How does Google make money from Android?
Android makes money by not being Apple.
Or rather persuading users to not search via iOS, Sybian (sic) or Meego on their phone.
As part of the lawsuit between Oracle vs Google, in January 2016 Oracle’s lawyer disclosed Android revenues of $31bn and profits of $22bn.
This is the Android business model:
- Offer world class smartphone software for the price of air.
- Gain 80% market share.
- Integrate these with Google search and mobile applications like Gmail, Drive, and Maps.
- Earn some pocket money on applications purchased through Google Play.
- PREVENT mobile phone makers from demanding high revenue share on searches carried out on their Samsung, Sony, or LG smartphone.
Apple probably takes a similar cut on mobile searches on an iPhone, as a website displaying Adsense (68%).
Goldman Sachs estimates that Google’s mobile revenues as $12 billion in 2014 and $15bn in 2015.
Imagine if they were all through the iPhone, iPad and Safari. $10bn of that $15bn would go straight to Apple.
If you’re wondering how this $10bn hypothetical might relate to the $31bn revenue number the lawyer came out with, recall that Android was released September 2008. The revenue number might run from 2009 to 2014. $31bn divided by 6 is roughly $5bn. I’m playing guessing games but I wouldn’t be surprised if Google disclosed to Oracle a $5-7bn 2014 revenue number. This avoided traffic acquisition cost is Android’s recurring value to Google.
That would also imply they are paying a cool $4bn to Apple already.
This is a perfect example of how free is never really free.
Why, these handset makers might actually be making some money if they could get a cut of the search revenues on their phones!