Smartphones

Will Google successfully monetize the Android market?

Donovan Colbert believes that Google borrowed a game plan from Apple and Amazon to monetize the app market. Do you think they'll succeed?

I'm in an ongoing discussion with an app developer over the differences between the Amazon Appstore, Google Play, and Apple's App Store. This developer is disillusioned with Google Play. The platform is more difficult and expensive to develop for, and Android users simply don't monetize like other stores. In fact, two-thirds of Android users don't even pay for apps. This is troubling, but I think there are signs that Google is taking steps to fix things. They've borrowed a game plan that's successfully been executed twice before by other companies.

Amazon's initial efforts to monetize Android users came with the announcement of the Amazon MP3 store in 2007. At the time, it seemed like an odd strategy for Amazon to enter the digital music business. The store was platform-independent, but there was a strong emphasis on it being an alternative for Android users, and they heavily pushed the Android native app. Ultimately, this made Android users feel like they might finally have an Android-oriented music store that could compete with iTunes.

After several years of growing their presence as an Android destination, with users who were already accustomed to paying for media content, Amazon released their Appstore. In March of 2011, this was an unexpected move that was misinterpreted by the majority of analysts. It seemed as if Amazon was trying to compete head-to-head with Google as a destination for Android users. Opening an app store to steal consumers who were notoriously unwilling to pay just didn't seem to make sense.

I think the release of the Kindle Fire shows a brilliantly executed long-term strategy that mimics the evolution of Apple's iPod line into iOS. I'd argue that from the start, Amazon knew what they were doing with the MP3 and Amazon Appstore. They had a well-established base of consumers who were used to paying for digital content, and they intended to expand that base to include apps, music, movies, magazines, and other content.

Many bloggers began to argue that the Kindle Fire didn't actually count as an Android device. By extension, the Amazon MP3 store, the Amazon Appstore, and the other digital content destinations offered by Amazon were never an attempt to capitalize Android users. The intent was to create their own ecosystem of Kindle Fire users who would pay for content. As the first Android-based tablet to gain significant consumer attention, I'd say they hit their goal.

The evolution of iOS also follows this pattern. We forget that the iPhone isn't a phone with an iPod -- it was originally an iPod with a phone. When the iPhone was released, it already had a consumer base that was used to paying micro-transactions for digital content. Apple expanded its offerings to include videos, then apps, books, magazines, and other content. Their users were always used to clicking "yes" to purchase content.

Google did it backwards. They became the alternative to iOS for people who didn't want tightly-regulated oversight of their digital media. Like a moth to a flame, the users who were the most interested in Android were the ones least likely to purchase any digital media, including pirates, rippers, burners, and hackers.

However, if you've been paying attention, you'll note that a while back, Google made a heavy push to improve and expand their content libraries. Google Books became legitimate (and for-profit) when Google eBooks was announced in 2010. Google Music Beta was introduced in May 2011. All of this was integrated and expanded to include movie and TV purchases when the Android Market was rebranded Google Play.

If this attempt to create a market of consumers more likely to click the purchase button wasn't clear enough, the release of the Nexus 7 tablet as a "Kindle-Fire killer" should make Google's intentions completely transparent. I recently saw Radio Shack offering a $25 Google Play credit with the purchase of a new Android phone, and the $25 credit for the Nexus 7 created a rush of Android app purchases. Google also announced Google Play gift cards.

Apple did it, as did Amazon, and now Google is doing the same thing. With estimates as high as 6 to 8 million Nexus 7 units moved this year, mainstream adoption among users who will make app purchases will certainly grow.

I don't expect Android users to ever monetize as much as iOS users, but I believe Google is making an effort to increase those numbers in a way that will be hard for developers to ignore. I also think ICS, Jelly Bean, and Motorola's direction for Webtop will fix many developer issues over device fragmentation, but that's a topic for another blog.

What do you think, has Google borrowed a page from Amazon and Apple? If so, will it work, or will Android remain a difficult-to-monetize app platform? Share your opinion in the discussion thread below.

About

Donovan Colbert has over 16 years of experience in the IT Industry. He's worked in help-desk, enterprise software support, systems administration and engineering, IT management, and is a regular contributor for TechRepublic. Currently, his profession...

6 comments
Android k
Android k

Yes , I think that Google will monetize the android market. Because it is providing developers to share their apps with everyone. SO it will help to monetize your app.

pfyearwood
pfyearwood

I once used iTunes using their Gift Cards. I may stll have a balance >$2. I use Android on a Galaxy Player with Gingerbread. I did once pay for an app. It was an android version of Dox2Go I first used on my Palm i705 and z31. It was a good price. However, I will not use my card for seperate purchases of $.99 or anything under $10. Maybe I missed something. Now, that Google will have gift cards, I will reconsider buying from Google Play. I am not against online buying, I just want to minimize exposing my bankcard info. Paul

malraux42
malraux42

I'm also disillusioned with more than just Play: as I've noted elsewhere we have sold nearly 2 orders of magnitude more copies of our app on iOS than Android. We're in the three major US market app stores as well: Play, Amazon, and NOOK. Oddly enough, we've sold as much in the tiny NOOK market as Play, and next to nothing in Amazon's market. Either way, at this point we're far, far away from recouping our investment in the Android version of the app (not just the [b]Play[/b] version), even though it uses Flex and the "only" modifications we had to make were implementing the Play and Amazon store APIs and putting a fair amount of work into supporting as many form factors as possible. I read a lot of articles on Gamasutra too, and Android success seems split there. For every "Android isn't worth the ROI" article or post, there's another saying "we only develop for Android and it's fine". I only have my own experience to go on, though. To your article's point: I think that Google is just realizing that it doesn't understand how people work, and it's playing catch-up with Amazon, partly to give Android users a full content experience (yay!) and partly because it sees the danger of a large segment of the Android, er, marketplace (little m) splintering off into custom Android Land with the Fire and to a much smaller extent the NOOK. And a very important piece of the market, tablets, to boot. There are some things that Google needs to realize can't be run entirely by engineers; marketing, retail, and content are among those things. Amazon and Apple realize this, and they pursue a more effective model of directing their engineers to build what they believe customers will pay for, instead of trying to get people to buy what their engineers decided to build. [q]They became the alternative to iOS for people who didn’t want tightly-regulated oversight of their digital media.[/q] We've talked about this one before as well. My contention has been that Android gained much of its popularity through being a low-cost alternative smartphone, and that the segment of Android users represented by tweakers, hackers, open systems fans, and "conscientious objectors" is relatively small. Over the past week or so I've begun to realize there is another element to the overwhelming popularity: ubiquity. For a good while Android was the only smartphone you could buy if you didn't want AT&T. I would say that Apple shot themselves in the foot there, but I suspect they gained enough from the exclusivity arrangement with AT&T (like the unlimited bandwidth for phones) that it evens out. So the alternative explanation is that Play doesn't monetize because the majority of people using Android simply don't want to spend as much money, which is why they're on Android phones to begin with. Ditto pirates, rippers, and burners. Or perhaps not really [i]alternative[/i] explanation so much as just a description of the largest segment. The tweaker/hackers/open systems people would have been on Android whether it was expensive or not, and might very well represent the one segment of the Android user base that actually does monetize well. The rest, as you say, are simply not in the habit of spending money. One final comment: I don't see what the link in your article has to do with "Many bloggers began to argue that the Kindle Fire didn’t actually count as an Android device." It's an article about why Android tablets aren't popular, mentioning the Fire only really in passing and not making much of an argument at all. I was prepared to read something discussing the Fire's lack of Google services or hobbled OS or use Nokia maps.?

dcolbert
dcolbert

I wrote this article before the Amazon event yesterday in California. Here are my edited comments from a thread on G+ regarding the Amazon event: It isn't about the tablet, (or the apps!) it is about the services. Google came to this realization late in the game, and Bezos articulated it at the top of the event. Also, Amazon sells devices cheap and makes up their money on the content. Bezos admitted it. They want to distribute content, not sell and support hardware. Google didn't get this early on. They wanted to enable hardware, but they didn't see how the money-channel on content and app delivery would support hardware penetration and adoption. Amazon saw how Apple worked it, and did the same thing. +Google seems to finally be getting that. Ultimately - we're going to end up with different "channels" for content distirbution, but unlike a TV, a different device will be necessary to access each channel. I think that will have to be addressed eventually, too. You need to have all consumers able to access all channels. Right now, that is a long-term liability for Apple, but it more of a two-way street between Amazon's Android fork and other Android forks. Amazon seems to understand that best. Google should start releasing all of the Google experience as an add-on .apk that could be added to devices like Kindle-Fire and Nook. Navigation, Maps, the Play Store, Android Music... make it all available as widely as possible. -------------------------------------------------------------------------------------- Beyond that - does the new Kindle-Fire HD take the wind out of Google's sails with the Nexus 7 and expected Nexus 10? Does Amazon have better content? There is no doubt that Kindle offers an enhanced experience compared to Google Books. Does XRay offer a more compelling streaming video service than either Apple movies or Google Play Movies can offer? I think these are the 3 big players right now, and on quality and scope of services is where they're going to differentiate from one another. Google gets it, but they're behind on this. Can they catch up?

dcolbert
dcolbert

I'm wondering if the lack of prepaid gift-cards was that big of a stumbling blog to monteization of the Google Play market. If the gift-cards come out and sales surge, I'll be surprised. I think the whole industry would be totally shocked if that were the case. At the same time, I buy the Gift Cards... for various online resources, for exactly the reasons you state, Pfyearwood. Xbox Live, Club Penguin, Amazon, iTunes, those are the big ones for me. I'm sure Google Play will join the crowd.

dcolbert
dcolbert

I think you're right about the availability of Android giving it a leg up initially when iPhone was exclusive to AT&T. That is originally why I adopted Android with the Droid 1. I was waiting for Verizon to get something. It could have been the Storm, but wasn't. It could have been an iPhone, but it wasn't. The Moto Droid 1 was the first there - and that launch at that time was critical. And the inexpensive device market probably plays a role too. I think you over-estimate that role. In the early days I saw the occasional person with a Droid Eris (the low end at the time) - but the majority of domestic users I meet have mid-range or high-end phones. Globally this might be more important. Places like India and Asia. But I've got a feeling that through most Western nations and economies it isn't value-phones that are driving numbers... so it should be a pretty Apples-to-Apples comparison if you remove the segments where income drives inexpensive purchases (where arguably, Apple wouldn't gain those customers regardless of if Android was or wasn't cheaply available - they would just go without). I also think you underestimate the impact of being the "official mobile platform of the Jolly Rogers banner". Was it you, or another Android developer, who was complaining about how rampant piracy is on Android? I mean... let's put it that way - it is easier to count Android developers who aren't complaining about piracy's impact on their sales than it is to track those who are. We can just assume that Android developers think piracy is a problem and be pretty safe. The way I see it, that is a cat that is out of the bag. This isn't an attempt to change the hearts of that segment of the Android market (or any pre-existing segment of the Android market). It is about growing a new segment that better reflects the consumer-bases that Apple and Amazon have cultured and nurtured. I'm not disagreeing with what you've said above, really... I'm saying that Google realizes this and they're trying to introduce a paying segment of users into their ecosystem. The current crop of Android users, for ALL of the reasons here, don't monetize. So what kind of users DO monetize, and how do we get Android into their hands and get them to start paying for things that other people want for free? If they can do that, and they could get better parity with the other markets - that makes it a more difficult proposition for you and other developers to ignore the Android market, right? Jason Hiner is a blogger who frequently has proposed that the original Fire wasn't really an Android tablet. The link was an example where he more or less makes that claim, "Depending on who you believe and what exactly you count (tablets sold to retailers vs. tablets sold to customers, and whether you count Android offshoots like the Amazon Kindle Fire), " (emphasis mine). I also thought it was interesting in that it was in a blog titled, "Why Android Tablets Failed: a Postmortem" from January - when it looks like Android tablets are coming off of life-support here in September. Heck, it looks like Android tablets may go skipping right out of the ICU soon, at this point. That seemed relevant to the point of this article, because I think the market approach of the Nexus 7 was the shot in the arm that gave Android tablets their much overdo second wind. Now we'll see how long that second wind lasts, and how far it carries Android tablets. Will the Kindle Fire HD knock Android tablets back down? What about Windows 8 tablets? They're not out of the woods yet... but it seems like they've at least found the right path. ?