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
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
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.
AOL should friend Oracle, sort of
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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Foolish contributor Dawn Kawamoto does not own shares in any of the companies listed. However, she is an avid user of both AOL and Google and knows about dogs and dog fights. The Motley Fool owns shares of Microsoft, Oracle, Google, Apple, and Yahoo!. Motley Fool newsletter services have recommended buying shares of Yahoo!, Google, Apple, and Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.