After 500 Million Android Activations, Where's the Profit?
Photograph by Balint Porneczi/Bloomberg
If nothing else, Google (GOOG) knows how to time an announcement. Later today, Apple (AAPL) is holding the event at which it’s widely expected to announced the next iPhone (we’ll be live-blogging it here), and Google has just tried to preempt the news with an accomplishment of its own: Some 500 million Android devices have been activated since 2008. Andy Rubin, who oversees Google’s Android efforts, shared the data point on Sept. 11 in a Twitter post: “There have been half a billion android activations to date, with over 1.3m added every day,” he wrote.
The number of Android activations by itself is impressive. Sure we’d all like to see sales figures as opposed to activations, but that’s like asking Microsoft (MSFT) to share sales numbers for PCs: The company can’t because it doesn’t sell computers. Likewise, Google’s hardware partners capture but generally do not report sales figures, so it’s simply not possible for Google to report sales. Activations, or the number of devices that are “registered” with a Google account—and therefore, purchased—are the best proxy.
The half-billion-large Android device family is growing as well: About 1.3 million Android devices are reportedly activated per day. You can extrapolate future growth if you want, but some analysts are already doing the math. Earlier this week, IHS iSuppli forecast that Android shipments will double again in 2013, exceeding the 1 billion mark next year. Whether you use Android or prefer a competing platform such as iOS, Windows Phone or BlackBerry, it’s difficult to suggest that Android adoption is unimpressive.
Does it matter? That’s now the bigger question because when it comes to profits, application downloads, or sales of individual devices, the answers are Apple, Apple, and Apple. Take a brief historical look at the profit picture from Asymco as just one example.
Early in Android’s short lifespan, it seemed to me that subsidizing a free, open-source platform to make a land grab for mobile eyeballs was a good play that would pay off over time. Nearly four years later, there’s little data to suggest the investment is paying off. In fact, more data suggests Apple’s methodical approach is financially sound.
Knowing I’m not in the mainstream audience for technology—I’m an early adopter of such products—let me share a personal observation as someone who uses both platforms (with a caveat): For the past two years, my main phone is an Android device. I have an iPhone 4S, but I use my Galaxy Nexus (005930:KS) 90 percent of the time or more. And yet: Apple has made far more money from me than has Google or any company affiliated with the Android ecosystem.
I have yet to click an ad on any Android phone or tablet via Google search or in an app. Most, but not all, of the Android apps I have installed are free. If I had to estimate the total amount spent on Android apps since I started using the platform, I’d say it’s less than $100. Some recent content purchases on Google Play probably bring that total to $150.
On my iPhone and iPad, however, that figure is likely five times higher, even though I use the devices less.
Google simply isn’t making any money off me, even though I’ve owned a dozen different Android devices. Heck, even Amazon (AMZN) has earned more from me, thanks to the 100+ e-books I’ve purchased—many of which I’ve read on Google devices.
Again, I’m not your typical consumer, but there’s a bigger point here. Via Android, Google has shown me no reason to spend money. It hasn’t convinced me as a consumer to vote for Android content with my wallet. Apple and Amazon have. That means my dollars to go them—therefore the profits do, too. If there are others like me in the 500-million-device activation pool, how and when will Google see meaningful profit from its Android investment?
To be sure, the company is making improvements with its content store, exactly what I suggested was needed back in March. The revamped, renamed Google Play store now has a wider range of digital goods: more books, magazines, music, TV shows, and movies. Since I use a Google Chromebook daily and bought a Nexus 7 tablet, I opted to use Google Play to buy two seasons of Falling Skies as opposed to purchasing them from Apple or Amazon. That was an exception. And if Google doesn’t continue to expand its digital offerings, I’m likely to find what I need elsewhere.
Luckily, Google still makes boatloads of money as the top search provider on traditional computers—86 percent globally in August 2012, per NetMarketShare.com—and therefore continues to be the top destination for targeted ads. For a time, this can help offset any lack of income from Android. As computer sales continue to flatten, or even fall, while mobile devices sales keep growing, it could become a problem. Android profits have to grow as consumers shift activities from PCs to tablets and smartphones.
I thought Android would be raking money in the market at large, but it hasn’t. It hasn’t even happened in my own house, and I’m an Android-centric device owner who uses a Chrome OS laptop as my main computer. I’m starting to wonder when—and how—it will ever happen.
So should Google be proud of 500 million Android activations from late 2008 to present day? Absolutely? But is Android truly successful for Google? I’m a definite maybe on that one.
Also from GigaOM:
Is Android Broken, and if so, Will Google Fix it? (subscription required)