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Google Earns $2 Per Handset; Apple, $575
Hugh Pickens writes "While Apple generates more than $575 in profit for every iOS device, and according to estimates in 2007 Apple earned more than $800 on every iPhone sold through ATT, Horace Dediu reports that Android generated less than $550m in revenues for Google between 2008 and the end of 2011, earning only $1.70 per year, per Android device — explaining how Apple is sucking up two thirds of the profit in the mobile phone business. Dediu's starting point is a settlement offer Google made to Oracle of $2.8 million and 0.515% of Android revenues on an ongoing basis. His assumption is that those numbers represent Google's revenue from Android to date. 'If this is the case,' writes Dediu, 'We have a significant breakthrough in understanding the economics of Android and the overall mobile platform strategy of Google.' Of course profitability is not the only reason Google is in the mobile phone business. 'P&L considerations were not the only (or even at all) factors in investment for Google. Having a hedge against hegemony of potential rivals, having a means to learn and develop new business and having a role in defining the post-PC computing paradigm are all probably bigger considerations than profitability,' writes Dediu. 'My take is that [Android] is not a bad business. But it's also not a great one.'"
Do "Android revenues" include advertising, e.g. ads shown in apps?
Still, Apple does get to pick the cream of the crop.
The whole idea of Android is provide Google with access to a market from which it would otherwise be excluded. So what Google makes on Android is still a whole lot more than what it makes on iPhones.
With Android now looking to expand across the whole computer spectrum including, shock horror, the desktop. That gives Google access to the whole market, regardless of the efforts of Apple and of course M$.
Chaos - everything, everywhere, everywhen
What I'm incredulous about is the fact that Apple users spend an average of more than $600 on apps & markup.
They don't. Well, not in that way, anyway. The $800+ comes from two things; AT&T paying $18 per month per phone to Apple for the privilege of being an iPhone carrier (presumably why they had an exclusive for so long), and the cost of the phone itself, at $399. That ignores that Apple does actually have to pay for manufacture, shipping hardware, labour etc to make the things. Though most of that is parts; they only pay $8 to foxconn for labour per phone. That, plus ruthless pressure on suppliers to cut costs that makes Walmart look slack, is why they have a ~40% profit margin on the hardware.
Google of course, doesn't make the phones - even the google branded nexus line are made by OEMs. Samsung make the Galaxy Nexus, for example, and samsung have been making out like bandits on the galaxy line - they sell more android galaxy smartphones than apples does iphones by quite a big margin, even though they make them mostly in Korea at considerably lower margin than Apple gets from China. This may all change once google finish acquiring Motorola of course; they might start seeing some of that hardware profit for themselves.
Bear in mind, google makes quite a chunk of money from iOS users, because Google licence google maps etc to Apple, and get paid for that. They don't get to charge the same licence fees to themselves for shipping google maps on android!
So android is not a very profitable OS in and of itself for google. It may even operate at a loss, once you include all the costs of updating it, working with carriers and OEMs for all their custom versions, having the market cope with all the different versions out there etc etc.
However, it does provide google an excellent platform for their webapps - google maps, google mail, google search - where they DO make an excellent amount of money from advertising. Apple could yank googlemaps from iOS at any time, and I've heard they're looking at doing just that. Look at the fun google had getting google+ on iOS, and google voice. Even if android makes no profit at all, having their own open source wide spread competitor to iOS and windows phone* gives them a huge opportunity to support their other services, and avoid iCloud etc eating their lunch in their core market.
* ok, windows phone might be a minnow now, but they owned the pda/smartphone market once and destroyed palm and psion in the process. Blackberry used to be a big player, and look what's happening to them. Apple and Google can't assume microsoft aren't willing to buy their way back into the mobile market, just as they did going from 0 to big player in the console market. Hell, microsoft are willing to toss most desktop and server users under a bus with windows 8 in order to get developers to make metro apps which will then be usable on tablet/phone, and that's a big gamble even with their massive cash pile.
Remember kids, it's all fun and games until someone commits wholesale galactic genocide.
Me too.
And I'm supposed to do serious work and study on a tablet? hahahahahahahahahahahahahahahahahaha
Why not exactly? I was thinking about this now -- my iPad has more pixels of screen (albeit a bit smaller) than my MacBookPro. It can talk to a bluetooth keyboard and to an external monitor. I don't know about an external mouse, I never had occasion to try. My MBP has a lot more CPU power and a development environment, and much more storage, but I can perfectly well connect the iPad to a server for that sort of thing. Why should I carry it around with me, or even have it cluttering up my office. I have a decent SSH client on it.
There are still reasons, of course. The iPad is a much more closed environment -- there is software I want to run (with GUI so I want to run it locally) that apple might not approve of. On the other hand more and more software is running in Javascript in a browser (and/or on the server side), so this is likely to be less of a restriction. I can see the laptop and desktop effectively disappearing. You put your phone/pad down on or near your desk and the keyboard and screen(s) on your desk are now extensions of your phone/pad environment. There might well be a CPU in the back of the screen, so that things run faster at your desk, and storage in the room or building to provide a fast cache of your cloud storage, but as far as the user is concerned, it's phone/pad all the way.
Most work which is done on a PC, still needs to be done on something resembling a PC form factor.
You mean something like an iPad or Eee Pad with a keyboard?
There are two things a tablet can do that a desktop, or even a laptop won't do:
1. Weigh less than 1kg and fit in a handbag or large pocket
2. Be usable (at least for some purposes) by random members of the public with no special training or experience.
To most (not all, and probably not you) users, these trump the things a desktop PC can do that a tablet can't.