Google’s Ads: Defense or Offense?

I recall not too long ago Google did zero advertising. “Just Google it” was spreading virally and Google was growing and had no need to spend money on marketing. Slowly but surely over the past few years, Google has stepped up its advertising efforts. Which, and some may disagree, I interpret as a sign of their slowing growth. Myself, along with others, have pointed out that Google’s long term growth prospects have been challenged. From internal discussions I have had with execs there it seems this is well known inside the organization. I have been observing two distinctly different advertising efforts and I have a few observations.

North American Advertising

Google has, all of a sudden, begun advertising Android in several prime time commercials in the US/Canada market. I see several fundamentals causing Google to get more aggressive in Android marketing.

  1. Samsung’s US dominance is declining. Samsung is currently in a very vulnerable position in the US. Many fail to realize Samsung’s aggressive marketing and sales commissions helped get them to where they are today in the US premium segment. Yet Apple still sells nearly ~2:1 more phones than Samsung in the above $500 wholesale price tier. Despite Samsung’s best efforts, and a massive internal effort to become the leading US smartphone vendor, they have yet to knock off the king of the hill. Furthermore, it is doubtful they will in the foreseeable future. It is not a secret that Google makes more money from iOS consumers globally but Samsung was helping them get the profitable US consumer more embedded to Google’s services. If Samsung’s growth slows or declines and it is not picked up by another Android vendor but instead by Apple, Google could be loosing key advantages in the US.
  2. Carriers backing iPhone 6/6 Plus more than other premium Android devices. In case you haven’t noticed, nearly every major carrier commercial running in prime time right now is for the new iPhones. This may very well be a part of the agreement between the carrier and Apple but the point remains. More promotion is going on currently for the new iPhones than any other US smartphone. Google must recognize Samsung alone can’t push the Android agenda forward in the US. Yet Motorola and LG are not equipped to embark on the same kind of marketing blitzkrieg Samsung can.


Google winning in India is not a slam dunk. I’m not sure many realize this. India is a completely green field when it comes to smartphones and smartphone ecosystems. In fact, Microsoft even has a chance in India. Google can not afford to be a minority player in India and they know it. Android One is Google’s push at getting Android deeply engrained into the Indian mobile ecosystem. Their challenge is things like Facebook, WhatsApp, and even other app stores/distribution methods, are more dominant than many Google services. Which is why Google is advertising on behalf of several Android One OEMs in India to help spread the word and drive the brand/ecosystem. I expect Google to be ruthless in competing for India. Which is fantastic for Indian consumers but may be quite challenging for competing ecosystems and even to a degree competing hardware vendors.

What Google has me thinking about with regards to their marketing strategy is a lot like Intel’s. When a vendor picked an Intel chipset, Intel offers marketing assistance as a part of that design win. Most PC OEMs do not shoulder the bulk of their marketing — Intel does. It is one of the main advantages they have had with OEMs over AMD. Intel’s chips may be more expensive but they will help/do the bulk of the outbound marketing for you. Similarly, Google is beginning to do the same. Understanding that their partners are not good at marketing nor can they afford big marketing budgets, it seems Google is willing to take on the marketing efforts for many of their partners.

What impact this has on their margins is a key metric to watch. Their growth is already stalling and they currently have the most profitable customers they are going to get to fuel their current business model. Spending marketing dollars to acquire customers who will they will reap less revenue from is both a necessity but also risks off-setting any gains.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

28 thoughts on “Google’s Ads: Defense or Offense?”

  1. I think this analysis is a little bit simplistic.
    Almost every company in the technology sector saw their prospects for long-term growth challenged it’s not only Google

    i will go as far as to say that Apple’ s long term growth prospects is even more challenging than Google Free and advertising business itself.

    I do believe that the Push in advertising is more about Branding than anything else.

    By making Android a recognizable brand and spread in many screens, and make the user experience and expectations on what Google wants, it’ll help put pressure on other OEM’s not to mess around with Android experience, hence putting their service Upfront regardless the company which will bring them more control hence more money per device.

    in some other way they are doing the same thing on OIS with their new design App on the App Store that is becoming more materialist. day by day.

    1. I disagree – Googles main barrier to growth is their almost complete lack of access to the china market – the worlds 2nd biggest and fastest growing major economy. Apple has no such problem as it is being embraced by the Chinese population with the governments blessing.

      1. You forget about the rest of the world that can be compensate for that also only advertising is not as big in china as it is in North America and Europe.

    2. Everyone sees growth prospects challenged. Not everyone competes in the most profitable sectors, thus each company is challenged by both customer base and business model to grow.

      What your missing is the fact that Google has to do this marketing which is fascinating in and of itself. The India stuff is straight forward and is a driver for partner design wins. The US one is really a defensive move as continued research comes in indicating that in the US and even in China more users appear to be switching or interested in switching from Android to iOS than the other way around.

      1. The only reason it appear fascinating for you Ben is because you maybe thinking that Google is still the same company as they used to be before their android success.
        created an Android Brand that is very appealing in my Opinion it’s just common sense just as it was with Intel

        I do not disagree that Google is facing Challenged with their prospects for long-term growth, i just do not believe that the challenge will come where you thin it will

        and i do not believe that Apple pose as big of a threat to Google as many of you think.

        also continued research since 2011 has always indicated that in the US and Europe more users appear to be switching or interested in switching from Android to iOS than the other way around. except that it never happened as many had expected and i don’t think it will to the degree where that could be a Big problem for Android.

        as i pointed out already the next Five year will answer a lot of question about the mobile industry, wait and learn

  2. The comparison with Intel is very insightful in both its similarities and differences.

    The similarities are that, as you mention, Intel did do a strong Intel Inside campaign to increase brand loyalty and awareness. Their competitor was AMD which was creeping into the low-end market, much in the same way as AOSP is seeing success even in markets outside of China. Andy Grove was intimately aware of the threat of a low-end disruption after summoning Clayton Christensen himself, even before “The Innovator’s Dilemma” was published. Intel also launched the Celeron line of processors to defend the low-end, much in the same way as Android One is aimed squarely at emerging markets.

    Andy Grove and Intel were quite successful at relegating AMD to the bottom-end of the market, and it is likely that the Intel Inside campaign contributed significantly to this. Similarly, we might see Google’s advertising campaign succeeding in keeping AOSP at bay in non-China markets.

    The difference as I see it is that unlike Intel, Android does not dominate the high-end. Intel’s case does not apply to capturing or defending the high-end of the market.

    At the same time, it’s important to note that Google makes a lot of money of iOS users. In fact, high-end Android users who switched to iOS might actually be more valuable to Google given some comments that you have previously made. Therefore, in the short-term, losing the high-end Android market to iOS is unlikely to negatively impact Google’s financials. Winning against AOSP is also unlikely to significantly improve Google’s income as long as AOSP users search on Google.

    My prediction based on the above would be that Androids ad campaign would be effective in emerging markets in preventing AOSP entering the mid-range market. It would not be effective in maintaining the high-end Android market in mature markets. Either way, the short-term financial impact will not be significant.

    1. who do you think will take the High End Market from android in mature markets that you are talking about, and why haven’t it happened yet even when Android was as it weakest?

      1. Regarding “who will take the high end market from Android”, Ben mentions that it may be Apple. I think similarly. I think Samsung will remain dominant in high end Android, but that market may shrink.

        If by “when android was weakest” you are referring to the early days, well that’s simple. Apple did not yet have contracts with many major carriers like Verizon, Docomo (Japan).

        1. my point is pretty simple

          a Samsung lost is not necessary a win for Apple because Samsung is not the only one making Good and strong Android Phone despite them being very successful

          China is driven the majority of the growth from Apple, their are loosing momentum in Europe and growth in the US their own market is not that impressive, without taking into account that not all IPhone sell come from the latest version a lot of it come from cheaper mid range or last year version that cost 0$ on contract,

          Android is getting better and better every year and History has shown us that it’s much easier to go Upstream in the market than to go downstream.

          while i do believe that the Apple Brand is extremely strong but i don’t think that is insurmountable as many of you love to think.

          many of your analysis a simply assumption about Apple taking user away from High End Android due to Bigger screen IPhone alone which is not different than those saying that Android will take user Away from Apple due to cheaper price alone

          1. Since this article is about Android and not about Apple, I don’t want to talk about Apple too much here. Furthermore, we don’t yet have the results for the holiday quarter following the iPhone 6/6 plus launch, so we don’t have much hard data to base our discussions. I would very much prefer to go into depth about Apple only after they (and Samsung, HTC, etc.) announce their holiday quarter results.

            What I am eager to see is a) whether HTC and others manage to gain market share in the high-end market, replacing Samsung b) how many Android users are moving to Apple c) how many flagship iPhones Apple sold. Without this data, I don’t think we can make a constructive discussion.

            Another data point I’m looking forward to is how popular AOSP is in non-China markets. I have seen comments that it might actually be quite high, but I don’t think I’ve seen multiple sources reporting that yet. This is a key data point.

          2. Here some Data that might give you some new perspective.


            I predict that Apple will have a huge quarter, but it will not be at the expense of Android but more because of existing customers who will upgrade to a the new IPhone and their growth in China, I also predict that the next 6 months will not be as good like many of you is hoping

          3. Yes, I’ve seen that data but hesitate to draw any conclusions from it due to the small sample size and very limited sampling dates.

            If that data could be reproduced with a larger sample size and longer time span, and optimally from multiple sources, then I would think more carefully about it.

          4. i agree except that as small as this sample size might be, this is not the kind of Data one would expect after all the buzz and the hype about Apple taking user away from Android.

            And I’m willing to bet that many of you who are expecting Apple will give a big blow to Android, will be disappointed at the end of the year

  3. “Many fail to realize Samsung’s aggressive marketing and sales commissions helped get them to where they are today in the US premium segment.”

    Even though South Korea is to be admired for its phenomenal success in the global economy, their ability to understand cultures other than their own is glaringly evident. Spending ~$12B annually on overall marketing, Samsung’s efforts highlight this weakness. Nothing highlighted this more than the Galaxy introduction extravaganza faux pas. Samsung thinks it can appeal to the premium market in the same way it treats the low-end market. They just do not understand the US culture.

    1. I don’t know where you are getting $12 Billion numbers from, but it’s completely ridiculous to believe Samsung is spending anywhere near that on marketing. For one….. they own their own Top 10 Global Marketing Group in Cheil Worldwide Marketing. Plus every year is not a year that includes sponsoring the Olympics like they did in 2012!

      Here’s the difference in their spending between Apple and Samsung as reported in their court battles earlier this year in USA: “In 2013, Samsung spent $363 million on marketing in the US, Apple spent $350.9 million, and HTC spent only $75.8 million.”
      If they only spent $12 Million more in the USA last year, how does that translate into $12 Billion being 12 times greater for the entire World??? Bogus exaggerations that include mainly spending on CAPEX. Which is an entirely different set of expenditures than pure advertising/marketing apart from those numbers dreamed up and put together by some absurdly perverted Apple Loyalist!

      Truth: There is no company in history that has ever spent $12 Billion on advertising/marketing budgets! …..largest single ad/marketing budget is under $3 billion and that wasn’t even Samsung Electronics Division alone. Topped Microsoft’s record Ad/Marketing Budget, but that was it!

      As you see Samsung only spent slightly more than Apple did in 2013. Which neither spent even close to that much and even taking into consideration all of Samsung Group, with all their independent Joint Ventures and private investments, they didn’t even come close to that figure! ……certainly not just in the USA. Which is the only place they hire additional outside Marketing firms for…… and why USA is their biggest marketing expenditures region!!!

      1. Samsung Electronics, which includes all their electronics products, had a marketing budget of ~12B in 2012. This was published by Samsung (the parent company’s) and reported by more than one tech site. How much was for cellphones, computers, TVs, etc. was not detailed.

        1. Show me a link with those actual numbers! lol…. because you can go back in all their share holder expenditures and you won’t find one that’s even close to that. Don’t forget that Samsung Group did however sign on to being the key sponsors of the 2012 Olympics!

          If that’s what you’re talking about or referring to, then you’re still off your rocker. Because Cheil Worldwide Marketing for that year (which is Samsung’s own Marketing firm) only earned less than $6 Billion that year and they were responsible for over 80% of their Global Marketing Budget!

          Let me know when you come up with solid figures from Samsung themselves, because at $12 Billion there is a lot of Bull**** numbers being thrown in there, that have nothing to do with Marketing and Ads! Get the link if it’s from Samsung!

          1. How ironic that you cite the same report that basically says Samsung spent $4 Billion on SG&A (Sales, General and Administrative) and that’s exactly what I’m saying! ……so again where is the $12 Billion they supposedly spent in 2012? A year they broke the bank on them being the top sponsor of the London Olympics!!!

            Now back to what Samsung reports as SG&A as a whole. Which is different what any other company reports, because they are not paying themselves out of their own pockets commissions and expenses to other divisions that are totally outside of Samsung Electronics. So that just over $11 Billion (not even close to $12 billion) is a way of moving profits to other division within Samsung Group, while still not holding all the shares in it’s Publicly Traded Samsung Electronics.

            There are many American Family of Companies that operate this way. There is one in California that basically built on construction of homes after the Korean War. Started by a banker who saw a need to move people out into the suburbs of Los Angeles. He started in tract homes. Then started his own bank as part of the family of businesses. Then interior decorating, building supplies, Real Estate Brokerages, land development and a staff of people only responsible for selling his construction projects to City Commissioners, etc. All of them were held as individual companies and never incorporated as a whole. One company losing money was sold to one making too much money, all in efforts to reduce taxes and redistribute wealth within the family of companies. His company was also responsible for covering the first mall in America in Whittier California, before also moving into Industrial construction projects throughout California and eventually also starting a Real Estate management company that had as one of it’s customers, the Mormon Church’s entire holdings in the state of California! …….and included in their marketing cost was week long summer trips for higher ups in the Mormon Church, commissions paid to their own Marketing Division, trips for county commissioners, celebrity sponsorships, banking commissions to their own bank, etc. So their Construction Company Marketing (SG&A) was huge to say the least, compared to their competition as the largest independent builder in the sate!!!

            The point I’m trying to make has to do with shifting profits…. not just to other divisions within Samsung Electronics (from who Samsung’s Chaebol (family owned) Everland Holding Company commands control all Samsung Electronics from), but moves them to whole other family run companies within and some from outside Samsung Group itself even. If you really want to take a look at how massive the Samsung Chaebol really is, then you must absolutely look at the whole of some over 80 companies (and that doesn’t even include a massive numbers of Joint Ventures and investments that truly span the globe) with the subdivisions within Samsung Electronics are just a small part of now!

            Samsung Electronics is still growing as they sold some parts (with commissions no doubt) off and acquired others from Samsung Group. Samsung Health and Electronics would be one such part. Formerly known as Samsung Medison (which doesn’t even include their massive Health Industry holdings in Hospital and a Top 10 Cancer Research and Treatment Center. Medison invented 3D/4D Ultrasound and supplies equipment, including not only Ultrasound, but Samsung Techwin co-developed Health Robotics Equipment around the World. Samsung is also heavily invested in Pharmaceuticals now and with just one holding company in Everland going public next year with an IPO offering (which you understand holds control of all Samsung Electronics) they’ve still got massive other Privately held entities like Samsung C&T and Samsung SDI….. etc…… not to mention Samsung Techwin among the Lee family holdings!!!

            So comparatively speaking they could lose all of Apple’s business and it’d be like a flea bite to Samsung as a whole!!! …….and that’s the difference between being privately owned by the largest Chaebol (family) in Korea vs just one publicly traded iTinker Toy Maker. iTrinkets are a dime a dozen commodity vs building the single largest EVERYTHING…… on Earth! ;-P Tallest Skyscrapper, Largest Shipyard, Largest Floating Structure Ever Built by Man and need I go on? lol….. If you fools are going to really compare Apple’s to Apple’s….. like in all of Samsung, then quit acting like Samsung Electronics is all of Samsung. When it’s clearly not even close. Especially now with Samsung Group growing faster than their Electronics Division that feeds on it’s self as well as the entire Samsung Conglomeration of companies, with Samsung Group headed for annual revenue of $500 Billion in a single year!!! ……and that’s not even the families entire global holdings! ^_*

            (Consider this; 8/9 years ago Samsung Group wasn’t all that much bigger than Samsung Electronics. Which alone had revenues exceeding Apple’s by $50 Billion last year. Ask GE how they get by without paying any taxes and in fact getting Tax rebates and incentives? Proving Profits are over rated when it comes to tax time and are mainly just on paper to keep your investors happy and that’s it. Sort of like the paper Samsung put in those reports to justify not having to pay as much in taxes in Korea! lol…. Where there is a “Will” (like in Lee Kun-hee’s) there’s always a tax write off to be had. Tax Write Offs Don’t come from Profits you know? But you can get them by paying yourself commissions and service fees to other parts of the Chaebol. They do it all just as legally as Apple does in getting away with paying taxes here in the USA.)

          2. Did you read the Asymco article? He seems fairly clear about adding three different elements, Advertising, Promotions, Marketing, and estimating the total amount attributed to Samsung Electronics.

            Horace also clarifies in the comments on the article: “This is the total of Samsung Electronics operations. I don’t follow other Samsung group companies.”

          3. How are obviously exaggerated commissions paid to own family members considered marketing costs outside to anyone who understands that we’re talking about the single publicly traded part of Samsung in Samsung Electronics? Only fools would not understand what’s being done here!

            Samsung pays themselves for anything made by Samsung SDI…. now that their 60yo industry leading Cheil Industries has been transferred and renamed. What does Samsung SDI do for Samsung Electronics? They manufacture all plastic materials and products for them!!!

            What does Samsung’s Cheil Worldwide do for Samsung Electronics? They do the majority of their Marketing Worldwide and only hire 3rd party Marketing in the USA. Which in court documents, they revealed in April, they only spent a few more Millions of Dollars than Apple did last year here in the USA!!!

            Obviously Samsung Mobile Phone Division, buys memory and processor chips (even Qualcomm chips) from themselves in Samsung Semiconductor Subdivision of Samsung Electronics. But they would naturally pay industry average prices for those from inside their own Everland Controlled Samsung Electronics. Samsung lost chip production for Apple’s A8 and A8x. But won A9 production completely away from TSMC with a Global Foundries partnership bid:

            Here’s the news in black n white to go with reports that Apple and Samsung had already inked a deal to produce A9 last year!

            So naturally Profits are down this year in Samsung Electronics on that note too. But next year they will even be making chips for AMD, Qualcomm (for their 3rd party customers as well as themselves), Apple and other chip customers!

            We are not talking about a company that totally outsources everything they sell from materials, to parts, product assembly, to marketing, to distribution, etc…. like Apple does! ……there in lies the salt being rubbed in Apple’s business model; they still rely on their greatest most innovative parts and materials for their products from SAMSUNG! ……..Apple can’t seem to escape the grasp of the SAMSUNG Global Conglomerate’s Domination in fields outside of simply being a Design House tied to SAMSUNG’s apron strings!!! lol….. …..and you better believe Apple is using Samsung’s AMOLED screens in Apple Watch…… just like Motorola, Nokia and others have been doing for years!

            Meanwhile besides the flexible AMOLED screens (LG does not produce mobile sized OLED screens in any quantity). Therefore that’s why we know Apple isn’t using LG’s inferior cheap White OLED’s through color filter technology using more energy with backlighting (not true RGB and Samsung has shifted to perfecting Quantum Dot Screens for larger screens! ….try as you fools may to disparage Samsung compared to Apple, you simply can’t knock a Global Conglomerate in so many fields outside of just having all their iTrinkets made for them…. like Apple does!!! ;-P ……and I don’t care how much they spend on marketing…. when they’re paying themselves for it all!!! lol…..

          4. I’m not disparaging Samsung, or anyone. I have a number of Samsung products that I like. You’re a bit of an anti-Apple nut aren’t you? Anyway, you’re missing the point, it doesn’t matter where the money goes, what is interesting is how much is spent in support of selling devices and how that maps to the number of devices sold.

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