Why Android Is Winning The Battles But Google Is Losing The War: Part 3

on November 14, 2012
Reading Time: 6 minutes

A Pyrrhic victory (/ˈpɪrɪk/) is a victory with such a devastating cost that it carries the implication that another such victory will ultimately lead to defeat. The phrase “Pyrrhic Victory” is named after King Pyrrhus of Epirus, whose army suffered irreplaceable casualties in defeating the Romans at Heraclea in 280 BC and Asculum in 279 BC during the Pyrrhic War. Someone who wins a Pyrrhic victory has been victorious in some way; however, the heavy toll negates any sense of achievement or profit. The term “Pyrrhic victory” is used as an analogy in fields such as business, politics, and sports to describe struggles that end up ruining the victor. ~ via Wikipedia

Series Schedule:

  • Mon: The Battle for the PC
  • Tue: The Battle for Mobile Phones Won
  • Wed: The War for Mobile Phones Lost
  • Thu: The Battle for Tablets
  • Fri: Picking Your Battles Is As Important as Winning Them
  • 3) The War For Mobile Phones Lost

    Mobile Search Is Not The Same As Desktop Search

    THE PLAN

    Google’s plan was to transport their highly successful desktop search strategy to the phone. This only made sense. Search worked on the desktop. Mobile was the future. Therefore, Google’s future would be search on mobile.

    MARKET SHARE

    Google’s problem is not a lack of market share. eMarketer notes that Google’s share of mobile ad revenue is 55% and it controls 95% of mobile search ads. No, Google’s problem is that search doesn’t work the same on mobile as it does on the PC. In fact, it barely works at all. On the PC, search rules. On the phone, apps rule and search is the court jester.

    SIZE MATTERS

    When it comes to ads, size really do matter. One of Google’s strenghts when advertising on the desktop was that they would unobtrusively place relevant ads next to and above their search results. On a phone, this was not possible. There simply wasn’t enough screen real estate to display both search results and advertisments.

    “Size absolutely does matter,” says Christine Chen, director of communication strategy at Goodby Silverstein & Partners, an ad agency in San Francisco. “If you look at the real estate available on a smartphone, it’s really sad compared to not just banner ads on the Web, but also to TV, print and outdoor advertising.”

    “The evidence is telling: advertisers are willing to pay much more to reach a thousand pairs of eyes gazing upon a computer or tablet than a thousand pairs looking at a smartphone screen.

    INVISIBLE OR IGNORED OR INVASIVE

    Mobile ads are relegated to a tiny portion of the screen and are often invisible or ignored by consumers.

    It’s a double-edged sword that cuts against advertisers both ways. It the ads aren’t big, they’re invisible. If they’re bigger, they’re seen as intrusive.

    Phones are seen as very personal. Users to not want to be tracked. Interestingly, while 60 percent smartphone users do not allow themselves to be tracked only 7 percent of tablet users and 18 percent of PC users reject tracking on their devices.

    NO OPTIMIZATION

    For both technical and privacy reasons, advertisers lost the ability to know who they were advertising to. On the desktop, cookies were the standard. On the phone, such technology was either unavailable or seen and intrusive or even offensive.

    “What makes Web ads so attractive to advertisers is the ability to track actions and optimize accordingly,” . Because a smartphone cannot use the same technology “your ability to track and optimize is much more blunt, or in some cases nonexistent.”

    This makes phone advertisments much less valuable that desktop advertisments. A banner ad on a Web page that costs $3 to $5 for every thousand impressions may cost only 75 cents or $1 for a thousand impressions on a smartphone.

    CONTEXT

    Context is important too. People surf the web for long periods of time on their tablets and on the desktop. They use their phones in bursts. Trying to promote ads when the user is attempting to grab a quick bite of information is annoying and counter-productive.

    ENGAGEMENT

    Finally, the engagement levels for smartphone users are lower, reflecting the slower speeds and smaller screens on smartphones.

    Android Doesn’t Monetize Ads Well

    How much of a problem is all this for Google? Huge. Android is so bad at monetizing ads that a study done on Opera placed Android in third plce behind BlackBerry on value for the money.

    Let me say that again. Android’s ads were in third place. Behind Blackberry.

    Apps Rule

    Google didn’t know that search on the phone wasn’t going to work the same as search on the desktop. Another thing they didn’t know was how important a role apps would play in both search and advertising.

    Smartphones were made for apps. People love to use apps on their smartphones. If they want the time for the next train, they use an app to tell them rather than doing a search. If they want to find a restaurant, they might do a search but they’re even more likely to use an app.

    Google’s problem is that apps are not searchable by web crawlers. If Google can’t search it, they can’t sell ads against it. For Google, apps are like a large and ever expanding black hole in their advertising universe. And as that hole gets bigger and bigger Android’s advertising opportunities get smaller and smaller.

    Android App Apathy

    But Android has apps. 700,000 of them. As many or more than any other operating system. So why isn’t Google making money from the sale of apps and app advertising?

    Take the University Co-op Society, which sells University of Texas merchandise via stores, the web, an m-commerce site, an iPhone app and an Android app. When it comes to m-commerce, Apple rules.

    “IPhone app sales are about 25% of our total mobile business and Android app sales are less than 10%,” says Brian Jewell, vice president of marketing. “That leaves a big chunk of sales that come directly from the mobile site. People entering our address directly or coming to us via a search engine or also possibly clicking through from an e-mail blast.”

    And on the mobile site, Apple dominates. Today, 50% of mobile traffic to the University Co-op Society’s web site stems from iPhones, 25% from iPads, 20% from Android devices and 5% from devices running other mobile operating systems.

    Retailers of all stripes tell similar stories, which is why retailers building mobile apps invariably have started with an iPhone app. Android is an afterthought.

    “Android users do not buy. IPhone users buy,” says David Sasson, president and founder of overstockArt.com.

    Android advocates bristle when confronted with the suggestion that Android owners do not buy content or consume advertising on their mobile phones. They say it is insulting.

    First, I’m not insulting anyone. If anyone is insulting Android owners, it is the facts, not I.

    Second, Android owners are not required to buy aps and content or consume advertising. It doesn’t make them bad people. It just makes them bad customers.

    We can argue all day as to exactly why Android owners aren’t buying. There’s lots of theories. The one thing we can’t argue with is the facts. Android owners aren’t buying. And that single fact turns all the market share numbers and the arguments for Android’s dominance on its head.

    ‘Cause you see – and this is the key point missed by most pundits – developers, advertisers, retailers and others don’t follow unit sales – and they don’t follow customers – they follow the money. And until Android owners are induced to part with more of their money, their overwhelming market share numbers mean little.

    The Future

    The future of mobile advertising doesn’t look any brighter for Google either. Voice search poses a huge threat as voice activated searches, like Siri, simply bypass Google search altogether.

    And then there’s always the ultimate threat that Apple will simply purge Google from its system by making Bing or some other brand the default search engine. It is reported that Google pays Apple $1 billion to be its default search, and earns about $1.3B from searches on Apple mobile devices. In the near-term, it seems unlikely that Apple will remove Google search. But there’s no love lost between the two companies and the long-term remains uncertain. Apple made the difficult and painful decision to remove Google from their Map application. Changing the default search carrier sometime in the future seems like a very real possibility.

    It’s A Trap

    All of Android’s mobile activations don’t add up to a hill of beans if they can’t be monetized. And Android simply isn’t doing the job it was born to do.

    It’s a classic tech trap. Google provides a rapidly growing service that is popular with non-paying users while it constantly becoming less and less valuable to Google’s paying customers – the advertisers.

    The result is pernicious. More and more time, money, energy, attention and resources are devoted to Android while the return – a 15% decline in the price advertisers paid per click on a Google ad – continually becomes less and less.

    Next

    Android is struggling to monetize phones, but there is more to mobile than phones.

    Tomorrow: “The Battle for Tablets”