Was Android a Big Mistake for Google?

by Steve Wildstrom   |   September 30th, 2011

By many standards, Android is a huge success. It has become the top-selling smartphone operating system and is on a growth path to increase its dominance. But there is a significant question of whether it has done any good for its owner, Google.

Google bought Android in 2005 from its founder, Andy Rubin, for an undisclosed price. Google, as is its wont, never explained the rationale for the purchase. And because the software is free to device makers, it has not made any money for Google directly.

The general thinking in the industry has been that the Google services bundled on Android devices would create enough additional revenue to make Android a paying proposition. Only Google knows the extent to which this is working and they aren’t saying. But I suspect that the incremental revenue generated by Android, including sales at the Android Market, have not been huge contributors to Google’s bottom line. Tablets would seem to present a lot more monetization opportunities than handsets just because of the extra screen real estate, but Android tablets have been dismal sellers. I’m sure the iPad, with default Google search and Google maps, is generating orders of magnitude more revenue than all the Android tablets combined.

Meanwhile, Android is making money for Microsoft. Microsoft asserts that Android violates a number of its patents and has been signing up phone manufacturers, most recently Samsung, to deals that require them to pay royalties on each handset for a license to the Microsoft intellectual property. The needs to obtain patents to defend Android against infringement claims by Microsoft and Apple was  a significant factor in Google’s proposed purchase of Motorola Mobility. And Google could face a substantial judgment in litigation in which Oracle claims Android infringes on Java language patents that Oracle acquired when it bought Sun Microsystems.

The bottom line is that Android is a big headache for Google without much evidence of a clear offsetting payoff. And now, Amazon has come along and helped itself, perfectly legally, to the Android source code and created a customized version of the software without so much as a by-your-leave from Google. The software will power the new Kindle Fire, which could easily become the dominant Android tablet when it goes on sale in November.

Android has been good for consumers and good for phone makers. Whether it has been good for Google is very much an open question.

 

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.
  • Laconically Sane

    Search did nothing for Google revenue-wise until they got into the ad business. They’ve always built first, monetized later.

    They’re getting their foot in a huge amount of consumers doors. Laying the potential for huge profits.

    • zato

      “They’re getting their foot in a huge amount of consumers doors.”

      Amazon is now standing on that foot.

  • Pingback: Does Google Need a New Strategy with Android? | TechPinions

  • Walt French

    IIRC, advertisers’ spending on mobile ads is estimated to hit $1 billion this year. Much of that goes to other firms than Google, of course. This is against the approx $15? billion Google has put into Android+Moto+misc.

    I see Google’s original purpose in buying Android Inc in 2005 was to prevent one man, one company (Ballmer/MSFT!) from locking them out of mobile search/ads. That has worked but it has been a very costly defense.

  • C. Bergmann

    And Android made one of their best friends to their hardest enemy. Apple has now thrown out Youtube and Google Maps from iOS, offers Facebook integration, but no Google+ and could easily exchange the default search engine on Safari and there is Siri, which could make the need for Google Search obsolete…

    Android is good for Samsung, Microsoft and Amazon – not for Google…