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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: 3, Insightful) by frojack on Friday May 29 2015, @04:30AM
However market share doesn't put food on the table, profits do
There are plenty of profits in Android. It funds 4 or 8 of the largest electronics companies in the world.
And dozens of other companies as well. But Android is an Alliance, not a single company [openhandsetalliance.com]. And all members fund software development at different levels.
That all of those profits do not flow to Google, is somehow portrayed as some observers as some kind of flaw or weakness. An awful lot of people seem to find that concept hard to grasp. They suggest it should be some other way, that Google should get all the profit.
So yes, Android is cheaper, because cooperative efforts spread costs. Those costs are passed through to end users. The BOM of many android phones exceeds that of the iPhone.
The question isn't why andorid costs so much less. Its why an inferior phone that is cheaper to build, costs so much more.
No, you are mistaken. I've always had this sig.
(Score: 2) by goody on Friday May 29 2015, @11:42AM
That's a pretty broad and unsupported claim that the iPhone is inferior, and empirical evidence flies in the face of this. The claim doesn't pass the smell test. The iPhone is used by everyone from housewives to businesspeople day in and out, most being quite satisfied with it and they continue to buy new models. Perhaps it's inferior to you because you can't put widgets/applets on the screen or change the OS font, but the fact is it has the same core functionality as an Android.
I don't think anyone expects Google to get all the revenue. I don't. Google developed an advertising eyeball delivery machine, and that's what they got. But even using that metric, according to the article, Android is second to iOS which is delivering more ad revenue. That's a weakness. Also, despite alliances or cooperative efforts, Android suffers from forking and upgrade issues. That's a weakness.
If the BOM cost of a cheaper Android phone exceeds that of an iPhone, it speaks to a business decision and not malice on the part of Apple. The Android phone vendors are targeting the lower end of the market, with smaller margins. Additionally, Apple has mastered the supply chain. People tend to joke when Apple buys a supplier, but there's a reason for that. That's how they get lower raw material costs and can have a most consistent supply chain. They're getting their cake and eating it, too.
I don't understand all the angst against the iPhone from Android users. You've got marketshare and a cheaper, more customizable phone. Life should be good. Does the success of Android depend on the failure of the iPhone? I don't think so.