Google's Big India Opportunity at Risk

India is taking aim at Google with its antitrust sights set on the tech giant. Google will be a tough company to crack, but India is determined to tame its dominance.

Last week, Google lost an appeal in India’s Supreme Court to block an antitrust order. The order requires Google to make significant changes to the way its Android operating system does business with smartphone makers, app developers and users. This strikes at the company’s core business model for Android and may force the technology giant to alter its approach in its largest market.

In October, the country’s antitrust watchdog fined Google the equivalent of $162 million for allegedly abusing its dominance of the Android ecosystem. India’s antitrust remedies, influenced by a similar case in Europe back in 2018, are far more stringent and the scale of change required is much larger. Google said it is reviewing the details of the Supreme Court’s decision and will cooperate with the antitrust agency on the way forward, in parallel with its appeal.

India has the largest number of Android users in the world, with 600 million users and another 200-300 million expected by 2027, according to Counterpoint Research. This makes the government's push to regulate Google's dominance in the country pivotal. Unlike in China and Europe, India's population is still growing and quite young. However, Europe's precedent shows the difficulty of actually inflicting any serious harm to Google's dominant position and turbocharging vibrant competition, at least in the near-term. The impact of the ruling on the region's competitive climate is still to be seen as most smartphone makers need to offer Google's products to remain competitive, and no strong alternatives have yet emerged.

Geoff Blaber, chief executive at CCS Insights, believes that the change in regulatory temperature is 10 years too late. He argues that Google has built such a strong position and demand for its services is so high that the impact has been far more limited than it would have been if it were introduced much earlier. According to Statcounter, a website analytics company, Google’s search-engine market share has stayed pretty much the same globally since the beginning of 2018.

Some Indian app developers are pleased with the court’s decision, but they face a difficult challenge if they want to compete with Google’s popular apps such as Google Maps. For one, it will require millions of dollars in marketing spending and investments in product development.

For years, Google has been subsidizing the development costs of Android by pre-installing Google Chrome and its search app. This has funneled 96% of smartphone users in India to its own browser and search engine, which fuel its advertising machine. Until now, Android has been distributed practically free of charge to smartphone makers. In 2018, Google said it would introduce a new paid licensing agreement for its apps on Android smartphones and tablets shipped into the European Economic Area, while keeping the operating system free and open source. It might have to do something similar in India.

Neil Shah, vice president of research at Counterpoint Research, believes that the Android ecosystem will either begin to look a lot more like Microsoft’s license-based Windows ecosystem, or much like Apple, if Google implements all the required changes in India. Shah believes that if Google decides to become vertically integrated with a closed ecosystem, it will have a major impact on the Android ecosystem in India.

Although India's huge and growing market might seem like the ideal place to reign in Google's dominance, the latest ruling is unlikely to be a magic bullet for digital competition.