The inside story of how Google conquered the smartphone world.
By Beth Kowitt, writer June 16, 2011
FORTUNE -- When Google (GOOG) acquired a tiny wireless startup called Android in 2005, fewat the search giant had particularly high hopes for the deal -- if they even knew about it. At that point Google had purchased just a handful of companies, mostly software makers it had quietly folded into its operations. (Big, high-profile deals like YouTube and DoubleClick came later.) Besides, not many people knew exactly what Android did: The upstart was in stealth mode, and co-founder Andy Rubin, best known for creating the Sidekick mobile device, said little about its product or mission. Executive chairman Eric Schmidt would later joke that he scarcely noticed when Google founders Larry Page and Sergey Brin bought the company.
Today, of course, Android is impossible to ignore. It is the mobile operating system -- the brains of a cellphone -- that powers more than 100 million gadgets. (That number will be out of date by the time you read this: Every day another 400,000 Android devices are activated.) Apple's (AAPL) iPhone gets credit for showing consumers just how cool and powerful a mobile device could be, but Google democratized smartphones by making Android available free to any handset maker that wanted to use the platform. At last count, Android software was on more than 300 different phones and tablets around the world. The only smartphones that use the iPhone operating system? iPhones. "If you just plot the graph looking at how quickly we grew," says Rubin, now senior vice president of mobile at Google, "it's almost vertical."
There's a lot of (justifiable) chest beating over Android at Google these days -- a corporate development VP has called the Android acquisition Google's "best deal ever" -- but in hindsight the overwhelming success of Android is kind of a miracle. Big tech companies screw up many if not most of their acquisitions, letting them wither from corporate neglect or driving out founders and other talent with their inflexible cultures and protocols. (Skype buyer Microsoft (MSFT), are you listening?) Even Google can be guilty of this too (dMarc, Dodgeball), but its management of Android is a textbook example of a deal gone terribly right: Rubin and his team thrived in Google's engineering-driven culture, which encouraged innovation by letting Android release less-than-perfect versions that it would continually upgrade. Google also embraced Rubin's vision of giving the operating system away -- a gambit, enabled by Google's broader ad-based business model, that stoked adoption of the platform.
But Android ultimately triumphed thanks in large part to its corporate benefactors: Google co-founders Page and Brin saw the broader potential of Android almost from the outset. For the young entrepreneurs Android was more than just another software acquisition. It was the centerpiece of their grand vision to transform the telecommunications industry and make it more open and accessible -- in short, more like the Internet.