Saturday, March 26, 2011

Google (revenue) model of Android OS

Yesterday we were hanging out at my place and suddenly one of my friend asked a simple question. What is there for google in this Android thing? What is the revenue model of Android OS. Is Google doing it just for charity?

One thing of which I was sure was that it cannot be just for charity. There must be something big. And then Google's advertising model came into my mind. But I disagreed with myself immediately since it looked like a joke to me (as i am naive in these discussions). How can a massive project like Android be feeded with only one source of income. I Googled a bit and was surprised to see that there is no clearly defined revenue model for Android, but my observation was almost right, though there are other means of earning but primary was advertisement only. Let me now explain it in detail. Google could be earning from mainly two/three sources:

  • Mobile Advertisement Platform: Why an Internet search company was getting into the mobile operating system business? The answer is hidden into the question itself. Since Google was a search company it is trying to increase traffic on google search so that they can sell it to advertisers which are glad to pay if there business/product is reaching more customers. Thus we can easily say that Android was purchased by google to ensure a growth trajectory for Google's mobile search advertising efforts. And the idea is working exactly as they had imagined: Google mobile searches grew 130 percent in third quarter of 2010 (Link).According to Rosenberg (SVP of Product Management at Google) "mobile search queries have grown five times over the past couple of years. And recently Android is fueling this". and according to Eric Schmidt "Revenue is large enough to pay for all of the Android activities and a whole bunch more."  
  • Android Market: Another source of revenue is the default application store for android OS "Android Market Place". Although Google can face some competition from other apps store vendors (like Amazon) in future. But right now google is filling its pocket from applications listed on Android Market and is earning money as transaction fees on buying an application through Google's checkout billing mechanism. (Link)
  • Sharing revenue with Carriers & Handset makers: This might be a good source of income for Google as they can share ad revenue with Android supported device manufacturers when they include google's native apps like gmail,maps,talk etc in their platform. Although Google denies from this revenue model it is still a mystry (Link). 







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