Mobile devices running Apple's iOS are more profitable for
Google than Android devices, analysis of data revealed in court shows. Last
week according to figures
revealed as part of a proposed settlement in an ongoing patent dispute case
with Oracle, Google makes four times as much from an iOS device than it does
from devices running its own Android OS. The court documents reveal
that Google has made about $543 million from Android between its launch in 2008
and 2011. We know that by the end of 2011 around 200 million Android devices had been activated, with around 90 million of these activations taking place in the
last two years. It works out to about $10 per handset. Google licenses Android
to handset manufacturers for free and generates revenue through advertising and
app sales -- it takes roughly a 30 percent cut -- though the company has never
officially revealed how much it makes from Android handsets. It's worth noting
that the court documents don't tell us how Google works out Android revenue but
does show us that Google offered Oracle a percentage of Android revenues, a
deal which was rejected by Oracle. But Google has also been licensing the use
of its products -- maps, search and so on -- to Apple since the launch of the
first iPhone in 2007. There have been some 315 million iOS device sales since
then and by working out Google's overall revenue generated by mobile devices
and removing Android from the equation, the Guardian reckons that Google makes
around four times as much per iOS device as it does per Android device.
Earnings Could be Higher -- For Awhile
Asymco's Horace Dediu takes the calculations further and said that
iOS could even be earning Google five times more than Android. "Many of
these figures begin to hang together as we balance assumptions about costs,
revenues and statements made in public. There is a consistency within a
comfortable margin of error. If that is the case, then the economics of Android
begins to take shape," Dediu said. "My take is that it's not
a bad business. But it's also not a great one. As long as there is exponential
growth in units, Android will improve its position inside Google relative to
iOS. But from Google's perspective, iOS is today a bigger business. And iOS is
not standing still. It's growing not only in terms of units but in revenue per
unit. "In terms of returns, Android is sustainable. However, in relative
terms the value created leaves much to be desired. Whereas Android generates
$1.70 per device per year and thus an Android device with a two year life
generates about $3.50 to Google over its life, Apple obtained $576.30 for each
iOS device it sold in 2011. The economics of Android are nothing like the
economics of iOS. Things could be about to get worse for Google and Android,
too. A separate analysis from Flurry conducted earlier this year shows that
revenue generated per iOS user by the iTunes App Store is over four times that
of the revenue generated by Android user through Google Play, the company's
new-look app marketplace. The same analysis showed that Amazon was generating
much more revenue per active user in the Amazon Appstore than Google was
generating per Android user. This could lead developers to abandon the company,
Flurry's Peter Farago predicted. "As developers make decisions to support
different platforms, the ability to generate revenue will always be a key
factor. Based on revenue potential, we expect to see an increasing number of
developers support Amazon. We also believe that companies such as Samsung, the
leading Android-supporting OEM, could also consider emulating Amazon's move to
fork Android. Google will need to reduce commerce friction to maintain strong
developer support," Farago said.
Apple Intensifies its Battle
While Google clearly relies on iOS to generate a large portion
of its mobile revenue, Apple's attitude to Android couldn't be more different. Apple is still
very much at war with Android, driven by the determination of its late CEO and
co-founder Steve Jobs to crush Google's mobile OS. Apple's tactic is to take on
Google via patent disputes in courtrooms worldwide, not directly, but through
proxies such as Samsung, the largest manufacturer of Android-based handsets and
tablets, and Motorola, another Android handset and tablet manufacturer which
Google is in the process of buying. Recent rulings would appear to favor Apple, a ruling was described by one patent
expert as posing a serious threat to "the Android ecosystem at
large." So with levels of revenue generated by Android for Google
comparatively low, developers considering it to be an unprofitable platform and
Apple determined to crush it, it looks as if Android faces tough times ahead. Analyst
firm IDC sees Android not just surviving, though, but sustaining its share of
the smart connected device market in the next few years. The number of
Android-based devices will grow from a 29.4 percent share in 2011 to a
market-leading 31.1 percent share in 2016, IDC believes. iOS-based devices will
grow from 14.6 percent share in 2011 to 17.3 per cent in 2016, according to the
company's projections. However, Android could still face the same problems with
generating revenue over this period, it seems. "Android's growth is tied
directly to the propagation of lower-priced devices. So, while we expect dozens
of hardware vendors to own some share in the Android market, many will find
profitability difficult to sustain," said Tom Mainelli, research director,
Mobile Connected Devices for IDC. "Similarly, we expect a large percentage
of application developers to continue to focus their efforts on iOS, despite
the platform's smaller overall market share, because iOS end users have proven
more willing to pay for high-quality apps."
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