Google is acquiring Illinois-based Motorola Mobility.

AUG. 15, 2011 • Google Inc. will pay nearly $12.5 billion to acquire Motorola Mobility Holdings Inc. Although Google has marketed its own Android phones with hardware sourced from partner electronics manufacturers, the acquisition of Motorola puts the company in direct competition with smartphone makers who use the Android OS. No change is expected in Google’s policy of giving rights to use Android to these hardware manufacturers for free in order to build market share against Apple’s iOS devices, and Google says it will run Motorola as a separate business. Despite any ripples in its partner relationships, the benefit of gaining Motorola’s 17,000 established patents, and 7,500 patent applications, is seen as too major an advantage to pass up. Beefing up its patent ownership is a strong move to fight off the increasing number of patent lawsuits being filed. In related news, Google announced that its recently introduced Google+ social network will only skim off 5% of revenues generated by games on the platform. Facebook charges 30%.

Impact: Back in 2009 many research firms, DFC included, predicted Android smartphone sales would overtake their iOS counterparts due to the former’s open architecture and low cost relative to the latter, as well as the plethora of manufacturers, models and network carriers supporting it.  Indeed this has happened.  Recent findings from Gartner shows the Q2 worldwide smartphone market at 108 million units sold with Android at 43.4% share and iOS at 18.2%.  With Android’s growing success, it only made sense that Google would want to better steer the Android hardware business. This does not mean Google is trying to quickly dominate hardware/software ecosystem in the same way Apple is the sole controller of the iOS. Although Google now has a shot at the option if it ever chooses to become more like Apple. Still, all the noise about Google having a new foothold in the hardware side really pales in comparison to the importance of gaining Motorola’s patent war chest as a defensive move against other large tech firms with similar IP weaponry. As for its Google+ commission policy, it’s a great inducement, yet game developers and publishers will appreciate the better rate more once the platform is fully launched and has many more millions of users.