AOL investors need to keep an eye on the whole brouhaha between Apple and Android-based smartphone makers. If you don't, it could leave your AOL investment broadsided in the long run.
For every Android-based phone that's sold, Google (Nasdaq: GOOG ) stands to benefit by reaping more mobile advertising revenue -- not AOL (NYSE: AOL ) . Google has done a phenomenal job over the years enticing handset makers like Motorola Mobility, Samsung and HTC to use its free mobile operating system, Android, on their smartphones and tablet computers.
So much so that Google's slice of the $2.1 billion mobile advertising market is expected to soar to 23.8% this year for its mobile display advertising, compared with 18.8% last year. And that's not good for AOL, which is seeking to land at least 10% of its revenue from mobile advertising over the next 18 months, according to AOL CEO Tim Armstrong in a Bloomberg interview.
Armstrong, without offering specific figures, characterized AOL's current mobile advertising as a drop in the bucket. As a result, growing its mobile advertising by double digits may be within the realm of possibility given it's starting from a small base.
Google, meanwhile, posted stellar third-quarter results and pegged part of its performance to its mobile advertising revenues and rapid Android device growth. In a rare move in which it broke out its mobile advertising revenue results from its overall revenue results, Google's CEO said the search titan's mobile revenue run rate is currently at $2.5 billion, more than double that from a year ago.
AOL should friend Apple
AOL ought to be giving Apple (Nasdaq: AAPL ) an "attaboy." The computer maker is indirectly helping AOL in its quest to steal mobile advertising revenue away from Google.
Recently, the U.S. International Trade Commission sided with Apple on one of the four patent infringement claims it filed against Android-based smartphone maker HTC. Beginning April 19, under the commission's ruling, HTC will be banned from importing smartphones that allow the capability to recognize telephone numbers, according to a Bloomberg report. That potentially reduces the number of HTC Android-based phones coming into the U.S. market until HTC gets its work-around in place.
For AOL, that's obviously good news on the mobile advertising front.
AOL should friend British Telecom
Apple isn't the only tech titan accusing Google of violating some of its patents with the features it loads into Android. Earlier this month, British Telecom weighed in with its own patent infringement lawsuit.
The European carrier alleges that Android's location-based services, personalization tied to content and services, navigation, and guide information smack of thievery of its technology. It's seeking not only financial relief but also an injunction.
AOL investors should be interested in the injunction or any efforts that would slow down the distribution of Android-based mobile advertising -- er, mobile software.
Carrier Verizon (NYSE: VZ ) has long been a staunch supporter of Android, and it would be surprising to see it take a similar tack as British Telecom, but now that it has the iPhone, it may look deep into its patent portfolio for any potential violations.
AOL should friend Oracle, sort of
Oracle (Nasdaq: ORCL ) is another tech behemoth that has filed a patent infringement lawsuit against Google over its Android software. Last year, the enterprise-software giant alleged Android's Application Programmer Interface (API) took its cues from Oracle's Java API packages.
Although Oracle wants upward of $1.4 billion for the alleged infringement, it's smart to realize there is more money in gleaning a bit of Google's mobile advertising revenues. It's also asking for 15% of the mobile-advertising revenues derived from the Android platform.
The parties are trying to hash out a settlement and the trial has been postponed from its October start until the new year, according to an IT World report.
AOL investors should keep a keen eye on this fight. APIs are a critical part of the software makeup, and should the court ultimately find Google needs a Java license and Oracle wants to play hardball, Google's mobile-advertising revenues could take a hit if it has to hand over a large chunk of its advertising to Oracle.
While that won't put money into AOL's pocket, it may help to narrow the advertising comparison gap between AOL and Google.
AOL should friend Microsoft -- not!
Microsoft is a significant partner of its rival Yahoo! regarding search technology and advertising. That is one reason AOL should not friend Microsoft. But a second reason, and it's a biggie, is that the Redmond giant is working with the Android ecosystem partners.
With Microsoft collecting royalties from members of Google's Android ecosystem, it's lining its deep pockets quite nicely. As noted in one Motley Fool article, Microsoft is collecting licensing royalties from more than half of all Android-based devices.
Fortunately for AOL, Microsoft never pulled the merger trigger on its previous buyout attempt of Yahoo!. Otherwise, Yahoo! would be benefiting from those Android royalties as well.
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