Android is clearly the top smartphone OS, going by numbers. The velocity at which the operating system has grabbed marketshare has clearly taken most people at Apple Inc., Microsoft Inc. etc. by surprise. However, when we dig a little deeper and take a look at the revenues/profits made by Android (For Google in particular and for the OEM’s otherwise), the numbers don’t look all that cozy.
Let us first look at the profit numbers of smartphone makers (I am including all OS’es, not only Android and iOS):
Apple
Apple insider reports:
Apple revealed earlier this month that it sold 16.24 million iPhones in its first quarter of fiscal 2011, resulting in $10.5 billion of revenue for the company.The iPhone’s share of global handset profits has been steadily climbing. In August of 2009, Apple was reported as making 32 percent of the industry’s profits.
Android’s annual revenue for google is $1 billion as of last year. Even with aggressive estimates, if these revenues are $2 billion this year, we can clearly see that Android’s revenues and profits(Google + All OEM’s) out together are nowhere near iOS and iPhone. This is the story till now. As I have mentioned right at the beginning that the Android revenue model is still a TBD for Google. Considering the fact that, Android is now immensely popular and is also a lot more polished (Can Apple fanboys still call the platform a cheap unpolished cousin of iOS?), and the fact that Google has spent all those billions in buying Motorola Mobility, it is time for Google take a harder look at the revenue models for Android. So, I sat down today to do the same:
Location based advertisements: I have put location based advertisements right at the top even before the search advertising because I simply don’t think search advertising can create enough revenue for Google to sustain the Android ecosystem. With the rollout of Google offers, and the buyout of Dealmap by Google, it is pretty obvious that Google can venture into this space very quickly. Location, along with intentions (Google+ and possibly Twitter status updates) can make for a killer combo which will help Google serve out deals to Android users. My point of contention, however, is that even a third party app can do the same on Android.
Mobile payment platforms: Mobile payments is going to be big. With Square doing so well on the iPhone and NFC making a headway of late, Google mobile payment system called the Google wallet stands a good chance of churning out a lot of revenue for Google. Imagine making orders and payments in a restaurant through your Android (not too tough to imagine).
App Store revenue: Although there are multiple app stores (Amazon, Getjar appstore’s) for Android, Google should be able push hard for the official Android market to get the majority of good apps. Although the quality of Android apps available in the Android market is still questionable, Google can still make a lot of money from the market(take a leaf out of the iOS appstore).
Search Advertisement Revenue: The one trick, that has made Google the company it is, may be not a as successful on the mobile platform as it has been on the PC’s (It might work better on the tablets, once the Android tablet’s become worth a mention). However, this trick will still hold on to a part of the revenue that is generated by Android(95% of Android searches are through Google).
Google’s own apps: Google’s own apps which include Gmail, Google docs, Google+ etc. should be able to generate a lot of revenue for Google through ads, and through tie ups with the OEM’s and data providers.
Tight integration of Google Voice and video calling services like hangout: Google Voice is a killer app. With Google Voice rolling out in many countries, it should be be able generate a lot of revenue. Skype’s revenue might be at stake and Microsoft will have bear the brunt. Similarly, Video chat applications like hangout (Not yet released on Android) can be a major revenue churner for Google.
Motorola Mobility: All the $12.5 billion spent on Motorola can’t be because of the patents that Motorola Mobility holds. Google can now start releasing pure Android devices along with no bloatware.
If Google can buy out one of the major carriers, Sprint or T-mobile in the US, and enter into exclusive partnerships with carriers in UK, China, India and Brazil, it can lead to some real disruption in the industry. Just a speculation at this point in time, but this can be the killer move which can still make Google the greatest company ever.
Google-Motorola-T-mobile
Better phones and in home carriers,OEM’s can lead to better sales and a true Nexus phone. The Nexus one was supposed to ship for $99 with no contracts and the carriers didn’t approve. And you thought all the carriers were your friends Right??
More devices such as TV’s and refrigerators: Google has already ventured into television with Google TV. Will there be an android for more devices? How Google will monetize Android on those devices is to be seen too.
Patents: Google making money out of patents. Anyone??
These were some of the mechanisms which I could think of for Android to make money for Google. However, after this discussion we must not discard the fact that Google still makes a lot of money from iOS and other smartphone platforms by serving ads and by serving its suite of apps.
Get in touch with the writer at mitra[dot]arkid[at]gmail.com.
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