Friends turn foes

The relationship between Google and Samsung is looking increasingly strained, after recent announcements from the Korean vendor suggest that it is gradually stepping up to compete with its old American ally.

The two firms have enjoyed a successful partnership in recent years. Samsung shipped over 88 million units in 4Q11, of which almost 40 per cent were smartphones. It is the largest Android device vendor and the number two vendor overall in the market. Meanwhile, Android is the most popular smartphone platform in the market, accounting for more than half (50.9 per cent) of smartphone handsets in the market in 4Q11, according to Gartner.

However, the relationship seems to have hit an impasse, according to Nick Dillon, analyst at Ovum.

“There are rumours of Samsung making demands over the future direction of the platform and, being in that position of power, it probably has more sway than other handset manufacturers. It seems to be quite a perilous relationship at the moment,” he said.

These concerns have been exacerbated by announcements from Samsung that it is putting more emphasis and investment into its own OS, and it has also recently launched its own mobile advertising exchange to rival those set up by Google, Apple and other operator plays.

Samsung is eyeing opportunities to cut Google out of its smartphone value chain by investing in Tizen, an Intel-backed open source platform that was launched late 2011. The Korean manufacturer plans to merge its own smartphone operating system, Bada, with Tizen and recently told Informa Telecoms and Media that it plans to expand the variety of handsets and tablets that run on Bada, by making the OS open source this year. Reports suggest that Bada will be used in lower-end smartphones, while higher-end devices will run on the Tizen/Bada-merged platform.

Meanwhile, the Korean firm’s new AdHub Market advertising platform lets companies buy advertising space on mobile devices from either app developers or Samsung directly. Google also sells advertising space on Android devices through its AdMob exchange, but Samsung would not provide details on exactly how AdHub Market will compete for business with AdMob.

The move suggests Samsung is gradually turning its back on Google, but it isn’t the only one, mobile operators are as well. According to Malik Saadi, principal analyst at Informa Telecoms and Media, Android has, until now, been very attractive to operators because it provides flexibility to promote smartphones across all of their segments and data plans, but Google’s business model could cause conflict with operators’ business models.

“In an ideal world, operators would want a platform like Android, but not controlled by a vendor like Google. That’s why some, such as Telefónica, are turning to Mozilla, with the B2G platform. B2G ideally provides operators the flexibility of Android with no supreme control by any other software player like Google, so it would enable them to get their framework like RCSe and WAC and be able to influence the roadmap of that platform, because that framework is open source.”

Google’s prolonged takeover of Motorola Mobility could also exacerbate fears that handset manufacturers have over the Android platform. The deal could mean that other handset manufacturers opt to invest in their own platforms, or in operator-led platforms instead. After all, they have already shown similar apprehension after Microsoft announced its partnership with Nokia. At this year’s Mobile World Congress, only one device was unveiled that ran on the Microsoft Windows Phone platform, apart from those launched by Nokia, which was one of a multitude of handsets launched by ZTE.

This suggests that handset manufacturers see the Nokia/Microsoft partnership as a closed shop and could also distance themselves from Android if they perceive a similar Google/Motorola partnership forming.

Despite that, Google’s opportunities in the connected device market are looking far from bleak, as it looks to be scoping out the home-networking market with its acquisition of Motorola’s connected-home business. The acquisition gives the search giant control of Motorola’s in-home set-top-box, TV-software and broadband-equipment divisions.

“If Google manages to create enough synergies between Moto Connected Home and its Android framework, this could make the company as a leading player in this nascent but lucrative business,” said Saadi.

And it is also eyeing up opportunities in the “heads-up” display market, having recently confirmed that it is developing augmented reality glasses. According to Adrian Drury practice leader and senior consultant at Ovum, Google’s decision to focus on the technology could prove to be a very significant one.

“The power for a search marketing organisation like Google to be able to push display ads at you – not just while you’re walking down the street but also while you’re walking down aisles, is potentially massive. It can be part of every single purchasing decision because it would be influencing people in such a way. It could prove to be an incredibly lucrative thing to have done to the market,” he said.

So as the relationship between Google and Samsung evolves from one of partnership to rivalry, it is the movement in the connected device space and in other future technologies that could define which of the two emerges triumphant.