Android investigate

Google's master plan for Android: More Internet users paying $6.30 a pop

The mobile industry is headed to Google, who is in an ideal position to clean up at roughly $6.30 per Internet user per year.

Forget today’s smartphone profits: Apple and Samsung increasingly split those relatively evenly, as research from Canaccord Genuity shows. But the real question is where the mobile industry is heading, and who will clean up. Increasingly, the answer to both questions is "Google."

Google loves the Internet - all of it

Google’s stated mission is to “organize the world's information and make it universally accessible and useful.” Put in commercial terms, however, Google’s mission is to get everyone on the planet using the Internet. Why? Because the Internet is Google’s piggybank.

As Asymco uncovers, excluding China, Google earns roughly $6.30 per Internet user per year:

asay-android-chart-01-2014.jpg

While that may not seem like much, it’s pretty significant when we take into account that there are roughly 2.5 billion Internet users today.

But the real opportunity for Google, and why Android is such a smart long-term bet for it, is the other 65% of the planet that still doesn’t use the Internet, as Asymco highlights:

Global Population of Internet Users.png

Google may not claim a full $6.30 from these emerging markets, but it’s still worth tens of billions of dollars each year, especially since most of the world will experience the Internet through mobile devices, not traditional PCs.

An Android in every pocket

While this same audience is up for grabs for Apple, too, Apple intentionally prices itself out of the competition. It’s impossible to be both a high-margin, market share leader in a competitive market. It’s against the laws of basic economics.

Apple’s ability to reap the majority of industry profits was anomalous, and has been effectively curtailed by Android-based Samsung’s rise. While Apple has taken some steps toward lowering prices in order to compete in emerging markets, its heart is ultimately not in a low-margin business.

And let’s face it: the emerging markets are where the action is. The U.S. is already over 80% Internet penetration. Most European countries are at least 70% saturated. Add in mobile phone subscriber numbers, and it’s clear that the only real growth left in developed economies is getting users to trade up to more expensive smartphones and tablets. In emerging economies, however, there is still tremendous room to move users from feature phones to Internet-enabled smartphones.

Which means the field is ripe for Android.

Developers and Android's fragmentation

Which is the not the same thing as arguing that Android is a developer’s paradise. Apple advocates are quick to point to the fact that Apple iOS developers make five times more per download than Android developers. Apple customers seem to use their devices for a greater variety of purposes, and are willing to pay up for content.

That’s fine, but it’s not necessarily indicative of where we’re going. It’s very likely that developing markets will require local applications. An ostrich farmer in Namibia is more likely to need to use the web to check market prices than to buy the latest Angry Birds app.

And when they use the web, they will slowly be dropping Namibian dollars into Google’s pocket.

There’s a reason that the hottest job trend, as measured by Indeed.com, is HTML5. And why Firefox, an OS that puts the web first, has seen growing success in emerging markets, along with Android. Apps can be useful, but the web is infinitely more useful, and Android is all about delivering the web...along with Google services to accentuate users’ web experience.

Google could have given up when Apple took the stage to trumpet its 90% share of the smartphone market. Instead Google took the long view, working to grow the overall size of the web-enabled mobile market. After all, there was a lot at stake. Namely $6.30 per Internet user.

About

Matt Asay is a veteran technology columnist who has written for CNET, ReadWrite, and other tech media. In his day job, he is the vice president of business development and marketing at MongoDB. He was previously chief operating officer at Canonical, ...

14 comments
Bozo T Clown
Bozo T Clown

Aside from the usual digs at Apple from someone who obviously does not get it.  The reality is that the writer makes the same mistake every financial prognosticator has made (and which are basic economics) and that is that the people he is referring to may not make $ 6.30 a YEAR!!!  Without validating that figure, it is likely based on conglomerated ad views, click throughs, usage fees and the like; something that you cannot replicate in other parts of the world.


A very good premise but an overly simplistic conclusion.

tutor4pc
tutor4pc

The article makes no mention of some things where Google is in the driver's seat and also where Google goofs. The spy car will be powered by Android. The car sends all kinds of data to whomever, may be starting with the NSA. On the other hand, I wish Google would break the Microsoft monopoly. There are the Chromebooks but because the Chrome browser is a data collection venue for Google I would not consider it until some independent privacy protection agency verifies the device as secure and spyware-free.

bluscarab
bluscarab

I'm a high stakes stock investor and am seeing rabid numbers of android sweeping the world - Samsung besting all competition by many orders of magnitude. Samsung has single-handedly promoted the android platform by storm with a little help from sister corp LG. Hell, Samsung makes 60% of the iPhone including some of its software!!!

If Google were smart, they would form a strong alliance with Samsung and even bend a little to their wishes because when you look up the definition of innovation - you'll see Samsung. And their innovation is matchless - from washers, dryers and refrigerators to LED TVs and Dubai Skyscrapers - Samsung is king.

greggwon
greggwon

Matt, the majority of people that I talk to and work with have Apple devices, or are interested in replacing the Android with an Apple device because they hate the quality of the Android experience, overall.  Latest Best Buy marketing says that you can bring your Android or other device in and trade it in, to upgrade to an iOS device.  Note the use of the word upgrade.  The crowd of young, non-technical Android users who are just picking Android or worse, Windows devices, are all trying to get "attention" be being in that "in" crowd.  They have no earthly idea how to use either their Android device, nor an iOS device to it's full capabilities, they just know how to make calls and open a browser and use email and play some games.


The few Android users that I do have in depth conversations with, lament about various failings of the software or device that they have.  It's just one of those things where people have their own motivations to pick a product, and Android devices, going for low prices means that there will more regularly be new devices, because the income has to continue to flow.  Those new devices will diversify the support issues at the phone companies and at the device manufactures and brick and mortar dealers.  It will create a pretty large nightmare overall.


Googles creation of Android was a great thing, considering they pulled Java-ME off the market.  But what would of been best for Google, would of been to manufacture devices and put themselves directly in competition with Apple.  Now, with so many Android device manufactures and so many Android "store fronts", users and developers encounter a whole lot of pain  trying to understand what it is they are actually buying.


Go to an Apple Store and watch and listen to people buying products there.  Go to other Best Buy, Frys and other stores and listen to people buying products there.   The people at the Apple store know why they are there and what they need.  The people at Best Buy and Frys have no idea what they need, and the sales people there with all their personal biases are controlling what gets purchased.

chuckpa
chuckpa

Apple could have taken the entire market over if it were not for those prices.  I have lived this long without the need for Apple, I suspect to finish it that way.  Google Skynet!

jdm12
jdm12

This would be an interesting story, if we were told where that $6.30 were coming from. I mean, to the best of my knowledge, I've never paid Google anything, so how are they earning that amount from me? I don't doubt that they are getting it. After all, rich people are always squeezing working people somehow. I just want it spelled out.

GeoTel
GeoTel

As you watch the fiber boom across Africa, it is obvious that is where service providers are headed. In a region that currently has limited coverage, viewing each person worth $6.30 it is no wonder they are investing into building out the infrastructure. 

mmm3bbb
mmm3bbb

While I agree with the conclusion, I'm not sure I understand almost everything before that. Isn't the bulk of Google's revenue from advertising which exists independent of the OS running on mobile devices? Even if Apple were to dominate global device sales, this chart wouldn't be too different for Google, right?  The real issue (as you allude to) is that the device is less important than services, especially in emerging economies. Those services run on a backend that Google has tons of and Apple has almost none. 


As devices get more splintered in form factor (e.g., wearables, IoT), hardware commoditized, cheaper, far more numerous (IoT), and more standards-based (BLE), the Smart Phone market and debate as we know it today is going to get quaint really quickly. Then it becomes less about Google vs. Apple and much more about Google vs. what's next on the backend. And for all the credit we give Google in their current dominance, the one thing we know for sure is that 10 years from now will look nothing like today and history is rarely kind to tech incumbents in the long-term. 

adornoe
adornoe

It's so magical, that 109%.


Imagine if Apple and Samsung were to report profits greater than what they actually earn.  They would have been paying taxes on income greater than what they took in.  


Somebody at Canaccord Genuity loves to play with the numbers.  


Hmmm.... wonder when Walmart will start reporting higher than actual profits, after they win over market share from a shops that close shop after Walmart moves in.  


Creative bookkeeping is rampant in Washington and in other government levels, but, no company is ever going to report earning more than they actually did, so, the company that produced the report above should stop the stupidity too. 

bluscarab
bluscarab

@greggwon - I think you are a very biased fanboy who can't part with his losing team. Apple had its days and we all enjoyed it when it arrived. But when the party is over - let's find another party. If you ever tried playing with the new Lumia 1520 or the Galaxy Note Pro 12.2 without an attitude problem, you'll see why I think these are the prototypes of the future - not iOS.

2Step
2Step

@greggwon That really is a narrow and decidedly biased viewpoint.

>>"The crowd of young, non-technical Android users who are just picking Android or worse, Windows devices, are all trying to get "attention" be being in that "in" crowd".<<

Really? I think you have that one upside down. From my experience the "young, non-technical" folks I see with smartphones are buying Apple, with the motivation of having the "cool" device the rest of the in-crowd has. I'm not an Android user, but I see more technical folks than neophytes going that direction. They like the freedom and tweak-ability factor.

Or is this how things are actually perceived now - gone full circle? With Apple now the mainstream choice and those choosing alternatives being seen as hip because they are now the ones daring to "Think Different". Funny

I am one of those even crazier folks who made the "worse" choice by going with a Windows phone. I've seen an interesting phenomena in my office. The vast majority of folks have iPhones, with only a few of us wackos going the Windows phone route (a Nokia Lumia 1020 in my case) plus a couple of die-hard Blackberry users (because of the keyboard). An interesting thing has been happening gradually as the iPhone folks see the WP phones in action - first curiosity, and then envy over something other than (gasp) an iPhone. Since the Nokia "Black" update came out several more are in the process of converting ( I think the "Nokia Beam" app was the kicker for them).

I know that isn't representative of the global marketplace, but I still find it interesting to observe what happens when people see products in action versus being swayed by trends, hype and the almost religious like zealotry I often see in comments and blogs, etc. When the shine of brand/fashion wears off and people make choices more weighted by user experience surprising things can happen...

Hazydave
Hazydave

@mmm3bbb I'm pretty sure Google is fine with iOS users using Google tools and services.  In fact, they have made an effort to keep these things better on iOS than Apple's counterparts, much as possible.


But of course, Apple could quash that in an instant by launching better tools and/or blocking Google.  This goes back to what I believe was Google's main interest in starting Android. On the Windows, Linux, or even MacOS desktop, software has been up to you, and Google certainly felt they won search on their own merits. But if you looked at smartphones prior to Android, you had Nokia, RIM/Blackberry,  Apple, Microsoft, and Palm, each in pretty tight domination of their search and software. You really couldn't change web browsers and other basic tools -- built-ins and apps weren't necessarily the same thing. Snd those less locked down were moving to lock things down more. At one time Apple even dictated the fery small set of tool developers could use to develop apps.


So Google saw search moving strongly to mobile,  and with a few political moves, they could be relegated to second class status on every mobile device. Android was a great solution, open in a way no other consumer-facing  OS had been. No special magic, Google apps follow all the same rules as other apps. Support for most any hardware a vendor wanted to build, allowing them as much or as little customizations as they wanted. When successful, it keeps Google around in mobile. And as long asthey keep their tools top notch, it keeps pressure on other platforms to not lock Google off their system.

mjasay
mjasay

@adornoe Apparently you didn't read the article they wrote. It's 109% because other vendors have losses.