A number of reports out underscore how strategic mobile is now for Google’s business. The first, from IDC, says that there were more smartphones shipped in Q4 than PCs. Think about that. And earlier analyst reports found that tablets (read: iPad) have cut into PC sales.
The PC era is now officially over.
PCs will continue to sell but the center of gravity has shifted to mobile devices. And Google has smartly — and remarkably — positioned itself in the center of that new universe. Arguably only Apple stands between Google and global mobile domination. Even on the iPhone most web searches are Google searches. So while the iPhone doesn’t drive as much revenue for Google as Android devices, it still fuels Google’s mobile growth.
Google CEO Eric Schmidt previously speculated that Android would become a $10 billion revenue stream if a billion users generated $10 per year for Google. That was purely hypothetical but it starts to look less and less hypothetical lately.
Today Google’s mobile ad business is worth roughly $1 billion on an annualized basis. But it’s growing rapidly. Piper Jaffray analyst Gene Munster estimated that Android generates about $5.90 per user and sees that figure growing to $9.85 in 2012.
According to a discussion of the forecast in eWeek:
Using Google’s self-stated figure that its mobile ad business was operating at a $1 billion run rate through 2010, Piper Jaffray analyst Gene Munster said Google generated $850 million in mobile ads for the year. Android, Munster said, accounted for $130 million of this total, good for $5.90 average revenue per user (ARPU). For perspective, Google’s advertising totaled $25.77 ARPU, while its Web search engine accounted for $18.85 a head. . . Looking forward, the analyst said Google could have an average of 133 million Android users by 2012, each generating $9.85 per year on advertising, meaning Android would kick in $1.3 billion to the company’s ad revenues.
Regardless of whether the precise figures are correct it’s clear that mobile has quickly become a material contributor to Google’s bottom line. And it will only continue to grow.
For several years many Google watchers scratched their heads about Android: “But Google doesn’t make any money off the platform.” In retrospect Android emerges as one of the most significant acquisitions the company has made. That was in 2005. The effort, focus and resources that Google has poured into mobile have put miles between it and its former rivals Yahoo and Microsoft. Both are scrambling to remain relevant to consumers and advertisers in mobile.
Though perhaps no one anticipated the iPhone, Google knew that the mobile user experience could be dramatically improved and bought Android to do so. When the iPhone was released in 2007 most mobile hardware makers had no response; there wasn’t another mobile operating system that was anywhere near competitive. Android was the only choice and many OEMs embraced it.
Just as Darth Vader surpassed his old master Obi Wan, so too Android has now surpassed the iPhone. Even Nokia, whose bureaucracy and complacency have put it in a corner, is now considering adopting Windows and/or Android to make its smartphones more appealing. European carriers have pleaded with Nokia not to use Android and further strengthen Google’s hand in mobile.
Many companies, such as Yahoo and Microsoft, were simply too bogged down to take the necessary steps to ensure their futures in mobile. Google was prescient — and acted. Microsoft still has a chance to gain adoption for Windows Phones, especially if Nokia uses the OS. But the mobile outlook for Redmond is very mixed. Android has now taken Windows Mobile’s place as the non-Apple OS of choice for most carriers and developers.
That Google is on the cusp of dominating mobile already is nothing short of remarkable.