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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: 5, Insightful) by gman003 on Thursday May 28 2015, @11:32PM
Sure - I can completely believe that 90% of people switching to iOS are switching from Android. That's because, once you remove Apple from smartphone statistics, the market is 90% Android and Android forks. There's simply not enough Windows Phone or Blackberry users out there, period, for them to make a significant number of new users for Apple. I completely expect the inverse to be true - the vast majority of people switching to Android are doing so from iOS. Particularly if you sneakily interpret "switching" to exclude people who have never owned a smartphone.
As further abuse of statistics, the article uses claims that Apple is making the biggest profits to somehow claim Android is doomed to fail. Guess what? If you make exactly zero profit, if your expenses exactly match your income, you will stay in business infinitely. Apple might be pumping more and more gold into their dragon's hoard, but Android manufacturers are the ones growing the market, and they're making enough money doing it to keep doing it.
Which brings up another point - how many new smartphone owners are buying iPhones? How do you think that compares to Android?
Apple covers the high end of the market only. Even their "cheap" model is relatively expensive. Android is competitive on the high end, but their explosive growth is coming from the low end. Lower profit margins, sure, but still profitable, and they're the ones making new customers to sell high-end models to. I think without Android growing the market for them, Apple would be in a much worse place themselves.
(Score: 4, Insightful) by Tramii on Thursday May 28 2015, @11:51PM
Guess what? If you make exactly zero profit, if your expenses exactly match your income, you will stay in business infinitely.
Not if you are a publicly traded company, you won't!
(Score: 0) by Anonymous Coward on Friday May 29 2015, @03:06AM
(Score: 0) by Anonymous Coward on Saturday May 30 2015, @07:56AM
He wasn't talking about growth, just profit.
(Score: 0) by Anonymous Coward on Thursday May 28 2015, @11:56PM
> If you make exactly zero profit, if your expenses exactly match your income, you will stay in business infinitely.
That presumes you don't lose all your customers to some other product.
(Score: 0) by Anonymous Coward on Friday May 29 2015, @12:58AM
If you make exactly zero net profit or loss how can you stay in business. I might as well get a minimum wage job as I would then be making more. Business exists to make profit or else why exist unless they are non profit organizations.
(Score: 2) by tibman on Friday May 29 2015, @02:20AM
Profit is after payroll.
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