Motorola acquisition - a long term plan to expand Google’s ad revenues from phone?

Google acquired Motorola, the struggling device maker, two years ago for $12.5 billion. Last week Google’s stock hit the $1,000 a share mark whereas, Google disclosed that Motorola Mobile lost $248 million in the third quarter. The losses have been growing—a year ago, Motorola Mobile lost $192 million. This might look like a mistake that Google committed two years ago. However, it can also be perceived as Google’s long-term effort to drive down the insanely high prices of smartphones.

Everything Google does, from core products such as Android and Chrome to far-out flights of fancy like robotic cars and computerized glasses, furthers a single goal: to get more people to use internet more often. The high prices charged by smartphone makers’ stand as a hurdle to that mission. Lowering the price of smart phones will mean more phones in circulation which will mean more surfing and searches, which will mean more ad dollars for Google.

Motorola will act as a hardware version of the Android strategy—not a profit-seeking entity, but instead one whose only eventual economic motive is to create pretty good phones at reasonable prices. In doing so, it hopes to force Apple and Samsung to slash their hardware prices, accelerating the smartphone's path toward becoming a commodity device.

Google has always made clear that Motorola is a long-term play. It is willing to wait years and lose billions if the end result is cheap, great phones for everyone.