A Message To Eric Schmidt And Android: Put Up Proof Of Profits Or Shut Up

by John Kirk   |   October 11th, 2012

There will be one billion Android devices—smartphones and tablets—in use within a year, Google chairman Eric Schmidt said.

Schmidt made the prediction during an interview with AllThingsD’s Kara Swisher and Walt Mossberg at the 92nd Street Y in New York Wednesday night.

Google is activating 1.3 million Android devices a day.

“Do the math,” Schmidt said. ~ via Business Insider

Doing The Math

All right, Mr. Schmidt. I’ll do the math. Activations are only part of the equation. The numbers that you keep conveniently not telling us are margins, revenues and profits. Activations without those numbers are meaningless. Market share without those numbers are meaningless. You want us to do the math, Mr. Schmidt? Your numbers – without context – are mathematically meaningless.

Now I have no doubt that Android has margins, has revenues, has profits. I have no doubt that Android is making money. What I SERIOUSLY doubt is just how much money Android is making. You want us to take you seriously, Mr. Schmidt? Tell us those numbers.

Market Share Myopia

We are OBSESSED with market share numbers when we should be obsessed with profit.

– Market share is a COMPONENT of profits. It means nothing in and of itself.
– Market share is the factor. Profit is the solution.
– Market share is just one of many top lines. Profit is the one and only bottom line.
– Market share is the means. Profit is the ends.
– Market share is not the goal. Profits are the goal.

Where Are The Numbers?

A business absolutely devoted to service will have only one worry about profits. They will be embarrassingly large. ~ Henry Ford

So where are Google’s numbers for Android? They have them. They’re just not sharing them. Why do you suppose that is?

When a company has favorable numbers, they shout them from the mountain tops. When a company has numbers that are unfavorable, they remain stoically silent. This is the industry norm.

– Apple seldom talks about Apple TV
– Samsung stopped reporting their tablet sales numbers
– Amazon never reveals sales or profit numbers for the Kindle Fire
– Microsoft actually does reveal the exorbitant amounts they lose on Bing. Go figure.

When a company says nothing about a product’s profits, they are telling us something. And that something is not good. Their silence speaks volumes.

No Profit, No Glory

“Business is all about solving people’s problems – at a profit.” ~ Paul Marsden

It is somewhat ironic that I keep reading stock market “bears” claiming that Apple is a “bubble” when Apple is one of the few companies that actually reveals their numbers and is built upon a solid foundation of revenues and profits. If a company wants recognition, if a company wants to be taken seriously, if a company wants us to respect what they do, then they need to reveal their profits.

There should be a new rule when reporting on companies. Unless a company is making a profit, words like “successful”, “winning”, “dominating”, and such should be banished. If a company wants the glory, they should have the guts to reveal their profits.

Market Share and Margins and Profits, Oh My!

Everyone obsesses over market share but anyone can achieve market share if they don’t care about profits. All they have to do is lower their prices or sell their goods or services at a loss.

– Market share is easy.

– Profit is hard.

– Market share plus profit share is genius.

Stop Talking About…

The worst crime against working people is a company which fails to operate at a profit. ~ Samuel Gompers

Now here come the excuses, the rationalizations, the justifications. “But, but, but…profit isn’t everything! There are more important things like…”

Please stop. There’s nothing more important to a business than profits. Stop talking about:

– market share without context.
– how much profit you’re going to make in some distant, undefined future.
– how much you’re making from some undisclosed and undiscoverable content, advertising, data gathering or other nebulous activity.
– how your business model is different and it shouldn’t be compared to other companies. You’re wrong. Every company’s profits can and should be compared. Profits are the great equalizer.

The proof is in the profits. If you don’t the have profits, you don’t have the proof. And if you don’t have the proof, then please, just stop talking.

John Kirk

John R. Kirk is a recovering attorney. He has also worked as a financial advisor and a business coach. His love affair with computing started with his purchase of the original Mac in 1985. His primary interest is the field of personal computing (which includes phones, tablets, notebooks and desktops) and his primary focus is on long-term business strategies: What makes a company unique; How do those unique qualities aid or inhibit the success of the company; and why don’t (or can’t) other companies adopt the successful attributes of their competitors?
  • Defendor

    Wouldn’t the Android profits, be reported as mobile ad revenue? Wasn’t that the whole point of Android?

    I don’t follow their earnings calls to see how well the break this down, but in the past I think it was revealed in one of the lawsuits that most of their Mobile Ad revenue was generated on iOS. But that may have changed by now, though perhaps not if they aren’t breaking it down in earnings reports.

    • synthmeister

      I’m pretty sure that Google only reveals “mobile profits” and does not break down how much comes from iOS and Android. People have only been able to figure out the numbers because of the various patent trials. In the Oracle trial, Google actually argued that it shouldn’t have to pay big damages on Android because it wasn’t really making any money.

      That’s why Google losing iOS users with Maps, is a lot worse than Apple losing Google maps–Google really isn’t making much money in the mobile space, and losing 200 million of its most well-heeled users is a very bad thing.

      • capnbob67

        Android may not have made much money in 2010 but with exponential growth and a billion or 2 users, $5-10 per user really begins to add up.

        A lot of this jibber jabber is falling into the old trap of “for Apple to win, others must lose”. Steve got over this, we should too. Apple Maps has been a debacle for both parties. Google looses quality access to iOS users and Apple’s teflon reputation for quality took a deep scar. It could cost Apple a few million sales over the iPhone 5 lifecycle, it could cost Apple switchers or new users… we’ll never know for sure. What we do know is that iPhone growth numbers are significantly slowing over the past few quarters. After a while fans are going to have to stop blaming seasonality, supply constraints, etc. and start to accept that there is real competition out there.

        The ugly truth is that Apple is “winning” but Google/Android is NOT losing. It is a broad ecosystem filled with winners and losers but net net, $bn in profits are being made and Apple is being “controlled” far more than if Android had never existed.

        • http://twitter.com/qka qka

          “Android may not have made much money in 2010 but with exponential growth and a billion or 2 users, $5-10 per user really begins to add up.”

          You are talking about the $5 and 10$ licensing fees they pay to Microsoft and others, correct? That does add up, and quickly.

          So the question remains, is Google making any money with Android?

          • capnbob67

            Is Google paying MS or is it their OEMs out of their hardware profits (which are much larger)? Are those fees one off device fees or annual recurring fees like ad revenue (NO)? Or are you just throwing an irrelevant glib little factoid into the mix? Mmmmm…

            Google doesn’t owe you any numbers but it’s pretty obvious that Android makes money and its massive growth is creating profits since it is clearly scaling usage far faster than it’s dev costs possibly could. Mobile creates incremental search use driving incremental ad revenue and an increasing proportion is coming from Android. Thus they are making $ from Android.

            Could they have made the same $ without Android? No. (too much MS or non-consumption)
            Could they be in a position where Apple and MS cannot easily mess with them without Android? No. (obviously)

          • FalKirk

            “Google doesn’t owe you any numbers…” – capnbob67

            They do if they’re going to claim that they’re they’re trying to woo developers or manufacturers or claim that their business models is succeeding. It they’re going to put out activation numbers, they should be putting out profit numbers too.

            “…it’s pretty obvious that Android makes money…” – capnbob67

            Obvious to who? Where’s the support for that statement? Where’s the prooof?

            “…and its massive growth is creating profits…” – capnbob67

            Proof? Massive growth has nothing to do with profits. Growth without margins and profits is useless.

          • SSShu

            This is how a Cult gets started?
            “Oh you’ll have to take our word on it.”
            “The holy-ledger-that-only-i can-read says we’re winning, so yes – we’re winning”
            “We are OPEN AND WE ARE HOLY – so take our word for it”

          • capnbob67

            “Obvious to who? Where’s the support for that statement? Where’s the prooof?” Falkirk

            The absence of proof does not deny something’s existence. I’ve explained this several times. Mobile search use cases are largely incremental. Incremental search uses drive Google ad revenue above the level it would have been without mobile uses. QED. Android makes money. We just don’t know how much. With a billion users, it won’t be insignificant.

            Why do you keep beating this insane drum? It seems far less probable that Android doesn’t make money. It clearly is not in the same league as Apple’s current model but enough of the OEMs are doing very well with Android to balance that.

          • FalKirk

            “The absence of proof does not deny something’s existence.”

            You cannot make an assertion without proof and then claim that the absence of proof does not deny that thing’s existence. That’s a circular argument and a logical fiction.

            “‘A’ is true. You have no proof that A is not true therefore you cannot claim that A is not true.”

            Bul…loney.

            You asserted that “it’s pretty obvious that Android makes money.” I challenge that statement. It’s not obvious at all. You asserted the statement, you prove it.

          • steve_wildstrom

            As noted above, OEMs pay the fees. This is a one-time payment for each device made. There are lots of other licensing payments for use of patented technology from Qualcomm, Ericsson, and others.

          • BC2009

            They reportedly make about $5 to $10 per year per active Android user in mobile advertising revenue. Replaced phones do not increase this since the old phone goes in the garbage. When a user upgrades from Nexus S to Galaxy Nexus, Google makes no additional money. It is the same user producing the same $10 per year. When a user upgrades from iPhone 4 to iPhone 5, Apple makes hundreds of dollars. So if Apple made $300 on the iPhone 4 sale, and another $300 profit on the iPhone 5 sale, they have made $600 on that user. That is the equivalent of 60 years of advertising revenue from the sale of two smartphones.

            The likelihood of Google making back their investment on Android in the next 10 years is slim. It really makes one wonder what they were thinking since they could have been the premier advertising service (e.g.: iAd service) on iOS. If they were still Apple’s partner they would easily be making $20+ per year per iOS user with little investment since iOS users are more engaged in apps and Web browsing.

            Now imagine if Apple decides to get out of advertising and instead partners with Facebook and starts using Facebook ads to fill iAd requests and starts sending half of their iAd revenue Facebook’s way?

            I still fail to see where Google made a wise business decision here. The only thing Apple was doing to block Google’s plan was standing in the way of a completely Google-dominated world. In that world, Google has no partners and therefore cannot be partnered with Apple. I know that Google tried to spin Android as the save-us-from-oppression hero, but the truth is that Google wants to be the all-powerful oppressor and that is the only motivation for Android. if Google could have strengthened their partnership with Apple they would be the premier advertiser to the premier consumer audience on the planet. Instead they have spent billions and made next to nothing. If anything ever happens to make their search revenue go away they are going to collapse because they have no other legs to stand on.

          • FalKirk

            “They reportedly make…” – BC2009

            So why is this what the “reportedly” make? Why aren’t they telling us the real numbers? What are they hiding?

          • Space Gorilla

            I’d say it’s fairly simple, Google is hiding the fact that a majority of Android devices are used as phones and not much more. This reality shows up in other data points (mobile web use, developer revenue, etc). An Android device that is used as a feature phone does little to help Google build a mobile computing platform. Viewed through the lens of ‘mobile computing platform’, Google is getting clobbered.

          • Space Gorilla

            It occurs to me there’s another data point we can look at. The very poor sales of iPod Touch alternatives on Android. Take away the phone part and these devices just aren’t selling. Android is not compelling as a mobile computing platform. It is doing very well as a phone platform, but that is a hollow victory.

          • FalKirk

            “It occurs to me there’s another data point we can look at. The very poor sales of iPod Touch alternatives on Android.” – Space Gorilla

            Really excellent observation. (I plan to steal it and pretend that it’s my own!)

          • Space Gorilla

            Feel free.

          • Jon T

            I don’t think Google would been Apple’s premier iOS advertising partner in any case. Google standards are -no longer- Apple’s standards.

          • steve_wildstrom

            Those license fees are being paid by OEMs, not Google.

        • FalKirk

          “What we do know is that iPhone growth numbers are significantly slowing over the past few quarters.” – capnbob67

          No they’re not. iPhone growth continues to grow and should expect dramatic growth in the holiday quarter.

          This post has nothing to do with Apple and the iPhone. It has to do with companies like Google and Android who declare victory but show us no profit numbers.

        • http://www.facebook.com/profile.php?id=1573495479 Rene Stein

          But, there is a hard cap on growth. The population of the planet. And that is only a multiple of 7 over what they currently have. So, if they are not making a lot of money with a billion users, they will not make a lot more money if they can expand to every person on the planet. Facebook has the same problem. They have a billion users and not great financials. Their growth is limited. Somehow both of these companies are going to have to figure out how to squeeze out more money per user in order to grow. That is not a great position to be in.

        • synthmeister

          Google testified in the oracle trial that they have made only around 500 million on Android in total yet they spent $12 billion on a money losing Motorola.
          That’s losing in my book.
          Apple takes 70 – 80% of ALL cellphone profits, including dumb phones, android or otherwise.
          That’s not just winning, that’s dominating.
          Googles business plan for android is very fuzzy, especially with the most successful android tablets forking google out of their own ecosystem.

  • Rich

    John,

    It’s understandable that companies want to talk about market share. In Google’s case, if there are a large number of Android devices in use, that indicates that consumers have a good experience with them, and that does give Google bragging rights. It’s much better – way better – than if users *didn’t* like the product experience.

    Imagine if a person can run 25 MPH. That’s pretty good, and if they can only maintain that speed for 50 ft. they probably won’t mention that aspect of their performance. It’s just human nature.

    • FalKirk

      “It’s understandable that companies want to talk about (their strengths).

      Agreed. It is Google’s job to show their best side. But it is our job to call them on it when it’s clear that they are hiding something. Google is hiding behind activation numbers. We should – in Schmidt’s words – not let them “do the math” until they provide us with the rest of the equation (margins, revenues, profits, platform results, strategic gains, etc.)

  • http://twitter.com/jgpmolloy John Molloy

    Business Insider’s spin was also very strange calling the Billion devices that Android will have in a year’s time, four times more than Apple. One assumes that the guy who contributed the article fell under Schmidt’s spell and figures that Apple will no longer sell a single iOS device.

    • http://www.facebook.com/dan.andersen.79230 Dan Andersen

      It’s worse than that, John: Over a month ago, Apple announced that there were already over 405 million iOS devices in use. It seems that basic arithmetic is not Schidt’s strong suit…or he’s prevaricating (as is his apparent habit).

  • j-g-faustus

    Android isn’t a money-making business for Google, it’s a defensive fortification to protect the asset that does make money: Google search.

    The scenario Google wants to avoid is a not-too-distant future where a) the world goes mobile, b) Apple controls the mobile market (which it could very well do today in the absence of Android), and c) Apple and Google have a spat which ends with Apple switching to Bing, causing Google search volume and profits to drop 90% overnight.

    Fortifications are a cost, not a means to profit. But the long-term profit could very well benefit, at least compared to the alternative of skipping the fortifications and getting overrun by barbarians.

    • FalKirk

      “(Android is) a defensive fortification to protect the asset that does make money: Google search.”

      I’ve heard this explanation before but I’ve never understood it.

      First, If Android is supposed to be a defense against iOS, it has failed miserably. Android has 4 times the market share that iOS has yet iOS provides Google with two-thirds of Google’s mobile revenue. It seems to me that Android is no barrier to iOS but it is a barrier to Google’s mobile profits.

      Second, if Google was afraid, in 2007, of a world where Apple might turn on them how must they be feeling now? Google’s Android has given Apple every reason to hate Google. If Google was supposed to be a defense against Apple, it has backfired badly.

      • Jurassic

        Google shot themselves in the foot (and the face) when they decided to stop being partners with Apple, and instead start competing with them.

        It was bad enough that Google decided to get into the mobile phone business, by buying the Android operating system, while the iPhone was in development (and while Eric Schmidt was on Apple’s BOD). But then to steal form Apple, changing Android from a Blackberry OS clone to an iPhone OS clone in 2009, is what got Eric Schmidt kicked off of Apple’s board.

        As a result of double-crossing Apple, Google is now losing all of that ad revenue that they were making previously from Apple and iOS. And ad revenue is really what Google is all about.

        First, Apple cut off much of Google’s revenue from searches by introducing Siri, which allowed users to go directly to the service and information they required… bypassing Google’s search engine.

        Then Apple killed off Google Maps on iOS and replaced it with Apple Maps, which is used for all iOS apps’ mapping services. So now, all of the ad revenue, that Google previously got from maps on iOS, is going into Apple’s coffers.

        Now, Google Maps is screwed on iOS, whether Google decides to make an app for it or not.

        There are three losing scenarios for Google Maps on iOS:

        1) Google doesn’t make a maps app for iOS (Result: they lose any opportunity of reclaiming the ad revenues they used to collect from Maps on iOS)

        2) Google makes a maps app for iOS, but it is similar to the previous one without turn-by-turn navigation, and other missing features (Result: No one using iOS wants to download and use a castrated version of Google Maps, and so they instead continue using alternate maps apps with turn-by-turn navigation)

        3) Google makes a full-featured maps app for iOS similar to the Android version (Result: iOS users will download and use it, but Google loses its advantage of having this app for Android only).

        • mhikl

          @Jurassic:disqus Good points, Jurassic. Here’s a question that I hope will be answered: Is Apple legally obliged to accept a map app from Google?

          • FalKirk

            Apple is not legally obligated to accept a map app but it would be both practical and politic for them to do so.

            If Apple rejected the Google map app, they would subject themselves to congressional and anti-trust scrutiny. Even if no anti-trust action was initiated, it would still be awkward and uncomfortable for Apple.

            From a practical aspect, there’s really no harm in Apple allowing a Google App. The Apple map app is integrated into the iOS operating system and into Siri. 80 to 95% of users will probably default to it in the long run.

          • mhikl

            Appreciate the response, FK. I kind of thought as much but prefer to know for sure.

            From what I have read, the jewels in Apple’s map app outweigh the problems and if Apple is able to fix the problems in fair time, the app will be a winner. This is the way of good stones. The better the gem, the easier to see the mar.

            Interesting how small problems are easy prey to hens. However, I had not heard about the problems with Google maps until the complains against Apple suddenly appeared. Then, fair game came into play. Probably not what Google would have wanted.

          • Tatil_S

            Mapquest has a map app, so there is not a blanket ban against them.

      • capnbob67

        “If Android is supposed to be a defense against iOS, it has failed miserably” – FalKirk

        No it hasn’t. You just have to consider the counterfactual. What if there was no Android. Apple would have sold many more iPhones (especially recently), so would MS, (and probably Nokia and RIM with their near-dumphone platforms). There would also be much more non-consumption with people saving up for expensive iPhones or just sticking with a dumbphone or inferior semi-dumbphone. There would be a smaller overall smartphone market and Google would be beholden to Apple far more than it is today and face a stronger MS in mobile. Now Google is neither
        Google is playing a long game. Apple may make $200+ per iPhone but when Android moves 1Bn phones next year and Google makes $10 per user per year in perpetuity, that is a nice business. Every incremental $ is also worth $1B+ from an existing user base – no more sales required.

        This is an asymmetric war (as you know well) and we also have very asymmetric information. Google owes you nor anyone the data you want to make easy comparisons. To call BS on Google/Android with next to no good data and then comparing them to Apple’s best metric when they have a different business model is facile. Why don’t you add Samsung’s $5Bn in quarterly mobile profits to Google’s and see how Android is doing?

        • FalKirk

          Google is making 3 times as much revenue from each iOS phone as they are from Android phones. If there were no Android, there would be more iOS and Google would be making more money.

          Plus, Google would still be allied with Apple. Try to picture a world in which Google and Apple had worked together for the past five years.

          You say Google’s in it for the long run? Where’s your proof? Google changes it’s strategy with every passing day. First they’re open, then they buy Motorola. First they’re open, then they sell the Nexus 7. Right now they have one viable phone manufacturer (Samsung) and no viable tablet manufacturers. There’s absolutely no proof that they are making any money from Android (although I’m sure they are).

          If this is Google’s defensive strategy working, I’d hate to see what would have happened to Google if it had failed.

          • W. van Dam

            “If there were no Android, there would be more iOS and Google would be making more money.”
            This is a bit like the RIAA claiming that each illegally downloaded song would have been bought in a store.

            Apple won’t make the mistake of sharing its OS again, so those iOS phones would have to be iPhones. iPhones are by design high end and pretty expensive phones. There are Android phones in the same price bracket, and I agree a considerable chunk of those customers would have bought an iPhone instead, but the majority of Android phones are not exactly high end. And I strongly doubt these customers would have purchased an iPhone.

            I’d also expect that the high end Android phones gather mobile Ad profits per phone well above the average of Android phones, while the many low end Android phones will generate zero to well below average. Because the Android platform addresses various segments, the average per phone profits may be significantly lower, but the total profits could very well be higher than otherwise would be the case.

            I doubt the messed up mix of slightly different Android phones with unique variants on their OS was exactly what they had in mind when they set out to create Android, but as you say they’re probably still making some money with it.

            “If this is Google’s defensive strategy working, I’d hate to see what would have happened to Google if it had failed.”

            They’d be back to Apple and MS, or perhaps other manufacturers, and be much worse off for it due to their disposition of having failed with Android.

            But also what if they’d stuck with Apple. I imagine that if Google were to rely on the Apple ecosystem, Apple would probably have had little trouble in enforcing their costly iAds platform. Apple is making a lot of profit because they make several exceptional products, but also because they know how to do business, for example with their suppliers, which you could consider to include programmers who sell in the App store.

            Making a profit today is important, but so is protecting future profits by avoiding a strong dependency on one party, which would then have the leverage to cut your margin to increase their own. A recent practical example is the price cut that the dominant Dutch supermarket chain simply dictated to their suppliers. Even though Google is as large as Apple is, they’d still be about as badly positioned as those farmers.

          • FalKirk

            “I imagine that if Google were to rely on the Apple ecosystem, Apple would probably have had little trouble in enforcing their costly iAds platform.”

            IAds was a defensive response to Android. Apple would never have gone into iAds if it weren’t for their war with Google. Frankly, I think Apple would love to wash their hands of iAds but they can’t afford to allow Google to roam the advertising landscape without competition.

          • steve_wildstrom

            To be precise, iAds was Apples response to Google’s purchase of AdMob. which serves mobile ads to all devices, including iOS. But your right, Apple would probably be glad to get rid of iAds. It has not been particularly successful. Which gets back to the heart of the matter: Apple’s core competency is devices and an app ecosystem. Google’s core competency is search and related advertising. Though they compete fiercely, they are really in fundamentally different businesses.

          • FalKirk

            “Though they compete fiercely, they are really in fundamentally different businesses.”

            Very true. I think that phones are moving towards internet services. Can Apple adapt? And there’s some question as to whether apps are trumping search. Can Google adapt?

            Should be fascinating to watch.

          • W. van Dam

            Sorry, I don’t follow you. How can Apple not afford to allow Google to roam the advertising landscape without competition? And how is the flopped iAds business going to do anything about that anyway – or did they recover recently?

          • FalKirk

            “Steve’s posts provides the answers.”

            Agreed. Steve said what I meant. :)

          • capnbob67

            Those are tactics not strategies.
            Their strategy is to get their OS and services onto the most devices in order to drive downstream revenue. Everything you mentioned are just evolving tactics to achieve that strategy.
            I agree that it is a series of zig zags but since they cannot compete with Apple’s integrated model, they are pushing the boundaries of the modular model and testing different approaches as their partners also test Google’s limits (e.g. Amazon, Samsung, etc.)

            Google have never had any interest in being beholden to anyone, not MS,
            not Apple. 5 years of being best friends would never have happened.
            Without Android, Google would always be the sub in that relationship and that is not in Google’s nature.

            Where’s your proof that Google isn’t in it for the long run? They have put out many major iterations of their OS which they have developed since 2005 (and beaten MS to the punch quite conclusively), pushed OEMs into making halo Nexus devices, invested in a content infrastructure that no OEMs could pull off and have built a very large if inferior App Store where most devs make money from advertising/in-app. Rovio seems to be doing very well from their annuity revenue ad-based versions of Angry Birds. Again – we have asymmetric data. We compare app sales but not total app revenue – in-app, ad $s etc. I’m not saying this is superior in execution or results but it is not “losing” either.

          • FalKirk

            “Their strategy is to get their OS and services onto the most devices in order to drive downstream revenue.”

            But there is no evidence that there IS downstream revenue. That’s what I’m calling on Google to reveal.

            “Where’s your proof that Google isn’t in it for the long run?”

            I’m only talking about Android here, not Google’s overall corporate strategy.

            My answer to your question is changing strategies. Android started as a pure “open” strategy. Give away the software, make the money on advertising. Then they bought Motorola. Then they came out with the Nexus 7.

            The Nexus 7 is a complete reversal of strategy. It’s hardware, not softare. It’s in-house, not licensed. It’s integrated, not modular. It’s subsidized which means its counting on content and advertising sales, not hardware sales.

            I think Motorola was a strategic mistake no matter which way it goes. If they start using Motorola to make Android products then they, again, reverse their “open” strategy and betray their manufacturing partners. If they don’t use Motorola then the acquisition was a giant waste of money.

            Google’s strategy is in flux. A sure sign that the original strategy was either flawed or not thought through. Changing tactics is fine. Changing strategy is a sign that the original strategy was ill-conceived.

        • mhikl

          @capnbob67:disqus There’s some child’s story about hens, eggs and counting I’m always reminded of when pondering a prognosticatory dance. Apple profits are now. Them eggs are a hatchin’.

          • capnbob67

            And yapping at the storm doesn’t stop it coming. John’s making as many prognostications as anyone in his excessive rant. If Google have 2Billion devices in 2 years and then start revealing how much of their ever increasing advertising revenue and profit comes from Android, all these paper arguments will look as silly as they are.
            If someone is looking to actually address and respond to a potential threat that Google and its OEMs pose to Apple, they should consider the probable downsides rather than scream that it is all smoke and mirrors and doesn’t exist. Samsung, Huawei, ZTE all exist, all leverage Android & Google, all make serious money and are all major threats to Apple.
            Anyone remember the hubris of Apple fans in the mid-eighties or Nokia or MS or RIM 4-5 years ago. By the time they accepted the reality of the threats, it was too late.

          • mhikl

            @capnbob67:disqus Calm a little, friend. They are just material objects and not worthy an aneurism.

            I do take issue with your supposition of any rant from John. There are enough lawyers in my family to know that rant does not fill a barrister’s pocket. Facts are what win the case, the coin, and the pirouette when out of view of chambers.

            I do not remember a child’s story to explain the “if”s in your thesis so I will have to resort to a proverb: If wishes were iPhones, beggars would order takeout. I’ll leave you to fill in the details.

          • AdamChew

            The problem with some android phones is they don’t surf the net well hence not much presence. Yes they served as dumbphones.

          • FalKirk

            “If Google have 2Billion devices in 2 years and then start revealing how much of their ever increasing advertising revenue and profit comes from Android, all these paper arguments will look as silly…” – capnbob67

            That’s true. But are we supposed to take it on faith that that is what is happening? There is no evidence that Google is profiting from Android, but I’m just supposed to assume that it’s happening because…well, just because?

          • FalKirk

            “Anyone remember the hubris of Apple fans in the mid-eighties or Nokia or MS or RIM 4-5 years ago. By the time they accepted the reality of the threats, it was too late.” – capnbob67

            I think that is all exactly correct only I think you’ve got your conclusion exactly backwards. It is Android that is not accepting and adapting to reality and it is Android that is at risk of reacting too late.

    • Rich

      Considering that Google is way more popular in search than Bing, it seems unlikely that if Apple switched to Bing, Google’s search volume and profits would drop 90% at any time.

      • Dave

        There’s a reason Google pays 100M per year to Mozilla to have Firefox default to Google search. If iOS would default to Bing, 95% of people wouldn’t bother to change it.

        Google is an advertising company, nothing more.

        • rattyuk

          But they don’t need to. As Siri adds more and more services then the fall through to “searching on the web” will be less and less.

  • Ron

    android isn’t designed to make profits for hardware manufacturers. it’s designed to funnel search and all other internet traffic through google, which makes profits just for google. google started off with and still has the best search algorithm. since then, they’ve branched out, becoming very skilled at tweaking other people’s intellectual property, giving it away free to OEMs, and thus reaping greater and greater search market share and profits. google couldn’t care less that their OEMs make negligible margins, and i think they’re quite clever in the way they manage to avoid paying any licensing fees to the patent holders whose IP they tweak.

    • FalKirk

      “(Android) designed to funnel search and all other internet traffic through google, which makes profits just for google.” – Ron

      There is not one jot of proof to support this oft told tale. Show me anything – ANYTHING – that shows that Google search is making money via data collected from Android.

      It doesn’t exist. Or else it’s the best kept secret in the known world.

      • capnbob67

        What you (and most of us) don’t know about how Google works and what data it uses for what purposes could fill a very large book. Android almost certainly uses the location data for all kinds of purposes including improving its mapping, traffic, POI, search result optimization, etc. A lot of mobile internet use is incremental to traditional computer use cases so it is additive to Google revenue streams.

        Android users drive incremental revenue to Google ad streams and a subset of those users also represent the most google-centric users out there. Neither Apple nor MS can block this which they could if those users were on their platforms. Without Android there would be more iOS users but also more WinMO/WP
        users AND more non-consumption. Dumbphones make Google no money.
        MS would block Google for sure, and it is always a risk that Apple could too. No-one wants their fate in someone else’s hands. Android was originally a defensive move from Google vs. MS, and in Samsung’s hands, it’s now highly offensive (against all other OS’s).

        • FalKirk

          “What you (and most of us) don’t know about how Google works and what data it uses for what purposes could fill a very large book.” – capnbob67

          This is the “super-secret,-nobody-but-Google-knows-how-well-this-is-working” defense. You have no facts, not data, no evidence whatsoever to support this theory but you postulate it anyway as though it were gospel.

          Stop telling me that Google is making money in some unverifiable, unknowable way. It’s not an argument, it’s an article of faith that’s asking me to deny everything I know and believe in some kind of super-human Google super-power. If Google were making money, they would be telling us. And they’re telling us nothing.

          • steve_wildstrom

            If you want to learn about how Google thinks and works, I highly recommend Steve Levy’s book, “In the Plex.”

          • FalKirk

            Thanks, Steve. A good recommendation.

          • mhikl

            @steve_wildstrom:disqus I just got the ebook. I procrastinated on the idea before so thanks for the suggestion.

          • Dave

            Whenever your device looks up its location, it sends the location as well as all visible wifi access points, GSM masts, etc to Google. This does not *directly* help search, but it’s clear it is used to improve maps and location information, all of which have an effect on the quality of their services, which helps the bottom line.

            Google maps got so good thanks mostly to the information collected via iOS users. Same idea behind Nokia using UPS logs to verify and improve its own maps.

            Why does Google have its own DNS? Because they are so cool and nice and want to spend money to help the internet? No, because they collect lots of information about which sites are being visited, new domains to search etc.

            Why does Google have the malware scanning in Chrome? Because they are so cool and nice? No, because it means you deliver ever URL you visit to them.

            Why does Google have Google analytics? Because they are so cool and nice? No, because they can track visitors between all sites which use GA. Same with the FB “like” button crap.

            Why does GMail exist? Because they love to sponsor some free web email for everyone? No, because it’s a goldmine of user information, and all of your data and mails are open to be mined.

            None of these *directly* contributes, but it’s all there to support the advertising business. Then there’s the advertising the nexus and google chrome on the google search homepage (!) when using IE or searching for windows tablets.

            Google erodes value of everything they get into until the only value left is in advertising. OS, web email, web maps, google docs, etc etc etc.

          • FalKirk

            Until a month ago, Google was getting all the same data from iOS – and making three times as much in advertising revenue too.

          • capnbob67

            “This is the
            “super-secret,-nobody-but-Google-knows-how-well-this-is-working”
            defense. You have no facts, not data, no evidence whatsoever to support
            this theory but you postulate it anyway as though it were gospel.” Falkirk

            It is no worse that the blatant reverse-rationalization of your position that without proof something doesn’t exist. Your lack of data, evidence or proof for your negative view on Google is just plain BS.

            Having lots of data for Apple saying that it is doing great has no impact on how Google is doing. They can be doing well at the same time, according to their model. It is basic first principle stuff that Android drives incremental revenue to Google and this makes Google money. That they don’t prove it to you is no refutation of those basic facts. It certainly is making Samsung $Bns in profit every quarter.
            Your idea that Google could have done better without Android is a nice ploy but a non-starter. It might be theoretically true but Google would never allow themselves to be so dependent on Apple. Two paranoid, NIH-wary companies couldn’t and obviously haven’t lived in harmony.

          • FalKirk

            “It is no worse that the blatant reverse-rationalization of your position that without proof something doesn’t exist. Your lack of data, evidence or proof for your negative view on Google is just plain BS.” – capnbob67

            You need to take a course on logic. I am saying that we can’t assume profits without proof. Google has the numbers but they are not releasing them. I am inferring that the reason they are not releasing the numbers is because those numbers are unfavorable.

            If Google wants us to view Android as successful, they need to come up with more than empty activation numbers. Activation numbers without profits or platform is not success.

          • mhikl

            @capnbob67:disqus Capbold, you have to agree that Google does like to brag. It brags that Google will have billion(s) of activations in such and such time. By such bragging claims, Google could just as easily brag that their profits are such and such, but it doesn’t. Now that doesn’t make sense. Why wouldn’t Eric make his case with the facts that puts to rest any questions or suspicions—to reiterate, the actual revenues and profits. With such proof Eric’s prognostications would have to be taken seriously. These are the biggies that would close the case and send any Apple reviewer or group followers away with tail between legs. Slam dunk would then Eric’s arguments be, due to lack of supportable reason by any reviewer or commenter looped on the Apple cider.

            So easy and confounding would be the case against Kirk’s points, his argument would dustify faster than the twin towers.

  • jfutral

    I still don’t believe the market share numbers, unless they can be quantifiably attributed to Samsung. Who else out there is selling Android devices in any significant quantity? With every Android handset maker except Samsung losing money, really, who is selling all those devices? And why aren’t they touting the numbers?

    Joe

    • BC2009

      THANK YOU! There numbers simply do not add up. It only makes sense if unsold Android inventory is being given away for free in second-world nations just to tally up activations.

      There is not a single Android manufacturer that discloses their unit sales. Let me repeat that. No Android manufacturers disclose their unit smartphone sales. Samsung (the biggest of them) lets the analysts make predictions and simply sits back without comment. Apple is the only one telling us how many smartphones they sold. They may not break it down by iPhone model, but at least we know they are all iPhones.

      Samsung should be telling us which phones that they sell are considered to be “smartphones” and how many they are selling each quarter.

      Google should be telling us how much they have invested in Android (Motorola Mobility cost $12B) and how much money they are making annually on Android. If

      Android is really “winning” then where are the “winning numbers”? Where are the actual unit sales? Where are the profits? For all I know Google is giving away calculator watches running Android that automatically activate themselves when you turn them on and counting these as “activations”.

      The only sensible reason these Android manufacturers aren’t reporting their unit sales is because it will become evident that something does not match up with Google’s reported activations.

      Apple and Nokia are the only companies reporting hard numbers.

      • Sharon_Sharalike

        A very large number of Android “smart” phones are actually really crappy phones. Samsung makes something called the Galaxy Mini, which sells for about US$150 all in (no contract). As one might expect, it’s horrible. Browsing the web is torture. Nobody would use it like that. And yet it counts just as much as a top of the line phone as far as “activations” are concerned.

        By the way, Motorola cost 12.5 billion up front, plus it’s lost another half billion since then. So make that $13B and counting. Add in all the other costs Google has incurred and the true cost of Android has got to be approaching $20B.

        • jfutral

          “Samsung makes something called the Galaxy Mini, which sells for about US$150 all in (no contract). ”

          Sure, OK. But that is Samsung, already proven to be the one Android handset maker making a profit. Are you saying that a substantial majority those activations are the the benefit of Samsung? Sure wish I had some numbers to find out.

          Joe

          • Sharon_Sharalike

            I’m saying that Samsung and other sell a lot of inexpensive phones that are technically Smartphones running Android, but their value to Google is close to zero. But they are counted in the activations. That giant number doesn’t mean nearly as much as it seems. It’s like lumping sales of Yugos and Ferraris together. Yes they’re both cars, but there’s a lot more value in one than the other.

          • jfutral

            Or maybe like lumping bicycles and scooters in with cars. Yes, they all have wheels, but are they really all cars?

            Joe

      • W. van Dam

        Apple and Nokia (mostly) offer distinctively different phones. The Android market as a whole is perhaps more diverse, but individual phones are also much less distinctive.

        I wonder whether their secretiveness has anything to do with a strategy to get the most out of a small margin, considering the differences are minimal and usually easy to copy, as well as that product cycles are very short. I’d imagine that if for example Samsung were to get a decent margin on one of their Android phones, there would be several imitations shortly after they’d publish their figures.

      • jfutral

        “For all I know Google is giving away calculator watches running Android that automatically activate themselves when you turn them on and counting these as ‘activations’.”

        That’s actually kind of funny because it could actually be true.

        Joe

        • http://twitter.com/_r1ch Richard Pawley

          You really can’t bring yourself to even accept Android activiation numbers? It’s all well and good you preferring iOS devices, but come one, you’ve got to accept that a heck of a lot of people prefer Android. That’s fact.

          Just because the only people waving their phone about are those with iPhones, doesn’t mean there aren’t 4 or 5 Android owners walking past you with one quietly sat in their pocket.

          • jfutral

            What I prefer is irrelevant to my point. My point is, with that many activations someone other than Samsung should be rolling in the dough. Even Samsung doesn’t really attribute their profits to Android. Every time I’ve read their reasons for profit success they point to the broad range of platforms they support, not just Android. Maybe that is just playing it close to the vest so Google doesn’t get any big ideas to try and strong arm them in some way.

            If there were more companies crowing about all the money/profit they make from Android I would have less of an issue with the activation numbers. Actually, probably none.

            As an investor, the only play I see in the Android universe is Samsung. Everyone else is blowing chunks, including Google.

            Joe

    • steve_wildstrom

      Huawei, ZTE, Lenovo, and others you’ve never heard of are selling millions of low-cost Android phones in Asia.

      • jfutral

        I’m no conspiracy theorist. I have no doubt there are numerous players I’ve never heard of. But at that level of activation, it seems someone other than Samsung (and theoretically Google) should be making some noticeable amount of money, even at low margins.

        I could be wrong, and it is no skin off my nose if I am. But the numbers still smell fishy to me.

        Joe

        • steve_wildstrom

          I don’t think Google is foolish enough to put out phony activation numbers. The SEC frowns very severely on that sort of thing. And if you are losing money on every unit, you can’t make it up on volume. Companies such as Huawei and ZTE do not have very transparent financials.

          • http://twitter.com/tshull tshull

            Which begs the question where are these Android handsets? They are not appearing as profit or mobile browsing. They don’t appear with devolpors except as the variations of Android that appear.

            Google in court admitted that majority of mobile ad venue comes from iOS.

            Where are all these handsets?

          • FalKirk

            I think that Google’s activation numbers are real, too. Android’s problem may be that the type of customer they are attracting is not the type of customer who readily uses and pays for Google services.

            There’s no point in giving away the razors for free if no one is buying the razor blades.

          • Sharon_Sharalike

            That hits the nail on the head. “Smartphones” is way too broad of a category. If a company like Samsung actually broke out its sales by model the reality of the market would be apparent.

          • jfutral

            It isn’t so much that the numbers are phony or fake, it is more what ‘activations” actually mean? The SEC may frown on phony information, but to my knowledge there is no actual SEC definition of ‘activation”. they leave that to the company using the term. So SEC allowance doesn’t necessarily equate to a meaningful term to anyone but the company using it.

            Google vox keeps touting “activations” in lieu instead of actual Android units sold, trying to imply or at least force an inference of huge market share based on this term “activation”. Hardware makers won’t talk actual units sold. Carriers talk about devices in relation to subscribers and most that I’ve come across (by no means have I an exhaustive accounting here) who carry both the iPhone and Android devices, iPhone regularly beats out Android in their quarterly reports.

            Analysts and pundits seem to talk a lot about market share, but few really explain how their numbers are anything but guesses, and probably biased based on these huge “activation” numbers Google keeps putting out. In other words they will find exactly what they think they should find, but not necessarily what is there to find. The whole “reality is perception” principle.

            So back to my original point that I have serious doubts about actual market share numbers, to the point that I have no reason to believe them and they even sound fishy. And regards to “activation” there is also no actual straight line that I should follow from there to “market share” except some tacit suggestion.

            Joe

          • steve_wildstrom

            There really is no mystery about what Google means by “activation.” The first time you turn on an Android device (an “official” one, not. say, a Kindle Fire). you are asked to register with a Google account. iOS works the same way–the first thing you do is register an Apple ID. That is an activation. It has nothing to do with carrier activation. I think we can accept those numbers as reliable–or as reliable as any corporate financials–because they are subject to audit.

          • jfutral

            OK, let me ask it to you this way, do you believe that “activations” is a one-to-one correlation to “units sold” or “market share”, that there is no way for there to be a registered activation without an actual new, as yet unregistered unit? 1.3 million activations a day equals 1.3 million new, unregistered Android devices in the hands of actual end users? And enough of those activations are enough smartphones to justify the high market share numbers oft quoted? And you believe Schmidt’s prediction if those numbers of 1 billion Android smartphones and tablets are sustained?

            The post-modernist in me believes where there is a Modernist system, there is a way to game the system (even legally), whether the system frowns on that or not. And since no other numbers I can find seem to support the high market share, much less activations, (except for Samsung), I cannot not rationally believing that “activations” actually means what everyone seems to believe it means and Google is running their own numbers game.

            Joe

          • steve_wildstrom

            I should correspond closely to units sold to customers (not units shipped into the channel.) These are worldwide numbers and there are millions of cheap Android phones being sold in markets where iPhone’s presence is limited or nonexistent. I don’t question the Android activation numbers. but I don’t think they mean very much.

          • thorntondw

            As I read yesterday, “Apple products are premium products sold at premium prices to premium customers”. With this business model it is likely Apple will never have great market share worldwide for any of its products but they will always have the lion,s share of the profits.

          • mhikl

            @jfutral:disqus Excellent argument. Double negatives are often confusing but I think I get what you mean.

          • jfutral

            Sorry, just bad editing.

            Joe

      • Joe_HTH

        LOL! None of those companies are succeeding with Android, at least not in terms of revenue and profits. Outside of Samsung, every single Android OEM is struggling and/or losing money. Look at HTC’s most recent report. Dell flat out said they couldn’t make any money with Android.

        Think about this. Microsoft makes more money off of Android than Google.

    • thorntondw

      I never believe anything Eric Schmidt says.

      • Joe_HTH

        Nor do I. The guy is completely full of sh*t.

  • Dave Thornton

    Excellent!

  • Mayson

    Peter Drucker aphorism: “Profits are the cost of the future.” No profits, no future.

  • capnbob67

    Apple is not competing against Google alone but also Samsung, HTC, Huawei, ZTE, etc.
    For all Samsung’s obfuscation, they are clearly making a bucket load of profit from mobile with their Apple-like numbers for the last quarter. Unless white goods, TVs and PC’s have had a massive turnaround without anyone noticing or components have massively increased their margins, mobile is propelling Samsung to Apple-like financial performance. We don’t know how many they sell but we know that they are many and highly profitable.

    Android has prevented 10′s of millions of iPhones being sold and captured a huge amount of non-consumption into an ecosystem that is hard to break out of. HTC are still profitable (though falling), LG is turning around and the Chinese brands seem to be doing very nicely, thanks. Nokia, Moto, SE and even HTC may disappear but the smartphone market is growing regardless and Apple’s share is only slowly creeping up and in the minority. Dying old brands is less an indictment of Google/Android than it is of the companies themselves.

    Google may make more money from iOS users (we only have their snippets of court docs to prove it) but Apple makes NO money from Android users. Google are playing a long asymmetric game of acquiring users, making small amounts of profit now ($5-7 per user), but also creating opportunities for future leverage. Will Key Lime Pie make every Android user a member of Google+? Google are the clear strategic leaders in working on ways to monetize eyeballs which Android gives them and denies Apple.

    Apple is fighting a war on many fronts and while it is doing very well defending (and slowly growing) the premium phone market, even that is being eroded by Samsung (20M x $700 smartphones in 100 days) and the lower end is increasingly lost to Apple. iPad is still financially strong in a very immature market but it is being hemmed in from below and has never made iPhone level margins. The iPad Mini will move the needle as long as it is priced well but Kindles/Nooks/Nexus’ are clearly taking user share and giving it to companies who don’t care about hardware profits. This is classic asymmetric competition as you identified in your tablet market posts.

    In summary – Android is an ecosystem that is making plenty of profit, unevenly distributed around the players of varying competence and is the major brake on Apple’s dominance of the mobile market.

    • http://twitter.com/qka qka

      As Mr. Kirk has asked in other posts, what Android ecosystem? There isn’t much of one, and what there is, users aren’t paying for. No significant ecosystem, no lockin.

      Again – Where are the profits?

      • capnbob67

        Ah, the flaky semantics of ecosystem vs. platform, etc. The one I was referring to is of Google plus OEMs, plus Devs.
        Add Samsung’s $5Bn of mobile profits and see what the Android “ecosystem” achieves plus HTC’s, LG’ Mobile’s, Huawei’s, ZTE’s, Rovio’s (ad-based) etc. Feel free to add SE/Moto losses if you need (but that is their fault, not Google’s). We won’t know what Google makes specifically from Android but that does not mean that they don’t. If it was $1Bn last year you wouldn’t notice in amongst the other revenue growth, but it could be $2Bn this year and $5Bn next year. Eventually it will become obvious.
        The broader Android “ecosystem” is minting money but it doesn’t report it in a way easily digested by you, me or Mr Kirk.

        PS: Why is there such resentment of Google Android ecosystem amongst supposedly educated readers here and on other high-brow boards? You’d think the idiotic jibes from the unwashed masses commenting at Engadget, Verge, BGR and the mainstream press had warped everyone’s minds? Or that people were taking Schmidt’s two-faced-ness personally. Both Apple and Google/partners can and are succeeding – largely at the expense of RIM/Nokia/MS.

        To me, what these premature and incomplete debates are pressaging is the end of discussion about whether RIM/Nokia/MS can survive (in mobile) and onto the real head-to-head battle – Apple vs. Google/Android in a maturing mobile market where easy non-consumption sales are harder and harder to find.

        • jfutral

          “Why is there such resentment of Google Android ecosystem amongst supposedly educated readers here and on other high-brow boards?”

          That is a huge mischaracterization of not just the article but most of the comments. I’m a capitalist at heart. If Google and/or Android does well, more power to them and bravo for capitalism. We are just questioning the numbers. The numbers are not adding up, so someone is lying, or at least not telling everything (which is still a lie in some people’s books). And not just little white lies, but on an order of magnitudes. That many “activations” should result in more people doing well enough if not uch better than it seems. Samsung is really the only Android handset maker making a profit? With that many activations? If I were an Android handset maker (that wasn’t Samsung) you better believe I’d be asking questions, especially of Google. And especially if I were Motorola!

          Joe

        • http://twitter.com/tshull tshull

          The issue is your underlying assumptions on Android. Profit is not the only metric that questions those assumptions. Look at mobile browser usage data. Where are all the android users?

          http://marketshare.hitslink.com/browser-market-share.aspx?qprid=0&qpcustomd=1

          Look at the trend lines and historical usage. What you DON’T see is the sharp climbing spike that should be coming from 1.1 mil activations a day. It’s barely changing. That’s not a sign of Android dominance.

          The only argument is that Android is at best a second tier OS that replaced Blackberry and WinMobile/Symbian. The fact that the numbers are not changing implies that Android is keeping pace/slightly behind iOS devices. Given browser share information, would Google have been better off as tied tightly into Apple or now as an adversary that Apple has to build strategies towards marginizing. Marginization strategies might include putting resources into a separate OS effort, or supporting someone like Amazon as they eat Android from within (Silk browser, Kindle Fire, and likely Amazon phone).

          Google’s long term strategy is questionable when it seems any company can hack their product AND that they have NOT dominated the browser market where their ads based revenue is generated.

    • FalKirk

      “Android is an ecosystem that is making plenty of profit”

      An empty assertion. Proof please. I haven’t seen one number EVER showing amounts Google is making form the sale of content, advertising or other via Android.

    • jfutral

      “In summary – Android is an ecosystem that is making plenty of profit”

      For who? More than likely Samsung. Probably a nice chunk, but not significant for Google if you try to comb through their quarterly reports. I’ll give you a few developers, but they were probably the ones already doing well from iOS so their notoriety transferred. But developers aren’t part of Android numbers, at least not that I’ve seen anywhere.

      If you add up all the losses and winnings that we know of (and we can only assume from a over-all bottom line basis since no one breaks out Android numbers specifically, which is a large part of the issue being raised) then Android as a whole is making less than Google and Samsung combined because everyone else is losing money.

      Except for maybe a niche market as a developer, this is not a market I would want to invest in (and that developer better have some strong support for me to believe he or she is serving a profitable niche). Again, for that level of activations it seems to me most all the players should be rolling in the dough, if not at least breaking even. That isn’t even close to the case.

      Joe

      [edit to add: Heck, I'd even be willing to entertain the notion that if not for Android all those companies losing money now would have been worse off. But no one is even presenting or arguing _that_ position. JF]

  • godzonekid

    The problem with Apple is they want PREMIUM profits from their hardware. All their hardware. Samsung, Huawie, HTC etc are quite happy to get the volume with the lower pricing and therefore the bigger profits. Remember, Apple’s profits are huge, but on lower volumes, and with more and more people opting for the Android way, I predict that Apple’s share will drop dramatically. I don’t believe it will collapse. Too many Apple fanboys/girls for that, and that’s all good. Nobody is forcing them to buy it. But Android offers the freedom that Apple does not. Apple keeps locking the system in various ways with upgrades. Which is why I will NEVER buy Apple unless that changes. Coz, at the end of the day, it is MY phone, not Apples, or Samsungs or…

    • FalKirk

      “Samsung, Huawie, HTC etc are quite happy to get the volume with the lower pricing and therefore the bigger profits.” – godzonekid

      You need to study the numbers before you make such assertions. Samsung is making money, but HTC is going down fast. They just announced record losses.

      And NO ONE is making anything close to what Apple is making. Apple mobile industry profit share in Q2 2012 was 77%. Note, that’s for ALL mobile phones, not just smartphones.

      And this is not about Apple. This is about Android not proving that they have any profits and declaring victory anyway.

      • mr.x

        HTC loosing money?

        Do you understand the difference between reduced profit and loosing money=

        • Dave

          Revenues dropping by half and profits by 80% is not good news, even if you’re still on the plus side.

        • FalKirk

          Mr. X is right. My wording was poor. I meant to say that HTC’s profits fell by 79%.

          • capnbob67

            Crowing about the market failures of some Android OEMS also does not invalidate Android’s success. Lots of PC makers have come and gone but the Windows platform remained strong nonetheless.
            HTC are really a tech minnow, temporarily elevated by first mover advantage in an immature market (based on their success in the prior WinMo era). Moto was a basket case before Android and only survived to be bought because of the Droid. LG/SE were old line phone makers who failed to adapt to the smartphone market just as RIM and Nokia failed to. These failures are far more about the inherent weaknesses in those companies rather than some weird Android plague people seem to be suggesting exists.
            LG appears to making it back and is now profitable in the mobile division. The Chinese brands are also growing like weeds and being profitable too. Samsung is taking on Apple directly and doing a pretty good job if its most recent quarter is anything to go by. Android is making $Bns in profits across the ecosystem.

          • FalKirk

            “Android is making $Bns in profits across the ecosystem.” – capnbob67

            There are no numbers to support that claim which is the reason for this article.

      • capnbob67

        “This is about Android not proving that they have any profits and declaring victory anyway.”

        There it is. A resentment of some implied “victory” from someone you don’t like. Who cares if Eric is spouting crap. It’s what CEO-types do. I don’t like Schmidt either – a worm of a man if ever I saw one – but to transpose that into a rant that denies Google’s model and the success of the wider ecosystem because they don’t reveal their financial results is just venting.

        Anyway, Apple’s profit share will continue to fall (as it is already 86-77%), since those back of the envelope analyst measures excluded the emerging victors (Chinese brands) and Samsung seems to be rapidly achieving some sort of parity as it sells more smartphones in more customer segments to more carriers than Apple. Android is doing well and getting stronger.

        If you cut me, I bleed the rainbow but denial of Android’s threat at this point is crazy. Assume Google is doing or is going to monetize its vast platform, Samsung and the Chinese are going to copy Apple, embellish Android and price their way to market success and strategize accordingly.

        • FalKirk

          “Assume Google is doing or is going to monetize its vast platform…” – capnbob67

          That is the assumption that the analysts, pundits and press are making and that is the assumption that I am challenging. Everyone is blinded by the activation numbers. Without proof of profits or platform, it is dangerous to “assume” that Android will monetize its platform.

    • http://twitter.com/tshull tshull

      Motorola’s boot loader locks begs to differ. Other manufactures are putting boot loader locks on their phones as well, which means you can’t flash the ROM to put a pure Android on the phone anymore.

      Now explain freedom. Unless you do as Richard Stallman and order your own components then build your own OS, then your freedom is…

  • JDSoCal

    Also interesting are the semantics Schmidt uses for this share: “Google is activating 1.3 million Android devices a day.”

    Google is activating? Really? More like the cell carriers are activating 1.3M incarnations of fragmented and forked Android variants that Google may or may not receive eyeballs, let alone revenue from. Does Google really get anything from a Kindle or a Nook, much less “activate” it? Bing is the default search engine on a Kindle. It appears that it will be on Nook’s too:

    http://www.readwriteweb.com/cloud/2012/09/microsoft-tying-nook-to-windows-office.php

    Note that Google, which spent $14B on Motorola, is projected to make 1/10th of that in mobile ad revenues this year:

    http://static.cdn-seekingalpha.com/uploads/2012/9/789988_13485828718533_rId9.png

    John is right; show me the money.

    • W. van Dam

      I expect they’ll want to earn something from the hardware as well now that they’ve bought Motorola.

      What I wonder is whether their purchase of Motorola had perhaps something to do with disappointing mobile ad revenues, or perhaps with their dissatisfaction with manufacturers. Or are they trying to replicate parts of the eco system from Apple?

      • ChKen

        They bought it out of whimsy.

        • Sharon_Sharalike

          And fear. Carl Icahn bluffed them into paying an absurd price. Google did very little due diligence. Eventually they will have to take a huge write down on that $12.5B. Right now the Motorola purchase is considered an “asset swap” for accounting purposes. In other words, they changed 12.5B dollars into some other asset also worth $12.5B. But of course it isn’t really worth anywhere near that, and one day they will have to show that difference as a loss.

          And in the mean time, Motorola loses money every quarter, while Icahn is still gloating over doubling up his chips.

          • W. van Dam

            Thanks for the answer Sharon!

    • steve_wildstrom

      There are two forms of activation for “official” Android products–this excludes unauthorized products such as Kindle and Nook. First, any product with a WAN connection has to be activated on the carrier network. But to use Google services, you also have to register the device with Google,and those are the activations Google talks about.

    • -hh

      Similarly, just what is an “Activation” is quite vague: it is my understanding that each GSM Network based disposable SIM card gets its own ‘Activation’.

      • mhikl

        @-hh Now that is an intriguing thought!

  • capnbob67

    “You want us to take you seriously, Mr. Schmidt? Tell us those numbers” FalKirk

    He doesn’t care a jot for you or us… therefore he won’t (not that it is his decision to make).

    The shareholders seem to be pleased with Google’s continued revenue and profit growth and are apparently not clamoring for a detailed breakdown.

    • FalKirk

      Google is doing fine. It’s only Android that I’m questioning.

    • ChKen

      I bought Goog in Jan 2007, and sold for a small profit in Sep 2007, because I wasn’t happy with Google’s level of disclosure. So, I’d say shareholders who are displeased tend to sell, like I did. Since I sold over 5 years ago at $542, Google has only appreciated 38.5%, or 6.7% annualized. Thank god I sold. The funny thing is I took that money and reinvested it in Apple at $134. It’s up 468%, or 36% annualized. If Google shareholders are pleased, Apple shareholders are ecstatic.

      • capnbob67

        Holy crap!!

        When will people stop comparing Apple to Google and assuming Apple’s success somehow denotes Google’s failure? Apple is stellar and a law unto itself. We all know that.
        The point is that this is asymmetric competition. 2 different models fighting it out. Samsung is minting money with Android and undoubtedly curtailing if not actually hurting Apple. Google’s reticence in revealing cost or profit for Android does not mean it isn’t making a $billion here or there today nor can’t leverage their platform into much more in the future. Why deny the probability?

        • FalKirk

          “Google’s reticence in revealing cost or profit for Android does not mean it isn’t making a $billion here or there today nor can’t leverage their platform into much more in the future. Why deny the probability?”

          Google has every incentive to tell us of their success. To postulate that they are actually having great success yet they are not telling us about that success is highly improbable.

        • ChKen

          Where did i say this was a zero-sum game? I didn’t. I noted it was ironic that when I sold my Google shares, I used the proceeds to buy Apple shares. Actually, I was just adding to my Apple shares.

          Further, if you weren’t so out of your mind, you’d have noticed I sold my Google in 2007!!! That was before there was any enmity between Google and Apple. Get over yourself. You’re the one who’s obsessed with this.

          As for Google making money on Android, did you read the trial transcript between Oracle and Google? The answers are there.

  • Ed

    This should be obvious, but I’ll say it anyway: Google’s business model is not “phones”; search…and the related advertising revenue…is their bread and butter. Market share is critical for dominance in search…and hence, profit.

    • FalKirk

      “Market share is critical for dominance in search…and hence, profit.” – Ed

      Android HAS the market share. Where are the profits? With the numbers Eric Schmidt is touting, Google should be king of the world.

      • http://profiles.google.com/naval.m.gilles Naval Gilles

        The profits are unknown and have not been stabilized yet. The same reason why you don’t see high profits from facebook mobile, twitter mobile, ect. The only profits coming from mobile are hardware. Google’s play is get the market share now figure how to profit later.

        See youtube, everyone was screaming for the profits from youtube. Then about 2-3 years ago, google figured it out, boom. Youtube is exploding.

    • Space Gorilla

      But if most of those Android devices are used as feature phones, that contributes very little to Google’s business model. That’s the danger, that Android fails to evolve into a robust mobile computing platform and simply becomes the new default phone platform. A billion feature phone users doesn’t do much for Google.

  • Lucas

    Google plays a long term game that you seem just incapable to understand. Google is not worried about making huge profits today, they seek domination. Google needs an open platform for their services to run over, that’s why they built Chrome open and free and now Android. The same way Internet Explorer leads users to use Bing and other Microsoft services instead of Google, a closed and tighty controlled OS like iOS could simply lead users away from Google. Siri and Apple Maps are examples of how Apple domination could threat Google more than anything. So don’t be that simplistic, the game is much more than making profits in the short term and Google is playing brilliantly.

    • ChKen

      Problem is others can fork Android and then not use Google’s services. How’s that for “brilliant”?

    • FalKirk

      “Google plays a long term game that you seem just incapable to understand.”

      This is the same Google-is-so-much-smarter-than-you-that-you-can’t-possibly-comprehend-them crap that I hear every time I point out the flaws in Google’s strategy.

      “Google is not worried about making huge profits today…”
      First, that’s a load of hooey. But let’s assume that it’s true. If so, then Google is a world class fool.
      “Google needs an open platform for their services to run over…”
      Bull. Their services are running over iOS AND THEY ARE MAKING THREE TIMES AS MUCH MONEY ON IOS AS THEY ARE ON ANDROID.
      “…a closed and tighty controlled OS like iOS could simply lead users away from Google.”
      And yet, despite Google’s provocation, it took Apple four years to remove the map functionality and the Google search functionality remains.
      “So don’t be that simplistic, the game is much more than making profits in the short term and Google is playing brilliantly.”

      You’re going to have to explain to this “simpleton” how Google’s home grown Android platform can have 4 times more market share than iOS yet only one third of the mobile profits generated by iOS.

      Stop with the “Google is playing (the game) brilliantly” nonsense. Google is announcing NO per device numbers, NO content numbers, NO advertising numbers. The only number they announce is activations. Until they announce something substantive to multiply those activation numbers against, those activation numbers are entirely meaningless.

      • Lucas

        I said you wouldn’t understand :)
        You insist to look at Google as an usual company, but you have to just watch Larry Page talking about Google once to notice it’s not.
        Let me remember you that many people made fun of Google when they bought what’s now Google Earth/Maps; people said it was stupid, Google would never profit from that, it was a total waste of money. Can you say it now? People the same about Youtube, that it was too expensive to maintain, would never give them enough profit to pay itself, and blablabla.
        And what about Chrome? How much money did they already spend to make a the best web browser around and then make it open source? Are they crazy? There’s a fork of Chrome called Rockmelt, that’s fully integrated with Facebook, a Google direct competitor, and could put Bing as the default search engine anytime! Do they care? Chrome became the most popular browser, avoided Microsoft to drive more users to Bing and their services, made it easier to users to use their services, made the web a better platform for their services to run over, made it sure a closed platform with the majority of their users (Windows/Internet Explorer) would not drive their user away or simply lock Google for any reason.

        That’s the just the same again, and you still don’t get it. People will say “Android is a waste of money, Google will never get that investment back, look at Apple, that a successful company” the same way they did before. But just imagine if Google Play becomes the number one online digital content store in the future and a huge source of profit for Google; just because Android became the standard mobile OS in the past, since only Apple devices could run iTunes Store, and Apple devices were too expensive and too closed to compete with an open and free OS that gives no profit at all. Then will you still say Android was waste of money? Long term guys, learn.

        Tell me one thing more, why doesn’t Google put lot of big blinking ads in the search results, like those on Yahoo and Hotmail? They could profit a lot more from big blinking ads! Why don’t they show the ads mixed with the results, so people would click on ads believing they are the best results? Why don’t they allow a web site to go up in the ranking of results? I guess you would probably do that without thinking twice, as you say, the more profits the best!! Well, if they had done that in the past, they’d have got more profit in the past, but they’d never be or keep as the most used search engine in the world.

  • FalKirk

    “don’t forget that Samsung is dabbling in other OS’s” – JDSoCal

    You know it. Samsung is keeping its options open.

  • rj

    This reminds of the server OS arguments of 10-15 years ago ago. Balmer and others used to pooh-pooh Linux as a server OS, because it wasn’t clear who was making money off it. They also used to harp on Linux fragmentation, and the questionable value of counting the number of Linux installs.

    It didn’t matter. Linux was valuable to companies like IBM and Oracle because it saved them from one player controlling too much of the industry. They didn’t need to make money from Linux itself, but they knew that if Microsoft captured the server OS market, their markets (enterprise databases, consulting, etc) would be next.

    We don’t know how much money was made by Linux – it is impossible to calculate. But its clear that today, Linux is far more important in the server space than Windows Server is.

    • FalKirk

      How does you analogy jive with the fact that iPhone only has 9% of the mobile phone market share but enjoys 77% of the profit share?

      Linux may have undercut Microsoft’s server profits, but how has Android profited Google or prevented iOS from becoming the preeminent mobile platform of our time?

      • rj

        iOS may be the current “preeminent” mobile platform (depending on how you measure and who you ask), but it clearly isn’t an overwhelmingly dominant one. If Android can prevent this from happening, it is a success for Google. If Apple dominated the smartphone market, do you think they’d continue to give Google the same terms for use of their services? Do you think they wouldn’t try to build their own replacements?

        • http://twitter.com/tshull tshull

          Then how do you define dominent? Seriously.

          In mobile browser share iOS with Safari is at 60%. Android is at 20%. This is mobile browser statistics, which means devices tat ACTUALLY go online as opposed to a dumbset running Android 1.6.

          Profit, and usage above 50%. What else constitutes dominance? Number of applications available?

          • rj

            “above 50%” and “60%” are a majority, not dominance.

            There are other measures (number of users, number of carriers) that put Android ahead.
            I wouldn’t be surprised if the carriers made a lot more money off of Android than iOS. More units, more plans, more device pricing flexibility from the vendors.

          • http://twitter.com/tshull tshull

            They are dominant if Android is at 20% for the highest number in browser share. Profit wise Apple is over 70. Anyway you cut it that’s at the minimum 3 to 1. Dominance.

            Carriers make money off of plans not phones. The device really doesn’t matter as long as its a 2 year contract plan.

            iPhone is actually available on more carriers round world and has strong presence in 3rd world countries.

          • rj

            If you have 60% of “browser share”, it means you don’t have 40%. Hardly “overwhelmingly dominant” (the phrase I used that you challenged). Particularly when the other guys are outselling you handily on a unit basis.

            As an aside, there’s reason to believe this much discussed “browser share” number is heavily skewed by iPad use. Kind of a bit like claiming Ford dominates the vehicle market, because their trucks have a higher “fuel share” than Toyota’s compact cars do.

            I’m not sure what “profit wise” means, or whether its relevant. It certainly isn’t a useful proxy for usage or utility. Windows Server makes more money in direct licensing fees than Linux does. But Linux is still the most important server OS in the world. By all accounts, Apple has the lion’s share of the profits in the desktop PC market, but with 80%+ of the world’s desktops running Windows, nobody would make the claim that OS X is the dominant desktop OS.

            Sure, carriers make money off of plans not phones. But in the countries where they subsidize phones with plan revenue, it stands to reason that they would favour phones that they pay less for. The recurrent rumours that Verizon promotes Android over iPhone by offering bigger commissions to its salespeople supports the notion that carriers find Android devices more profitable.

            “iPhone is available on more carriers round world” than Android? I find this very hard to believe, as I have never heard anyone make this claim before. There are just 2 iPhone carriers in India, and 2 in China.

          • FalKirk

            “I wouldn’t be surprised if the carriers made a lot more money off of Android than iOS.”

            That would be incorrect. Look at Sprint. They sold their soul to pre-pay 15.9 billion for the iPhone. And T-Mobile would sell their soul today to acquire access to the iPhone.

            Carriers hate paying the high cost for the iPhone but they know that the iPhone sells, it brings in new customers and it lower churn (keeps customers from leaving). Carriers pay more for the iPhone because they get more from the iPhone.

          • rj

            Pretty confident answer, considering that you don’t actually know.

            Your Sprint example is weird for a guy who just penned a rant on the importance of profits. Sprint doesn’t make money, and the oft-repeated rumor is that the Sprint iPhone deal wasn’t expected to turn cash flow positive until 2014. “But its a long-term bet” you might say. Sure, maybe it is. And maybe Android is too.

          • FalKirk

            “Your Sprint example is weird…”

            Sprint HAD to make that deal. It’s a gamble but it would have been even a bigger gamble had they not acquired the iPhone. If fact, I’ll take that back. It would have been no gamble at all. If Sprint didn’t take a chance on the iPhone, they would have had no chance of making it. They knew that, so the took the leap no matter how dangerous that leap might be.

            “And maybe Android (has a long term strategy) too.”

            I admire long term strategies. But I see no evidence that Android is a long term strategy. Further, Google is TOUTING it as a victory now – that activations proves that they are doing it right.

            I can sell far more jeans than you but still manage to lose money. It’s not volume that matters unless that volume is generating margins. I’m more than willing to change my stance if you can show me where the margins are or how this strategy is helping Google in the long run.

          • rj

            My point was that Sprint is not very good evidence that the carriers are making more money on iOS than Android right now. Sprint is not making money, period. And the evidence seems to suggest that (for now, at least) they’re losing even more because of the iPhone. On the flip side, we have the following indicators that suggest Android is making more for the carriers right now:
            - Verizon’s apparent preference to sell Android devices (eg strong rumors of higher spiffs to employees) implies that they make more per device on Android
            - many more Android devices are sold worldwide (which presumably means many more plans, albeit lower-priced ones on average)
            - given the “commodity” nature of Android devices, carriers are likely able to strike better deals with device vendors
            - the Sprint deal is likely not unique: there are presumably other carriers who have taken a big up-front hit in the hope of making it back down the road. In other words, there may be many carriers who currently aren’t making money on iOS at all.

            A common theory is that the original strategy for Android was to prevent Microsoft from controlling mobile (and squeezing Google out). So they decided to build a free alternative to Windows Mobile. The whole “commoditize the complements” thing. When the iPhone came out, it became apparent that Apple was also a threat, so they quickly modified Android to be a competitor to iOS. Again, to prevent the possibility (or given Apple’s history, some would say _eventuality_) of being shut out.

            Android will help Google if it helps prevent any single entity from controlling mobile. Now, you may think the war is over and Apple has won, but most would not agree with you. Android 4 was the first decent version; the first to be a “good enough” alternative to iOS. We’ve got at least another year or two before any conclusions can be drawn.

            As for Schmidt’s claims that Android is winning… well, that is what CEOs (or in his case, Chairmen), do. Pick whatever stat makes them look good. What else is he supposed to say? You want him to release profit numbers, but I don’t understand how he would do that. Why would he have access to Samsung’s and HTC’s and ZTE’s numbers? (Let alone all the carriers.) Android simply isn’t intended to be a profit centre for Google, kind of in the same way WebKit was never intended to be one for Apple.

          • FalKirk

            “Android simply isn’t intended to be a profit centre for Google, kind of in the same way WebKit was never intended to be one for Apple.” – rj

            Eric Schmidt just said that Apple versus Google is mobile’s ‘defining’ fight. Do you think that Apple would say that about WebKit?

            If Android isn’t a profit center, then what is it? What purpose does it serve?

          • rj

            “If Android isn’t a profit center, then what is it? What purpose does it serve?”

            I’ve already said, at least 3 different times. As have others. You choose not to listen.

          • jfutral

            “My point was that Sprint is not very good evidence that the carriers are making more money on iOS than Android right now. Sprint is not making money, period.”

            Right. So in other words being an Android vendor and NOT iPhone was pretty much tanking Sprint. So much for the “making more money from Android” argument.

            Joe

          • Sharon_Sharalike

            Exactly right about the carriers. Look at Sprint, for instance. Before they carried the iPhone they sold tons of Android phones. And iPhones cost them more to buy! You can even see it in their stock. Since they got the iPhone their stock price has…let me check…um, doubled. OK, bad example. I’m *sure* there must be a carrier that’s not better off since carrying the iPhone. Somewhere. Maybe on Mars or something. /s

          • FalKirk

            “I’m *sure* there must be a carrier that’s not better off since carrying the iPhone. Somewhere. Maybe on Mars or something.” – Sharon

            I know it may seem trite of me to say, Sharon, but you literally made me laugh out loud. :-)

          • Sharon_Sharalike

            :-) Tough to be sarcastic on the internet without people taking it literally. I find it helps to invoke other planets to emphasize the intended tone :-)

          • rj

            ” I’m *sure* there must be a carrier that’s not better off since carrying the iPhone.”

            Did I make the claim that carriers are better off not carrying the iPhone… let me check…. um, nope. But thanks for the irrelevant post.

          • steve_wildstrom

            If as carrier could get the same customer to buy an Android phone instead of an iPhone and contract for the same data plan, the carrier would be happier. Android typically requires less subsidy and gives the carrier a lot more branding opportunity. But they can’t and they know it. Which is why they are willing to pay Apple the extra money and lose most of the ownership of the customer to Apple, because if they don’t, the customer will go to a carrier who will.

          • rj

            I agree. Most carriers would prefer that you buy an Android device, because the subsidy is smaller (and their level of control is greater). But if they can’t convince you to go Android, naturally they’d prefer that you get your iPhone from them instead of someone else – some money is better than no money. Indeed, if the rumors are to be believed, this seems to be exactly the approach that Verizon takes.

            Of course Apple knows this, knows how desirable their product is, and probably has a very good idea of exactly how much they can get away with charging the carriers. They are in the best position to capture the highest percentage of the profit from their product, and they leave the least on the table (on a per-unit basis) for the carriers. Android device vendors don’t have as strong a bargaining position, and thus have to cede a higher percentage to the carriers.

            So, on the high-end it seems likely that the current hot high-end Android phones are more profitable (per-device) for the carrier than the iPhone is. On the low end, Android apparently has a huge numerical (ie activations) advantage. So does it really seem that unlikely that the carriers (by which I mean, carrier industry as a whole) realize more profit from Android than the iPhone?

          • jfutral

            “”above 50%” and “60%” are a majority, not dominance.”

            Not dominance if you are only talking two players. Definitely dominance when talking multiple players and no one else comes close to those percentages.

            Joe

        • SSShu

          I think its not that simple. Google can still make money off the iOS ecosystem even though its Android OS is at odds with iOS. They should have given Apple what they wanted solely because they are – for the lack of a better term – the golden goose (for Google, not Android). Because iOS – Safari users seem to stack up a lot higher in terms of traffic and Google based data acquisition – and this is stuff that Google doesnt have to work for, whereas they would always have to throw in additional manpower & R&D for Android to flourish even further. iOS == EASY MONEY (to some extent) for google.

        • FalKirk

          “(iOS) clearly isn’t an overwhelmingly dominant one.” – rj

          I beg to differer. Developers develop for iOS first. Developers make far more money on iOS. More apps are sold and for far higher prices on iOS. And companies are starting to create proprietary apps only for iOS.

          iOS is THE mobile OS of our time. If it was Google’s intent to derail other operating systems, it has failed in that mission.

    • W. van Dam

      We’re thinking the same, only you got a much better example and description.
      Edit: For clarification, I just posted a similar reply somewhere below.

  • http://geekfun.com/ Erik S.

    You seem to be missing the forrest through the trees.

    Android isn’t a company or a business, it is part of a company, Google. Google’s business is advertising, and right now, Google’s advertising business, and the company overall, turn a nice profit, as they have for quite some time. That’s what matters, right?

    Would Google’s profits or profit margins be larger today if they didn’t have Android? Maybe, probably, almost certainly, yes, but, is that really all that matters? Are this quarter’s, or next quarter’s or even next year’s profits all that matters? Apparently not to investors, because people buying shares of Google today are doing so at a 22x P/E ratio. The bottom line on the bottom line then is that future profits matter too.

    The question then is whether Android is going to make Google a lot of money in the future, right? That seems like an important question, and it might be, but it then again, it may be almost completely beside the point, because, you see, Google is profitable today and Android could be a good investment for the company if it helps them maintain profitability in the future.

    Android is important to Google as a whole so long as it makes a positive contribution to the overall profitability of the company in the future. Android is, if nothing else, a strategic investment. At the start, it helped Google contain Microsoft, which, make no mistake, was wary of Google, if for no other reason that Google could put pressure on Microsoft’s long-term profits. Since then, it has been more important in keeping Google from being trapped on a sinking ship as more and more Internet use goes mobile.

    Of course, Google doesn’t want to talk about that, it is too depressing, so they focus on the positive indicators, and make no mistake, Android’s marketshare is tremendously important. Every Android user is someone’s mobile internet and application use can be captured, profiled, and used to target advertising (both mobile, and otherwise), every Android user is someone who can see Google’s mobile ads. Those activations are important to Google because they are important to developers. They are important to developers, because while Android users might not be, on average, as individually profitable as iOS users, there are enough of them to be interesting. Those apps are important to Google, because they are important to current and potential android users.

    It really not that much different from Apple crowing about the # apps downloaded and volume of payments made from iTunes and the App store. They don’t crow about profits generated directly by iTMS because that isn’t what’s most important, but the other numbers are still important because they help underline other aspects of value to Apple’s customers and partners that help with Apple’s overall profitability.

    Of course, that’s not even the entire picture. The other part of the picture is the cellular carriers, and Android’s market share matters there too, but that is a subject for another time.

    • FalKirk

      “The question then is whether Android is going to make Google a lot of money in the future, right?” – Erik S.

      This is one of the best arguments I’ve seen, except…

      …it ignores return on investment. It’s not enough that Android makes Google money in the long run. There’s also the question of whether Google’s investment of time, money and other resources – plus the change in their strategic position in the market – could have been better served by following a different strategy.

      All I’m arguing in this article is that activations alone are not enough to prove that Android is a success. Show me proof – not vague promises – that Android is going to be profitable or that all this data they are collecting is going to some higher purpose.

      • -hh

        Well said. The old saying that this invokes is:

        “We lose money on every sale, but we make it up in volume”.
        So sure, Google may choose to use their deep pockets to create a foothold in the mobile market to prevent an Apple monopoly, but one can only bleed financially for so long before being forced to concede…if not to the marketplace leader, but to one’s accountabilty to one’s own Stockholders.
        -hh

    • http://www.facebook.com/dan.andersen.79230 Dan Andersen

      @Erik S.: “Android’s marketshare is tremendously important. Every Android user is someone’s mobile internet…every Android user is someone who can see Google’s mobile ads.”

      You’d think so, wouldn’t you? Yet the bullshit “activation numbers” are completely unsupported by direct indicators of platform attachment and usage, e.g. large scale Web traffic surveys. They show that Android-based devices are *not* being used for Internet access anywhere near proportional to their supposed installed base.

      It seems that most Android phones are simply being used as, at best, feature phones. I guess that’s what you get when you concentrate on the bargain basement and a big part of your marketing plan is BOGOF deals…

      • FalKirk

        “It seems that most Android phones are simply being used as, at best, feature phones.” – Dan Andersen

        It sure appears that way.

        Having read all of the many, excellent comments, I’m realizing that I should have put more emphasis on the fact that activations don’t matter unless those activations lead to something. I was focused on margins. But even when it comes to data, it appears that many of those activations are not providing the amount of type of data that is useful to Google.

  • RobDK

    I will tell you where all those Android activations are:

    My mum bought a Samsung touchscreen phone from 3 in the UK in August 2012. It has Android 2.1 installed. It does not have a proper querty keyboard on the screen, but a crappy alphanumeric keyboard just like old dumb phones. It is really difficult to use; sending a text message is so slow, and navigation around the UI is appalling. The build quality is appalling cheap plastic that bends every time one touches the device. My mum never uses the internet on it, and certainly has not looked at downloading any apps.

    So there you have it, Google/Android count crappy 2.1-installations as part of the 1.3 million per day, even though they will never be used to anything ‘smart’.

    Google/Android present the 1.3m and give the impression that all devices have a usage pattern that can be compared to iPhone 5 og Galaxy S3. The reality is far from this!

  • defense

    pff, what’s this useless anti-google rant ?

  • http://twitter.com/eduo eduo

    Channeling your inner ferengi, I see ;)

  • http://Twitter.com/AbbiV AbbiV

    I don’t see what your problem is w/ the activation numbers being touted by Google? If they don’t wanna make a profit, that’s good for us consumers, no? It’s not like they’re saying “we’re the most profitable” platform in the world :-/ And there are many examples of companies that tout sales of 1 thing but make their profit on something else. McDonalds tells you how many Billions of Hamburgers they’ve sold, yet they make no money on those- their profit is in the French Fries & Coke.

    • FalKirk

      “If they don’t wanna make a profit, that’s good for us consumers, no?”

      No.

      “The worst crime against working people is a company which fails to operate at a profit.” ~ Samuel Gompers

      • http://Twitter.com/AbbiV AbbiV

        The “working people” in that quote are the people working *in* the company that is failing to operate at a profit. You can’t say Google is not making a profit. Apple ran iTunes at a loss or break even for many years because it led to huge profit on iPods. And now iTunes itself is a profit center for them. As you point out, Apple doesn’t crow about Apple TV sales. But that’s because those sales are not big enough to move the needle. One day they will be; in the meantime we can let Apple improve upon it til it becomes a meaningful part of their business. Ditto for Android.

        Perhaps you’re upset about the whole “Android is winning” comment. You know what? Android *is* winning… marketshare. But they’re not claiming that Android is winning the profit race. Profit is a tool that allows you to sustain your business. At some point, focusing only on marketshare will come back to bite Google; until then tho, they can do what they think is right for them. Otherwise by your criteria, a lot of companies ought to close up shop; companies like: Amazon (even today, 17 years after launch, they barely make a profit), Instagram, Microsoft (how much money did they make off Internet Explorer?) & Twitter.

        It makes no sense to me that you want Google to shut up because they don’t reveal profit on Android, yet you don’t ask the same for many other big name companies that have employed the same strategy (go for marketshare 1st, then worry about profit) over the last 20 years.

        • FalKirk

          “It makes no sense to me that you want Google to shut up because they don’t reveal profit on Android, yet you don’t ask the same for many other big name companies that have employed the same strategy (go for marketshare 1st, then worry about profit) over the last 20 years.”

          I originally thought that I would write a similar article about the Amazon Fire and the Nexus 7 – two tablets that have not proved that they have made any profit at all. But Schmidt’s statements gave this article focus.

          I assure you, I feel the same way about all companies that make claims that they cannot justify.

  • steve_wildstrom

    First, I want to thank all the participants in what has been, in my experience, a very rare thing on the internet: An extended, informative, and civil discussion of an important question.

    I think the overarching issue here is that it has proven very difficult so far to generate a lot of revenue, let alone profit, from mobile advertising. This is a not a big problem for Apple. The flop of iAds is embarrassing, but not ventral to a business that makes it money selling hardware. It’s not a problem for the makers of Android handsets, who may be prospering or suffering, but for different reasons. It is a problem for Google and other companies, such as Facebook, that depend on advertising for their core business and are seeing more and more activity move to mobile, where it is far harder to monetize.

    • jfutral

      “I think the overarching issue here is that it has proven very difficult so far to generate a lot of revenue, let alone profit, from mobile advertising.”

      And apparently after the recent earnings report more of a problem than most thought. So is their position that they are “We’re uniquely positioned to get through that transition and really profit from it,” a prediction or a fantasy? Not sure how getting booted off prime real estate on iOS is somehow being uniquely positioned to really proft from mobile advertising.

      Joe

  • http://www.facebook.com/people/アメリ-フセイン/100001528841754 アメリ フセイン

    When GM went bankrupt it was the largest or second largest in terms of marketshare. Marketshare is completely meaningless.

  • http://twitter.com/snookasnoo Idon’t Know

    Apple does report Apple TV sales numbers. Google it.

  • bozotheclown

    Maybe I didn’t read down the comments far enough, but I haven’t seen anyone ask how many de-activations there are in a day. You know, lost, broken, replaced Android devices. So the real question becomes, “how many current users of Android (or iOS) are there today. And tomorrow, And so on…

    • steve_wildstrom

      It’snot clear that Android phones are ever officially deactivated, even if they are wiped. In any event, Google doesn’t report deactivations or net activations.

  • http://www.facebook.com/people/Rockatansky-Roadguarrior/100002002636129 Rockatansky Roadguarrior

    Nice!!!!!!!!!!!!

  • stefn

    It’s free beer tomorrow in android land. Lots of goodies like Jelly Bean. Except you cannot get it.

  • stefn

    Always look a trojan horse in the mouth. Cus’ that what Android is. That’s what the Fire is. Ways of selling you to a product rather than selling you a product. No commitments but lots of talk about doing no evil. Apple lets it products speak for themselves.