Google's (Nasdaq: GOOG) basking on its Android success -- 200,000 Android units activated each day, total shipments of Android are surpassing those of iPhone in U.S. and Nielsen reports Androids hold 27 percent of U.S. smartphone market -- but is the reported success actually minting money for the company?
A T-Mobile G1 Google phone running Android is shown photographed in Encinitas, California January 20, 2010.
Recently Google's CEO Eric Schmidt was questioned about this, but as there is no way to measure Android's success, Schmidt merely said, "trust me, we do," bordering on abstraction. When asked if the revenue was enough to support an Android project, Schmidt pointed out Google's ad-revenue model, saying, "Trust me, that revenue is large enough to pay for all of the Android activities and a whole bunch more."
Ever since Google launched Android in 2007, its business model around the open-source OS platform for smartphones has been ambiguous. Though, it is a widely accepted that unlike traditional firms, Google does not build product around a viable business model, but instead makes a product and then seeks a revenue-model.
Android provides an open-ecosystem for manufacturers and application developers to build products around the platform. However, with no control over licensing, its lack of an Apple-style application store to monitor apps, and also with no bargaining capacity with service providers, options for Google to generate revenue from Android are slim.
Nonetheless, one of the plausible existing revenue models that Google might be tapping into could be the revenue-sharing model whereby Google could have entered into advertising revenue sharing deals with carriers that support Androids and handset makers when they include Google applications like search, maps, and Gmail.
Another model in Google's armory is the transaction fee that it can charge from Android-based application makers through its Google Checkout billing mechanism.
Also Google can leverage its "Pay Per Click" advertising model by offering a "Pay Per Call" model through the integration of its Google search, Navigation, maps, and directory applications on the Android platform.
The other model that Google leverages on Android is by selling its Google-branded, bundled applications to users.
Overall, Google will continue to follow its dictum of giving free services away in exchange for more opportunities to market to end users through contextual advertising.
Since Android is an open-source OS, handset makers and service providers have the right to choose or allow Google to use their instrument and services. In fact, the model is porous enough to allow competitors like Yahoo! and Bing to come up with their own Android-based smartphones.
Cloud-based services can surely make a difference for Google in this area whereby it can allow space to only those applications and services that are willing to pay.
With no barrier for entry into the Android market and Google not inclined to play a platform-manager role, it remains to be seen what kind of a revenue-model evolves around Android.
International Business Times, The Global Business News Leader
