The Guardian is out with figures suggesting that Google earned only $550 million off Android in the past four years, which in turn sparked headlines that the iPhone is more a cash cow for Google than its own mobile platform. But that’s making a lot of assumptions that don’t pan out.
I struggled trying to figure out how The Guardian could say in its story that Android generated around $550 million in revenue from 2008 through 2011. That figure doesn’t appear anywhere in the court court document The Guardian based its story on. In fact, the document has nothing that says what Android revenues are at all.
Where The $2.8 Million Figure Comes From
The court filing says this:
In the event of a finding of patent infringement of the ’104 patent, Google is willing to stipulate that un-adjusted damages for the ’104 patent through 2011 are $2.72 million, and in the event of a finding of patent infringement of the ’520 patent, that un-adjusted damages for the ’520 patent through 2011 are $0.08 million.
OK, there are two different patents being argued about. Google proposed paying out like this, if it shouldn’t win the case, for the period of 2008 through 2011:
- 104 Patent: $2.72 million
- 520 Patent: $0.08 million
- Total: $2.8 million
The $2.8 Million Is Based On Patent Worth, Not Android Revenue
That 2.8 million figure isn’t said to be based off of Android revenues. My understanding is that those figures are based off what a court-appointed expert believes the patents are worth. Maybe they factor in Android revenues. Maybe they don’t. We won’t know until the expert’s report is released.
Despite this, The Guardian assumes the figures are a percentage of Android revenues and then further uses them with other figures from the court document to make a guess about what percentage of Android revenue the $2.8 million figure represents:
In a pre-trial settlement offer, Google proposed that it would pay Oracle a percentage of revenues from Android, suggesting it would pay $2.8m in damages on the two remaining patents that Oracle is asserting for the period to 2011, and then 0.5% of ongoing Android revenue on one patent which expires this December, and 0.015% on another which expires in April 2018.
That’s saying that the patents going forward from 2012 on should pay off a percentage of Android revenues as shown:
- 104 Patent: 0.5%
- 520 Patent: 0.015%
- Total: 0.515%
Where The $550 Million “Android Revenue” Figure Comes From
With the 0.515% figure in hand, The Guardian applies that to the $2.8 million figure to create the $550 million (really, $543 million) overall revenue figure for Android from 2008-2011 that it reports:
The $2.8m offer, at a combined rate of 0.515%, suggests that Android’s total revenue since the launch of the first handsets at the end of 2008 through to the end of 2011 was $543m. Patent payments relating to phones are generally made on a per-handset basis at a fixed licence fee for any phones that would be judged to infringe the relevant patent.
That leads to another part of The Guardian story:
The court documents (PDF) do not explain how the Android revenue is calculated, but the key source would be advertising revenue. Google also gets a 30% cut from app sales to Android devices.
But The $550 Million Might Be Hugely Inaccurate
Maybe a key source is advertising revenue. But is that advertising revenue based on what appears within apps? Advertising revenue on what appears if people do a search on Google with an Android phone and click on an ad? What about if they search on Android with some other search engine and select an ad? Is that revenue that’s counted toward Android?
We don’t know. In turn, that leads to confusion knowing how much Google makes off iOS devices like the iPhone versus Android.
Where The $2.5 Billion Mobile Revenue Figure Comes From
Again, from The Guardian article:
Google has however talked up mobile generally as key to its future. Larry Page, Google’s chief executive, said during an earnings call in Octoberthat Google was “seeing a huge positive revenue impact from mobile, which has grown 2.5 times in the last 12 months to a run rate of over $2.5bn.”
But while some people interpreted that to indicate Android revenue, it overlooked Google’s deal with Apple, in place since the introduction of the iPhone in 2007, through which it provides maps and the default search engine for its iPhone, iPad and iPod Touch products, which run Apple’s iOS software. Apple’s chief executive Tim Cook said the company has sold 315m iOS devices, though nearly half of those have been sold in the past year.
In turn, the comparison of total Android revenues from the court documents suggests that iOS has so far generated more revenue for Google than its own handset ecosystem.
Yes, Page said that, putting Google’s overall mobile revenue on a yearly basis, at the end of the third quarter of 2011, to be $2.5 billion. What chunk of that was from Android versus the iPhone? We still don’t know.
As we originally wrote, in a first pass at The Guardian story:
In other words, Google made more (top-line) revenue in one year from the iPhone than it did in three years from Android handsets.
Where The 4X iPhone Figure Comes From
That’s comparing The Guardian’s estimate of $550 million (which could be totally wrong for multiple reasons, including not counting search revenue off Android devices) to all of Google’s mobile revenue and assuming that $2.5 billion – $550 million = $1.95 billion generated by the iPhone.
In turn, that leads to headlines like Boy Genius Report has about Google earning four times more off the iPhone than Android.
The reality is that we have no concrete idea of what Android earns until Google provides those figures and explains exactly what’s included. If that happens, then we have a first step toward further trying to determine what the iPhone and iOS devices might contribute.