Google has never really cared about selling services to the consumer. Instead, they want to give you something that keeps you on their site so they can generate advertising revenue. This is the strategy with Android, but that may be backfiring as handset makers replace Google as the default search engine.Google gives a ton of services away, like GMail, Google Docs, Google Reader, etc. You get the picture. These aren't money losing propositions though like so much free stuff on the web before them. Google rakes in tons of advertising revenue because of these and other services.

Android is no different. Google released it as open source software and then counts on the advertising revenue as consumers use the devices browser to search for things on the go. In 2009, total advertising revenue on mobile devices was over 400 million dollars and it will definitely be higher than that in 2010.

The problem is, Google only gets advertising revenue when Google's search engine is used. According to a blog at the Harvard Business Review, handset makers domestic and abroad are replacing Google as the default search engine and going with Bing and Baidu.

Microsoft locked down Windows Phone 7 to use the Bing search engine as the default for its devices, so it has a supplemental revenue stream above the licensing fees handset makers pay. Microsoft worked out a deal with Verizon where some of its Android phones will also have Bing as the default search engine. Whether the consumer buys Android or Windows Phone 7 in these cases, Microsoft wins and Google loses.

Similar agreements are happening with Motorola, and in China a similar scenario is playing out with the Baidu search engine.

There isn't a thing Google can do about it either, at least as long as it keeps it under the current open source license. Instead, Google will be forced to fight back by making its own payments to carriers and handset makers to keep Google as the default on the device.

Now, not only is the operating system free, Google's partners might get paid by Google to use the search giant's own search engine.