Posted on 01/25/2016 8:24:21 PM PST by Swordmaker
Turn on the Android spigot, please.
According to Oracle Corp. (ORCL), Alphabet Inc.'s (GOOG) free mobile operating system Android has generated $31 billion in revenues for the company. The Redwood Shores, Calif.-based company has filed a lawsuit accusing Google of using Java to develop Android without paying dues.
“Look at the extraordinary magnitude of commerciality here,†Oracle attorney Annette Hurst is quoted as telling a federal magistrate attorney judge in the courtroom in a Bloomberg piece.
The revenue amount for Android is not peanuts. But, it still falls short of Apple Inc.'s (AAPL) earnings from iPhone by a wide margin. According to another piece in online publication Qz.com, Android's lifetime earnings are still less than the amount earned by Apple from iOS devices (specifically, iPhone) in a single quarter — $32.2 billion for the quarter ending Sept. 30 (their Q4), which is the most recent quarter for which data is available at this time. (See also: The Importance of Being An iPhone).
That then begs the question: How does Apple manages to make a killing off its operating system, even though it has less devices in use as compared to Google's Android?
The key to understanding the difference is to look at the source of revenues for both systems. Apple is a vertically integrated company. This means that it makes hardware as well as software for its devices. Consequently, even though it has only a 13.9% share of the total smartphone market, Apple makes tremendous amounts of money as margins. As the Qz article notes, this is only the amount that Apple makes off its devices and does not include its cut from app store sales (which are included in the “Services†category).
On the other hand, Android is all about volumes. It is free operating system available on 1.4 billion devices (or, approximately 84.3 percent of total smartphones in the world) worldwide, as of Sep 2015. Google does not charge developers for using Android. Instead, it makes money off mobile advertising and app sales.
A 2015 report from Goldman Sachs estimated Google's 2014 mobile advertising revenue to be $11.8 billion. A majority of that revenue came from iPhone-related searches. In fact, Business Insider calculated the amount of search advertising revenue from Android to be in the range of $3 billion. And Apple's revenues from Google may increase in the near future. In an earnings call last year, Apple CEO Tim Cook said that the April to July quarter witnessed the highest measured switching rate from Android devices to iOS. No wonder then, Google paid a billion dollars to Apple in 2014 to become the default search engines on iPhones and iPads in 2014.
Android also earns money through app purchases. It takes a 30 percent cut from each app sale. That is a substantial amount and comparable to Apple's cut from similar sales. However, the Android operating system is mostly popular in developing markets, where app sales are not substantial. As a result, its average revenue per user is substantially lower as compared to that of Apple. (See also: Android versus iPhone: The Economics of Apps).
In a 2012 interview at tech conference LeWeb, the then CEO of Evernote Phil Libin said that the average revenue per user for iPhones and iPads was $1.79 and $2.18 respectively, a substantially higher figure than the revenue generated by Android per user.
When quizzed about those figures later, the company's vice president of corporate development Ken Gullicksen offered three reasons for the discrepancy: more time spent by iOS users on the Evernote app, a generally wealthier clientele in iOS, and iOS' efficient payment mechanism.
Not much has changed since then. Apple's average user is still wealthier, more engaged, and loyal as compared to Android users, who have a plethora of device and version options.
Android may have trumped Apple in terms of sales and volume of devices in the market. But, it has some catching up to do in terms of revenue.
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In my cursory reading, missed the analysis of iOS divorced from it’s proprietary phone. Android and apps are not tied to a phone manufacturer and Apple products certainly are. The costs of being a phone manufacturer/seller are certainly substantial.
It is an apples to oranges comparison.
Just had to put that in.
DK
I agree with your apples to oranges conclusion... to me it appears as if AAPL is the IBM of the 1970’s and 80’s while GOOG is the MSFT of the 1990’s+ ,,, everything about AAPL is smugness and proprietary and forcing users to use their systems such as iTunes... whatever happened to iPods which you could easily load with existing MP3’s from your computer?
You can still load your iPhones, iPads, or iPod touches with MP3s or any other file format of music you have on your computer. Who told you that you couldn't? It's easy.
Nor is everything Apple "smugness" and "proprietary" as you claim. That is the voice of someone who doesn't use a Mac and really doesn't know what they are talking about except from listening to other people who do not know what they are talking about. A Mac can use far more software than any Windows machine, including all Windows software, Mad, UNIX, Linux, and many other operating systems' software. My main Mac has eight different operating systems on it that I have actually had running simultaneously.
I've told you this before, yet you continue spouting your ignorance about proprietary and smugness claims. You do so because you have a bias you cannot let go of because you don't know anything at all about Macs. . . or other Apple products, as an example your question about MP3s and your implied disability of Apple products to handle them. You've been told this before too.
I think you are mis-applying costs for revenues. Apple takes home a bit more than 94% of the profits of the Cellular phone industry. Samsung had ~11%. LG had ~1%. All of the other 500 or so cellular phone manufacturers either broke even or lost money on their operations, which explains why the three who showed a profit totaled more than 106% of Cellular phone profits. The other posted losses of more than 6% to bring the industry back down to 100% profit.
All but Apple are participating in a price competition race to sell the most phones for the lowest prices and they are all losing the race. Apple alone is satisfied in winning the race they alone are running, the profit race. As such, Apple does not divorce its product lines into operating systems and hardware.
Nor does Apple expect to make any money off of amorphous secondary advertising income, as does Alphabet/Google, who usually leaves the hardware revenue to its partners, except when they ill-advisedly try to compete with their partners with a phone from time to time.
How long since you’ve been able to drag and drop onto an iPod?
Both questions are strawman arguments. . . and you knew that was never the system for managing music on an iPod. You question was just as irrelevant.
Drag and drop...you are talking about 1990s technology.
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