Google's Winning Smartphone Formula

Another day, another new insight into the shifting and lucrative smartphone market. And no matter how you slice it, it's all good news for Google (Nasdaq: GOOG  ) .

This week, a Nielsen survey revealed that for all smartphones purchased in the first two quarters of 2010, those based on Google's Android operating system outsold Apple (Nasdaq: AAPL  ) devices for the first time in Nielsen's survey.

Let's look at another survey, released yesterday by market researcher NPD Group. This one is headlined "Motorola (NYSE: MOT  ) , HTC drive Android to Smartphone OS lead in the U.S." However, the survey: (1) is only for second-quarter purchases, and thus (2) only covers six days of Apple's iPhone 4 sales, and (3) only accounts for U.S. consumer purchases and "does not track corporate/enterprise mobile phone purchases."

With that out of the way, the survey shows 33% of consumer purchases in the quarter were for Android devices, followed by Research In Motion's (Nasdaq: RIMM  ) BlackBerry OS at 28% and Apple at 22%. It's the first time since the fourth quarter of 2007 that RIM is not on top.

NPD also says Verizon's (NYSE: VZ  ) Wireless unit held onto the carrier lead with 33% of all units sold. AT&T (NYSE: T  ) , Sprint (NYSE: S  ) , and T-Mobile followed behind, with 25%, 12%, and 11%, respectively.

How Google wins
It's no surprise at all to see Android pass RIM and Apple in sales. It is, after all, part of the Open Handset Alliance and thus designed to be used by a large number of handset makers. The iPhone and BlackBerry operating systems run only on their respective devices. Still, the Android growth rate is exciting to witness, and it's accelerating daily.

On its conference call about three weeks ago, management reiterated it was seeing 160,000 devices were being activated daily, or about two every seconds. Yesterday, Google CEO Eric Schmidt told TechCrunch that number is up to 200,000 per day.

Google makes nothing, directly, on each Android device purchased. It's definitely thrilled to see the ecosystem growing, however, because it makes money on all the searches performed by mobile users (though hopefully not while driving). In fact, Schmidt is just as happy to see iPhone sales surging, he says, because that also drives more Google searches -- and thus more ad revenue for his company.

Following that logic, Schmidt is even pulling for the new BlackBerry Torch to be a smash hit. Introduced yesterday, the Torch's web browser is based on the same WebKit engine that powers the iPhone and Android-based devices -- and will drive even more mobile searches.

Yes, these days, any smartphone sale is a win for Google.

At his peak, Fool analyst Rex Moore averages two Google searches per second. He owns no companies mentioned in this article. Sprint Nextel is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers selection. Apple is a Motley Fool Stock Advisor recommendation. The Fool owns shares of Google. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 06, 2010, at 1:30 PM, Aeoran wrote:

    @InfoThatHelp: after reading many of your posts to date, the only thing in my mind for which there can be no doubt is that none of your posts contain info that helps.

  • Report this Comment On August 06, 2010, at 2:17 PM, mDuo13 wrote:

    Google's success with Android is an important hedge for the case where Apple decides it's sick of offering Google by default and accepts a bundle from Microsoft to make Bing the default search on the iPhone, or some other seemingly unlikely scenario. Having the market centralized under the will of Mr. Jobs is precarious for Google; having the market decentralized in the hands of many manufacturers using their own versions of Android is far more stable.

  • Report this Comment On August 06, 2010, at 3:58 PM, BadCopNoDonuts wrote:

    it is amusing that certain people have such a relentless agenda against certain companies! Remember kiddies...... emotional investing is not the way to go..............

    Anyway, I've noticed that RIMM often moves opposite to what the market is doing (today being a great example). Anyone have some idea why?

  • Report this Comment On August 06, 2010, at 5:00 PM, beida wrote:

    @ Aeroran: I believe InfoThatHelp is the same person with an ID "JamesApple" on Seeking Alpha. For some reasons, he has this profound hatred towards RIM., He has quite a few ridiculous claims, such as that RIM is going bankrupt in a couple of years. Some other posters speculated he was fired by RIM.

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