The profits obviously aren't as simple as x widgets cost y dollars to produce and sell at price z (might change with the impending Motorola acquistion) and it is probably never going to be known strictly how much Android makes. But if you think Google can't convert half a million new Android phones a day into money, you haven't been paying attention to Google at all.
The fact that Apple makes a lot more profits than Android manufacturers is nearly of no consequence for Google. Microsoft managed just fine as Gateway and others crashed and burned.
Microsoft sells Windows licenses for money. Google gives Android away and hopes to generate ad revenue from people searching on those devices. Not a very apt comparison.
I think this blind faith in Google to be a bit weird.
I still find unbelievable they can make that much money just with ads – I do believe they do, it just befuddles me – on a phone it's even harder to display them and in fact you don't see as many in the mobile web, are we really sure that Android is profitable? Maybe it's not yet and they're still trying to find the business model for it. Maybe it will never directly be, it will just serve as measure to not be excluded from the mobile world and keep competitors (not derogatory) from eating into Google.
> I still find unbelievable they can make that much money just with ads
I do as well, and wish there were more research available on internet advertising. I'm sure a few companies at the top of the pyramid make money, but everyone else (IMNSHO) is taking money out of their left pocket and putting it into their right pocket (A buys ads on B, B buys ads on C, [...] Z buys ads on A; in the end, a zero-sum game).
I'm sure we'll be shouted down, but you're not alone in your opinion.
I'm sure a few companies at the top of the pyramid make money
This is absolutely, completely untrue. One of the reasons internet advertising is so popular is because its effectiveness can be proven - advertising companies can show how people exposed to ads buy at a higher rate. The improvement in rate can be calculated exactly, which shows the advertiser exactly how much they should spend.
There they promoted a new product in one market exclusively online, and did no promotion in the other market. Sales in the promoted market were 11% higher than the control.
Don't believe it? Try it yourself - I wanted to understand it better, so signed up for an affiliate account and did some Facebook advertising. It worked quite well - I was able to make around $15 for every $1 spent (obviously this was a very specific market segment).
"The Interactive Advertising Bureau (IAB) is comprised of more than 500 leading media and technology companies that are responsible for selling 86% of online advertising in the United States."
Aside from anecdotal evidence (your returns of 15:1) I haven't found any long-term studies done by independent researchers that prove internet advertising is any more effective than other forms of advertising, if it's effective at all. The only real accomplishment internet advertisers can lay claim to is training the general population to never even glance at the left / right / top / bottom navs on a page.
In general, the poll results and comments in another recent thread on HN on ad blockers (http://news.ycombinator.com/item?id=3324709) seem to support my theories about how ineffective internet advertising is. I'd be interested in seeing some untainted long-term research on this subject.
I've personally suspected for a long time that advertising was in for a huge disruption. Either people will realize they're not getting the value they think they are or some company will realize that 10% of what Google makes is still a ton of money and undercut them heavily. Then all these business plans that rely on "give it away and make it up with ads!" will fall on their ear.
No one doubts that Android is a complement to Google's business but fundamentally if the app store developers can't make money then it's largely pointless.
iOS is the place where people like 37Signals can thrive.
Android is the place where people like Facebook can thrive.
They've got a market of millions of people who don't buy anything, but click ads occasionally. Android should team up with AdBusters because on the Marketplace everyday is buy nothing day.
To Google the Marketplace is necessary only because the availability of a marketplace is the norm. Android enables them to have control over the next generation of mobile phones, in which we now have 3 possibilities:
1) Apple switches to another search provider, in which case iPhones will have a functional and brand disadvantage as Google Search is both good and a synonym for searching on the web
2) Apple does not switch to another search provider, in which case mobile searches are dominated by Google, as iOS and Android represents a majority
3) Android ends up on 90% of all smartphones, like Windows, making whatever Apple does irrelevant, even if Apple continues to enjoy the highest margins in the industry
You're clearly not seeing the forest from the trees.
They estimated Android downloads to be 6.7 billion about 2 weeks before Google announced there had been 10 billion downloads. That isn't very accurate.
They explicitly compare their estimate of 6.5 billion Android downloads with 18.5 billion iOS downloads. Free downloads are included in both cases (but the Android estimate is way, way out)
(Edit: To make it doubly clear, I'm implying that their estimate of revenue share shouldn't be trusted either)
Yes, I read the article, I believe they stated that it was an estimate. Perhaps their estimation methods are conservative. Perhaps Apple provides better data than Google upon which to make estimates. Perhaps the timing of the data leads to more accurate estimates for Apple. You can't simply say that because one estimate was wrong that everything else shouldn't be trusted. (Well you can say it, but there's no logical basis that underpins the argument) Perhaps they estimated the downloads based on sales, who knows. A week before Google released their data the estimate was useful, now it isn't because we have better data, that's simply how life goes.
In the business of selling apps I'd much rather I went to market underestimating the size of the market than overestimating it. To me, one more download is one more client to support with no revenue upon which to service it. I guess if I developed for the Marketplace I could have 40% more freeloaders than anticipated. Awesome, just what I needed, more expenses and the same rev.
I'm not in the business of cheerleading mobile operating systems, I'm in the business of selling stuff. (To be fair, I do cheerlead Apple because people can't buy my stuff on Android, perhaps the market is changing and I'll have to adapt, but once my stuff is available on both platforms, I really wouldn't care what people use)
I'll be ecstatic when the marketplace is at a billion a year but I think that's a bit off at this point. App Store vs. Marketplace is like Google vs. Bing for traffic, if you're a huge site you'll see 15% of your traffic from bing, but if you're a smaller player you'll see 99% from Google. Likewise when doing SEO work I don't care about bing because it doesn't drive traffic for me like Google does. On the other hand I use Bing for SEM because it has cheaper CPCs with a better conversion rate.
Worse, it is an estimate of sales to date of the two markets. The Android market was seriously immature until around a year ago, and it has been exploding since (from a personal perspective, the number of apps worth buying has increased exponentially in the past couple of months). Most recent anecdotes seen on here and on other development boards have found similar current sales rates across Android and iOS. If I'm making an app now, it is meaningless that for three years iOS held a huge headstart.
There are a couple of platform zealot prats rambling on with their standard, dated anti-Android nonsense in here. It is disheartening that they haven't been carpet bombed into the hellban so many voices of reason end of enduring.
