Android A Bad Deal... For Google

Android is a raving success if you're a customer or Samsung or HTC or some other OEM. But Google's latest earnings report shows nothing but bad Android-related news. What was the point of it all again?

Larry Seltzer, Contributor

October 19, 2012

2 Min Read

You won't find the word "Android" in any of the disappointing Google earnings reports Thursday. The closest references are the continuing bad news about Motorola.

Motorola Mobility revenue was $2.58 billion, $1.78 billion of that from the mobile segment. Analysts were expecting $2.94 billion. Google closed its $12.5 billion purchase for cell phone maker Motorola Mobility Holdings in May and it seems all it has done since is shut down parts of it and lay off employees.

And the other revenues from Android? What other revenues from Android? Google Play is, from what I can see, the only way Google makes money off Android. I'm sure it's not nothing, but it can't be a huge money maker for Google. I'm no finance expert, but from the actual SEC filing Thursday, I think Google Play revenues--Google's cut from app sales--must be mixed into the "Other Revenues" line, which totals $1.525 billion for the nine months ended Sept. 30, which is a little over 4% of consolidated revenues.

Total advertising revenues, incidentally, are about 85.5% of consolidated revenues. Since Motorola revenues are over 10% of the total, it's fair to say that Google is still a one-trick pony when it comes to revenues. There are ads and then there's a little other stuff. And that little part includes Android.

So why did Google do Android? To be nice to everyone else, except Apple? That seems to be as good a reason as any to explain how things have worked out.

I guess the thought was to drive traffic to Google services, basically search. It's possible Google has done this, but it's also probably a pyrrhic victory. The consensus on mobile advertising revenues is that they are lower-quality and bring in less per click--and indeed the cost of Google ads per click has been dropping. Google also spends a lot of money developing Android. Its R&D costs continue to climb, both in absolute terms and as a percentage of revenue.

Mind you, Google is still making tons of money and "filthy rich" is not an unfair descriptor to use for it. Android has made tons of money for Samsung, HTC, and several other companies. For Google, however, it's a charitable affair.