Google Would Be Better Off Abandoning Android Than Losing Its iOS Deals

Google Would Be Better Off Abandoning Android Than Losing Its iOS Deals

Google can't really afford not to be on iOS.

Quick, what makes more money for Google: iOS or its own Android operating system? If you didn’t know anything about what a farce Android has become, you’d assume that Google was making more advertising revenue out of its own platform and ecosystem, but you’d be wrong: the search giant makes up to four times more off of iOS. Ouch.

Those rather bleak numbers come via a damages offer that Google just made Oracle over charges that Android infringes upon various Javascript patents and copyrights. The Guardian explains the numbers:

In a pre-trial settlement offer, Google proposed that it would pay Oracle a percentage of revenues from Android, suggesting it would pay $2.8m in damages on the two remaining patents that Oracle is asserting for the period to 2011, and then 0.5% of ongoing Android revenue on one patent which expires this December, and 0.015% on another which expires in April 2018. The court documents do not explain how the Android revenue is calculated, but the key source would be advertising revenue. Google also gets a 30% cut from app sales to Android devices.

Google said the damages figures matched what had been calculated by a court-appointed expert. The offer does not mean Google accepts that it has infringed the patents claimed by Oracle.

The $2.8m offer, at a combined rate of 0.515%, suggests that Android’s total revenue from the launch of handsets at the end of 2008 through to the end of 2011 was $543m…

[But] Larry Page, Google’s chief executive, said during an earnings call in October that Google was “seeing a huge positive revenue impact from mobile, which has grown 2.5 times in the last 12 months to a run rate of over $2.5bn.”

But while some people interpreted that to indicate Android revenue, it overlooked Google’s deal with Apple, in place since the introduction of the iPhone in 2007, through which it provides maps and the default search engine for its iPhone, iPad and iPod Touch products, which run Apple’s iOS software.

Got that? Google is offering to play half a percent of Android’s advertising revenue to settle the Oracle case, or $2.8 million. If half a percent is $2.8 million, Android’s advertising revenue is about half a billion dollars. But Google’s total mobile advertising revenue is over 2.5 billion, making iOS potentially far more important to Google’s mobile ad revenue than Android is.

If that’s the case, it’s got to suck for Google that Apple seems posed to start dumping them as the engine behind many core services in iOS, such as Maps. Bet they wish they hadn’t incurred Apple’s wrath by launching a two-bit iOS clone now. There’s a lot more to this game than devices sold.

  • Lycestra

    From the article, if you replace Apple with Microsoft, and Google with any company in the 90’s, this could run as a justification why nobody should try to compete with Windows in OSes: it just isn’t profitable to try, and stick with what you’re good at (ads, for Google). Yet alternative systems, like Linux, gained traction for those who don’t want Windows, and wasn’t focused on making a direct profit but making a platform; a foundation. iOS itself isn’t profitable, but as a platform, it has a lot going for it. And Apple, in being in charge of that platform, has similar levels of power (good, bad, righteous or abuse. Not the point of my comment) that can bring you profit as a leader. Still, some won’t want to feed from the iOS ecosystem, and prefer alternatives… like Android, which, as everyone knows, was spawned from Linux, is similarly open, but still divergent from the Linux platform as far as userspace (which is what’s relevant to marketplace of hardware, software, and users) is concerned.

    In my humble opinion, Google killing off Android now would be like Linus Torvalds moving to work for Apple when he was offered. It would be far too near sighted, and counterproductive to what the goal really is. Google would much rather be on the forefront of technology, than focus entirely on profit. Such nearsightedness is how companies settle in and die out from lack of vision. It’s risky, but it’s oh so worth it.

    $.02

    (disclosure, I’m exclusively an iOS user)

  • aardman

    @lycestra

    Actually iOS is very profitable. It’s not directly profitable because Apple doesn’t sell iOS but it is indirectly profitable through Apple’s mobile devices. Thought experiment: if Apple suddenly switched platforms to Android, I doubt if their mobile devices will continue to make as much money as it does.

    Google is probably better off killing Android the way it is now and maximizing its iOS-based revenue streams. Why? Because although I agree with your assertion that having your own platform is the key to long term profitability, Google’s problem is that it is not really in control of its own mobile platform. First, they open sourced it. Then they made it free. We’ve seen that before: Linux. In some ways Linux is a success, mostly in the server space, but I don’t think that is the kind of success that Google was hoping for.

    So now you see the Android platform. Highly fragmented, some device manufacturers just deciding to fork on their own and there’s nothing Google can do about it, most others showing zero interest in delivering timely updates because they’d much rather sell new handsets, — it’s just a mess for Google. Nobody at Google, it seems, sat down and asked okay what’s going to happen if we opened up the code and gave it away for free?

    Google thought they were going to do a DOS-Windows type end run around iOS by making Android available to anyone who wanted to sell a smartphone. Key difference: Microsoft kept the source code to itself and Microsoft did not give it away. So Microsoft still had control of the platform and more importantly, the clone manufacturers. (Plus unlike Android it didn’t hurt that they had a near-monopoly with DOS-Windows.)

    Google is stuck though. It can’t backtrack and close an OS that they had already open sourced. Neither can they start from square one and build a new, more proprietary OS –there’s no room for that anymore. Instead, Google is facing the fate that IBM suffered in the PC market. They are losing control of the platform. It’s not clear that someone will end up controlling the Android platform which means it is consigned to further fragmentation. Or Samsung might end up being the dominant Android mfrer and so they’ll wield de facto control of the platform, determining the Android version that developers will code for. Whatever the outcome though, Google is assured to be not in control of Android.

  • jcolebrand

    Hey so uh .. Oracle doesn’t have much of a dog in the JAVASCRIPT fight, but when it comes to JAVA they really give a shit. Funny how the addition of a simple little “script” makes a tech blog look incredibly incompetent…

  • pappy53

    You, sir, are an idiot. Two-bit clone? Ever heard of multitasking, notification bar, and voice-to-text? All Android, and all copied by Apple.
    IOS goes back a lot farther than 2008, with Mac, iPod, etc., so this is not a fair comparison.

  • pappy53

    You, sir, are an idiot. Two-bit clone? Ever heard of multitasking, notification bar, and voice-to-text? All Android, and all copied by Apple.
    IOS goes back a lot farther than 2008, with Mac, iPod, etc., so this is not a fair comparison.

  • RRuReady

    Wow, I actually feel a little dumber having read this awful excuse for an article. “Two-bit ios clone”? I’ll have to remember that and quote it to the next family member or friend who switches to Android after years of using an iphone….right after their jaw drops to the floor from seeing how much a phone can really do when it’s not in the walled garden that is ios.

    Judging by your tone, I’m aware this wasn’t supposed to be a comedy piece. I want to thank you for the laugh anyway.

    -Former iOS user…clean for nearly 2 years now

  • jdkoreclipse

    I just dropped IQ points while reading this……

About the author

John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.

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