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When Android chief Andy Rubin on Sunday tweeted the news that there are now 900,000 device activations each day -- resulting in 328.5 million potential new users per year -- investors should have been cheering. Instead, they were dumping.
Shares of Google (Nasdaq: GOOG ) are off more than 2% since Friday's close, thanks mostly to Apple's (Nasdaq: AAPL ) announcements at Monday's Worldwide Developers Conference. Among other things, the Mac maker said it is replacing Google Maps with TomTom and offering tight integration with Facebook (Nasdaq: FB ) in its iDevices.
Judging by the movement of the search king's shares -- down as the market has trended north -- investors seem to be nervous that Apple's growing influence coupled with a sense of rivalry with the Big G will prove perilous to shareholders. Should Google investors be concerned? Is it time to sell? Let's consider the key facts as we now have them.
Naming the beast
Of all the statistics Apple chief Tim Cook provided during WWDC, none were as impressive as 400 million active iTunes accounts. Here are two interesting ways to think about that total:
Amazon.com (Nasdaq: AMZN ) has 164 million active customers, meaning they've made a purchase sometime in the last 12 months. We don't know how many iTunes members have purchased over the same period, but I wouldn't be surprised to see similar numbers.
Microsoft (Nasdaq: MSFT ) has 1.25 billion Windows users worldwide. While the Mac is nowhere near that installed base, it's probably fair to say the majority of Apple's 400 million iTunes users own at least one iDevice. These two aren't as far apart as it sometimes seems.
And that's important, because developers want to be writing code for large platforms that host paying customers. Recent data from Flurry Analytics found that 69% of new mobile development projects are targeted at iOS versus just 31% for Android. What's more, these same groups could expect just $0.24 in Android revenue for every $1 earned writing a comparable iOS app.
Having a huge and growing installed base via iTunes mutes the impact of 900,000 daily Android activations. Who cares how many there are if they're all cheapskates who won't fill the coffers?
Searching for a rebuttal
On the other hand, is it really so bad that Android fails to attract paying customers in the same way that iOS does? After all, Google is in the advertising business and every one of the 3,125 Android devices activated in the five minutes you've spent reading this adds to the Big G's mobile advertising database, undoubtedly the world's largest and the source of sponsored listings in Google Maps.
Apple will take a bite out of that business when it switches users to TomTom, but think about the hundreds of millions without an iPhone or iPad. What will they use? Open-source alternatives are out there, but Maps is likely to remain a popular option.
There's also volume to consider. In a world of some 7 billion people, the vast majority still use feature phones. Will most upgrade to the iPhone? Not according to researchers. IDC predicts that Android will grab 61% of the worldwide smartphone market this year and then fall back to 52.9% by 2016 as Windows Phone elbows its way into the race.
By that point, Android's installed base may have risen past 1 billion devices and the income gap that's so wide right now -- $0.24 for every $1 earned selling an iOS app – could narrow considerably or disappear entirely. That's the beauty of selling in volume.
As impressive as Android's growth is, the beauty of iTunes is that it has all the back-end elements of a payments platform since every customer's profile includes a credit card number for charging movies, apps, music, books, and so on. Think of it as an Amazon-scale e-commerce platform, but 400 million users strong.
To be fair, Google's Wallet is already in place and in a lot of ways is as convenient or more so than iTunes. But the system also isn't without drawbacks. The Big G is designing it so that each phone acts as a point-of-purchase device with an embedded chip for near-field communications. Apple doesn't have that worry.
Instead, marketing chief Phil Schiller and his team could work with retailers to build a massive network of location-aware store apps. Download, go to the mall, and then open your store's app when you arrive. Check in, get a deal, find inventory, and click "buy now" to process the sale via iTunes. Show the e-receipt to the store clerk and you're done.
But even if this does come to pass, there are still plenty of reasons to love Google. Apple, meanwhile, has so many opportunities that the possibility of an iTunes payments system doesn't even make the list for our senior technology analyst. Pick up a copy of this new Apple research report to learn more and stay up to date on key company news for an entire year.