Why Did Google Invest $ 22 Million in a "Dumb Phone" OS? – The Motley Fool

Alphabet 's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google recently invested $ 22 million in KaiOS, a maker of feature phone operating systems. Google Nokia 's KaiOS-powered devices this year, and this new investment should support those efforts.

Google may be surprisingly, since it already owns Android, the most popular smartphone OS in the world. However, it makes sense when we consider that many mobile users in developing markets still use phones.

Why do not they feature phones matter?

Last year, 1.55 billion smartphones were shipped worldwide, according to research firm Counterpoint, but that represents just 2% growth from 2016. Meanwhile, feature phone shipments climbed 5 % to 450 million – that market's first annual growth in years.

Counterpoint analyst Neil Shah notes that newer 4G models, which replaced 2G ones, and a new generation of "smarter" feature phones spurred that growth. HMD Global, which licenses Nokia's brand and designs, shipped 70 million devices last year.

Feature phones like the Nokia 3310 and 8110, which were both refreshed versions of classic designs, accounted for a large portion of HMD's shipments in key markets like India. Another popular feature in India is the wireless carrier Reliance Jio's Jio Phone. Both the Nokia 8110 and Jio Phone Run KaiOS.

Higher-end feature phones cost the same as low-end smartphones, but they use cheaper data plans. As a result, many customers in key emerging markets like India are clinging to feature phones instead of upgrading to

Understanding Google's moves in developing markets

Back in 2014, Google launched Android One a program that introduced unified hardware and software standards for original equipment manufacturers (OEMs) in developing markets. Google partnered with Indian OEMs like Micromax, Spice, and Karbonn to launch low-end smartphones that puts Google's minimum hardware requirements and ran Android stock.

That expansion, along with the launch of other Android devices, secured Google's position mobile OS leader in India. However, KAOS reported that it was reported that between the first and the last quarters of 2017 and 2018, it was reported that it was reported as a stand-alone OS last year. seized 15.1% of the market and toppled iOS as the country's second-most-popular mobile OS. Smartphones phones with support for 4G networks, NFC payments, newer apps, and dual SIM cards. KaiOS recently told the tech-news website TechCrunch That Over 40 Million KaiOS-powered devices have been shipped worldwide.

KaiOS 'surprisingly high growth potential Google, since the tech giant is relying heavily on India for its long-term growth. Last year, India is the world's second largest smartphone market after China, and ensures that growth is expected to offset slowing smartphone sales in the Chinese and American markets

By investing in KaiOS, Google provides that core apps like Search, Maps, YouTube, and Assistant reach feature phone users. Google is hoping that these users will grow dependent on the services, and that they will eventually upgrade to smartphones.

The rebirth of Firefox OS

KaiOS is technically the successor to Mozilla's Firefox OS, an open-source OS for smartphones, tablets, and smart TVs that was discontinued in 2016. Firefox OS was succeeded by a community-driven OS called Boot to Gecko (or B2G), which eventually evolved into KaiOS.

An investment of $ 22 million is pocket change for Google, which generated over $ 21 billion in free cash flow over the past 12 months. But it's a big investment for KaiOS, and it could secure its position as so-called "Android of feature phones." As for Google, it's a smart tactical move that prevents KaiOS from evolving into a dangerous competitor

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun has no position in any of the stocks mentioned. The Motley Fool owns shares and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy