Google’s child Android is dominating the smartphone space. So we now question Google, on how they benefit from the Android phones- financially? Paid Content reports that Google has signed revenue-sharing deals with the major wireless carriers who support Android phones. Google has a revenue sharing deal with handset makers as well. So when 60,000 phones are sold, cash counters at Google Inc is also going “chii—kiii—ng”.
The revenue sharing deals appear to be advertising revenue shared with carriers that support Android. For handset makers, the revenue comes in when they include Google applications like search, maps, Gmail etc which is not a requirement for Android phones. Well, the details are sketchy since Google is not as open as Android. Google declined to comment on their agreements stating they are private and confidential.
By being nosy, we found that the deal is applicable only to handsets that are Google branded like the Droid, Nexus One and G1. It excludes any phone that uses it own User Interface like HTC Evo or Samsung Behold II. Since, all Google applications will generate advertising revenue, Google can still afford to share their revenue. In fact, Google has nothing to loose. At present, direct revenue generation is only from the search application.
So, does this make Google look cheap? This is a common technique employed by Microsoft, HP and other giants to generate revenue. AOL, MacAffe or even less prominent softwares have paid pot load of cash to install their applications to the manufacturers. The largest loop hole in Google’s Model is that Android Operating system is open source, hence it cannot make a dime from licensing the operating system. If an Android phone does not make use of Google Applications, it wont be able to make any money through applications either. A good example is Moto Backflip!
Hence, there is nothing cheap about offering financial incentives to cell phone carriers or handset makers in the form of revenue sharing deals. After all Google’s revenue from these deals might be small, as revenue from apps like Gmail or Maps are nearly zero. However, Google is not a charitable organization to cut such deals if they don’t see a huge potential. After all, they are one of the most innovative companies on the planet.
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Additionally it is general knowledge that Google makes money from Android through hardware manufacturers
1) Making the latest update available exclusively to a particular vendor for a limited period.
2) Allowing vendors to install Google’s proprietary software such as GMail etc along with their phones exclusively.
Very few understand that not everything on Android is open source and what is open source is also controlled by Google. The code available for everybody to download and use is the “stock” code. Google makes money by not releasing this stock version before a new model is available in market, so the new phone has some exclusive features not available to everybody. Google also has certain code that is not released along with the stock version, which it allows only the hardware vendor exclusive use with whom they have contracts.
Now the question is: when will the regulators sue Google for not being able to change the default search provider from Google Search to Yahoo Search or Bing, just like they did with Microsoft? And if google allows people to change from Google Search to Yahoo Search, how will Google make money then?
My guess is that even if some people change the default search engine on their Android devices it still won’t reduce the 86% market share of Google in the search engine market.
They don’t need to worry much about the few who prefer other search engines and they will still get the bulk of the searches and the bulk of the ad revenue from the Android devices.
In addition I think Google has another important objective with Android and that’s to make sure Apple won’t own the smart-phone market. If that would happen then Apple could easily direct most of the ad revenues from smart-phones to its own pocket.
So even if Google did not make any money on Android, the fact that it weakens one of its strongest competitor is already worth the investment.