How Google makes Money from Android

Steve Ballmer thinks that Android is no longer Free, since HTC pays them royalty for patentson every Android phone sold. Just because they can’t fight Google, Microsoft is taking easy steps to do what it does best: Suing smaller companies to Make money.

On a more serious note, How does Google make money from Android – an Open Source smartphone OS. It costs nothing to phone manufacturers and is freely available to modify, hack, & redistribute.

The first obvious earning source appears to be the Google ads. Building the fastest smartphone web browser increases the chances of using web for searches on your phone, and the searches are made more often than a user did before. With millions of users worldwide and assuming even 1 search per user per day, Google  can make enough money to  feed it’s engineers for sustaining Android for years to come. But is that all? No, not really.

Recently, Google’s CEO Eric Schmidt announced that  Android will soon have the capacity to feed Google $10 Billion yearly in revenue. And back in Nov 2008, Microsoft CEO Steve Ballmer said Google’s give-it-away Android strategy was a sure-fire money loser.

Here are some possible sources of income at this point of Time, and Possible sources of Income in the Future

• MarketPlace: Google charges $25 for signups as developers, then keeping a share of paid app’s price. Going by stats, and now the release of Market to 29 new countries, this could grow from several Million$ to a multi-billion dollar deal within a year.
• AdMob: The ads revenue is not just driven by webpage ads but also in-app ads. 50% of the free apps in the Android Marketplace are ad-supported and can fetch Billions of PageViews, every single day. Eventually, Eric believes,ads delivered via mobile devices will bring Google more revenue than ads delivered via PCs. After all, Selling 200,000 devices per day is a huge number. All in all, a significant earning for Google today and multi-billionaire tomorrow.
• Saving on iPhone: Every year, Google pays Apple 10s of 100s of Million Dollars to keep the Google search the primary choice on iOS devices. With growth of Androids, (users choosing Android over iOS) Google endsup paying way less to Apple, since the deal is per iOS device sold. Don’t get it wrong, this number is huge enough to run Android operations inside Google.
• Paid services: Its something that wont happen with every android user, but it happened with me. Being too much dependent on Integrated Google services: Gmail, picasa, docs, on desktop & mobile, I ended up actually upgrading my account to a 40gb paid service. Auto-syncing camera shots to picasa is just one of the reasons.

If Google had been evil, they would have looked into many other modes of earning like analyzing user’s phone using analytics, stealing and selling user’s data but luckily they are not. The mantra for the company is still intact, that’s why we love Google, Hate Facebook.

Android is the future, NewsWeek rightly calls this evolution the “Android Invasion“, so many industry evangelists cant be wrong.