest number of players are covered.
• It is clear that a huge effort is required to get Fortnite optimised for the dizzying number of different hardware and software configurations that exist is required, but given the financial return, it is a worthwhile investment.
• Hence, I think it likely that these efforts will continue and grow as will the number of installations on Android devices.
• The message is clear: one does not necessarily need Google Play to be successful on Android.
• The vast majority of the value on Android is created by only a handful of apps and services meaning that other services may also be able to make a success of leaving Google Play, distributing their products themselves and keeping 100% of the revenue rather than 70%.
• For Google, this is less about money and more about control.
• Google uses the popularity of Google Play with users to force handset makers to distribute its apps and services and set them by default on their devices.
• The net result has been that Google has commoditised Android handsets and drained the industry of profitability almost exactly as Microsoft and Intel have done to PCs.
• Having its apps front and centre and set by default on Android devices undoubtedly has driven usage and created enormous value for Google.
• Consequently, if the biggest apps and services no longer need Google Play, then Google’s ability to ensure its apps are at the centre of every device will diminish and potentially its revenue generation.
• Obviously, there is the possibility that Google apps and services are now so entrenched that users will use them whether or not they are already present on the device when new.
• Either way, should the top apps and services become available independent of Google Play, then Google’s ability to control Android will be materially diminished.
• I think that Epic’s decision to take this route is planted firmly in the economics of the revenue sharing arrangement, highlighting a good reason why Google should cut its revenue share.
• This is because the strategic and financial benefit to Google in terms of control and advertising revenue are likely to be far greater than the loss of revenue from a revenue share cut.
• It would also disincentivise, others from distributing their products on their own.
• Fornite’s success is a warning shot across Google’s bows but it is unclear whether Google will take any notice.