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Farhad Manjoo writes in the NYT that with over one billion devices sold in 2014 Android is the most popular operating system in the world by far, but that doesn't mean it's a financial success for Google. Apple vacuumed up nearly 90 percent of the profits in the smartphone business which prompts a troubling question for Android and for Google: How will the search company — or anyone else, for that matter — ever make much money from Android. First the good news: The fact that Google does not charge for Android, and that few phone manufacturers are extracting much of a profit from Android devices, means that much of the globe now enjoys decent smartphones and online services for low prices. But while Google makes most of its revenue from advertising, Android has so far been an ad dud compared with Apple's iOS, whose users tend to have more money and spend a lot more time on their phones (and are, thus, more valuable to advertisers). Because Google pays billions to Apple to make its search engine the default search provider for iOS devices, the company collects much more from ads placed on Apple devices than from ads on Android devices.
The final threat for Google's Android may be the most pernicious: What if a significant number of the people who adopted Android as their first smartphone move on to something else as they become power users? In Apple's last two earnings calls, Tim Cook reported that the "majority" of those who switched to iPhone had owned a smartphone running Android. Apple has not specified the rate of switching, but a survey found that 16 percent of people who bought the latest iPhones previously owned Android devices; in China, that rate was 29 percent. For Google, this may not be terrible news in the short run. If Google already makes more from ads on iOS than Android, growth in iOS might actually be good for Google's bottom line. Still, in the long run, the rise of Android switching sets up a terrible path for Google — losing the high-end of the smartphone market to the iPhone, while the low end is under greater threat from noncooperative Android players like Cyanogen which has a chance to snag as many as 1 billion handsets. Android has always been a tricky strategy concludes Manjoo; now, after finding huge success, it seems only to be getting even trickier.
[Editor's Comment: Original Submission]
(Score: 2) by MichaelDavidCrawford on Thursday May 28 2015, @11:40PM
whether ad blocking could be enabled by default is orthogonal to my argument.
The problem I see is that a large fraction of the world's economy depends solely on advertising. It's not hard at all to start a website then publish some self service ads on it, such as adsense. For many people this represents what at first appears to be a realistic way out of their lives of desperation.
But the number of ad-supported websites is growing far out of proportion to the number of people who visit the websites. While the economy does - loosely speaking - grow over time, the advertising-supported sites are growing far faster.
For this to work, someone at somepoint has to spend real money.
What I am saying, is that a crash could be coming when those ads aren't producing anymore.
What we have now are increasingly obtrusive ads. At some point even the obtrusiveness isn't going to produce sales of products and services.
Yes I Have No Bananas. [gofundme.com]
(Score: 2) by opinionated_science on Friday May 29 2015, @01:54AM
I guess I agree. But in a thought experiment I imagine a model of advertising like this.
There is a distribution of items for sale, for given prices, and given saturation.
For example, within day to day expenses there are consumables. If you drink soda, all those soda ads might work, but when was the last time you bought *anything* base on soley an ad?
The sales space is saturated because there are many items in each slot - artifical scarcity (e.g. Apple), simply competes on brand. You either will or wont buy a brand, because brand's short-circuit spec comparision.
So in this saturated space, the model suggests the only place ads will have an effect, are when you actually go to purchase something.
Does this make sense? Or is my viewpoint to restricted...?
(Score: 2) by MichaelDavidCrawford on Friday May 29 2015, @03:08AM
I am reminded of an article on Soviet television in TV guide, from the early seventies. In the US a TV commercial will say "Our tea is better than their tea". Under Communism the ads will say "Drink tea, it's good for you".
Advertisements that sell a specific product or service in a minimum number of clicks actually work pretty well. It's not hard to build a successful eCommerce site. You don't even need to purchase inventory is you sell products that are amenable to drop-shipment directly from their manufacturers.
It's far more difficult for brand-name advertising. While I agree that we don't make purchase decisions based specifically on advertisements, brand-name recognition does make a difference. For brand advertising to be effective, it has to be pervasive.
I expect that many small website operators don't understand the distinction. My father kept bees as a hobby. Suppose he started a popular blog about beekeeping. I expect such a blog would work well to sell bottles of his own honey, but it would not work well to promote a mass-marketed honey brand.
What the brand-advertisers do is commonly known as "A/B testing". Run a specific type of ad in a specific geographic area then look at how sales increase or decrease. Now run a different ad. With some time, patience and investment, you can create very effective ads.
Unfortunately for those whose livelihoods depend on advertising, not every advertiser understands testing. Even Apple computer once dropped a million pieces of direct mail without testing the mailing in any way.
Yes I Have No Bananas. [gofundme.com]
(Score: 2) by opinionated_science on Friday May 29 2015, @08:06PM
I guess from my viewpoint (attempting to be objective) there are 2 forms of adverts. Novelty and Brand. Novelty is "this is new in someway" and Brand is "We exist as the option for $THING".
I would say that web ads are nearly all Novelty and not Brand. Physical ads are nearly all Brand and no novelty. There are subtleties of course, but this is a model.
Hence, it would seem logical that most ads will not do anything because it would require the viewer to be a) receptive to novelty b) be able to afford $THING.
The perception of this is that ad revenue > $0 gives >$0 sale increase. The problem is it is stochastic and becomes saturated, hence the correlation between revenue and sales is random.
Any of this hand waving maths making sense?
(Score: 0) by Anonymous Coward on Friday May 29 2015, @02:13AM
no crash. this is the natural evolution of all things. the smaller ad companies will get gobbled up by the larger ones as the 'advertising economy' shrinks. at some point in the future, there will be just 3-5 big ad companies. smaller ones will pop-up from time to time but most of those will bust. not enough food. a very small few will survive, thrive, and become a new big player that eventually gobbles up an old big player. how? diversification. theme and variation. advertising won't be the only type of food they eat. free markets are very much like a natural-world ecosystem.
this is why we have 1%ers and all the rest. this is why we had monarchies. wealth and power have mass - and they have gravity to attract more mass and increase their gravity. but yes, when most of the towers in all the kingdoms and all the lands get too tall, the whole system colapses like the tower of babel. a better analogy are trees in a forest. plant a forest worth of trees. the ones that grow the fastest will dominate and make it harder for newer trees to reach the same height. fortunately, trees are prone to dying of old age and thereby allow new trees to grow forth into the light. also, mankind - the forest regulators - will cut down the larger trees.