This morning, this news struck me:
Great, so Google releases one of the most unique and valuable application features to the iPhone. But why would it do that if this would have been a perfect selling point for Android devices? This proves my fears that Google could abandon Android at any time since they don’t really care about it.
Google Is An Advertising Machine
Unlike Apple, Google still makes the vast majority of its revenue with ads (something around 95% of the total $24 billion in revenue in 2009). It’s what Google does better than any of its competitors. But since advertising makes up such a large amount of their revenue, it is natural that anything else is just considered minor and less important.
Google Wants To Expand The Market For Ads
The reason Google gives away so many things for free (including the Android OS) is because with every additional person using the internet, the total addressable market for Google grows. As it is focusing on ads, any additional person using search is a potential click and in return driving new advertisers to their site.
Google Uses Android To Shake Up Competition
For this reason I suspect Google’s primary interest is showing competition how to design a phone and operating system that would enable people to use the mobile internet. For Google location search has become of primary interest. That’s why it launched a satellite, expanded maps and finally brings it to all devices. But although this all costs several millions, it is minor to what Google can expect to generate in the long run from this data. And again, because every additional user is a potential click and drives more advertisers to its site, it can give away such applications for free.
For Apple, The iPhone Is Strategic – For Google, Android Is NOT
Since Google does care more about opening up the market than about the success of it’s own operating system, it does not regard Android as a strategic asset. Sure, it was positioned well, being available on several devices. However, as long as Google is available on most of the market leader’s phones, it couldn’t care less about Android. As I pointed out before: Android itself doesn’t generate one dollar of revenue for Google. However, every iPhone Apple sells is direct revenue that goes to its income statement. Therefore Apple needs to pay way more attention to what is happening to and around its phone. But that also reassures me that they will keep on making decisions that will drive sales. And if people don’t like it anymore, Apple is in deep trouble. In case you had any doubts how big the iPhone really is for Apple, see this graph.