No, Google Doesn’t Make Four Times More Off The iPhone Vs. Android

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.

Related Topics: Apple: iOS | Channel: Mobile Marketing | Google: Android | Google: Business Issues | Google: Mobile | Top News

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About The Author: is Founding Editor of Marketing Land. He’s a widely cited authority on search marketing and internet marketing issues, who has covered the space since 1996. Danny also serves as Chief Content Officer for Third Door Media, which publishes Search Engine Land and produces the SMX: Search Marketing Expo conference series. He has a personal blog called Daggle (and keeps his disclosures page there). He can be found on Facebook, Google + and microblogs on Twitter as @dannysullivan.

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  • http://twitter.com/utseo UtahSEO

    Very insightful. Those numbers from The Guardian didn’t really make sense to me either. I’m glad you took the time to explain it for me. Many thanks.

  • http://www.thednetworks.com Dhawal D

    Set the record straight, LikeASir!

  • http://www.facebook.com/preston.sumner Preston Sumner

    Not sure why you struggled to figure out where the $550 million figure came from when it’s simple math based on Google’s own statements and numbers. Nothing in this article really refutes the original claim that Google is making more money off of iOS than Android.

    Google could refute the whole thing immediately if they would just release revenue numbers for Android. But they don’t. There’s a reason why.

  • http://twitter.com/aaronwall aaron wall

    I think you meant “billion” in the first and third instances here  “$2.5 million – $550 million = $1.95 million”

  • http://searchengineland.com/ Danny Sullivan

    Google never gives any statement about what Android revenues are. You won’t find that anywhere.

    Google agrees to potentially pay $2.8 million in damages based on what a legal expert’s opinion of what the patents were worth for the period of 2008-2011, which may or may not be related to Android revenues. But we don’t know.There’s an assumption that the further payments from 2012 onward, which are percentages of Android revenue that would be paid, can be used to figure out what the 2008-2011 patent damages estimates must mean Android revenues are. That’s an assumption.

    Let’s assume that it’s correct, so that we can then say that Android’s revenue was $450 million. The next problem is that we don’t know what exactly that covers, as even The Guardian says. Does it include clicks on paid ads in the browser? That’s a huge issue that has to be clarified.

    But let’s assume that it does. Now we have to take that $2.5 billion in mobile revenue. That all net or gross? If it’s net, we assume that Google makes only a small slice of the revenue it agrees to pay Apple for iOS activity. That means the bulk of the $2.5 million might be mostly Android.

    We really don’t know. And I’m sure Google could release all those figures. But then again, Apple could also release the amount of money it pays Google. Neither company tends to reveal much of anything.

    The revenue figure also don’t go to Google’s uber-motive with Android, which has always been to ensure that it doesn’t find itself locked out of the mobile marketplace. To a big degree, it doesn’t matter if Android is a loss, as long as it keeps Apple or Microsoft from owning the mobile space.

    That’s the same reason it offers Chrome. Rarely do you see anyone ask how much money Google makes off of Chrome. But Google has a big investment in it. Why? Because it sees benefits beyond revenue in having a browser that isn’t controlled by competitors.

  • http://searchengineland.com/ Danny Sullivan

    Thanks, I’ll fix that.

  • http://www.facebook.com/people/Tony-Swash/790871973 Tony Swash

    Back in September 2011 as part of a senate judiciary hearing Google Exec Susan Creighton, testified under oath that two thirds of it’s mobile search comes from Apple iOS devices. Given the other ample evidence that iOS users actually use the web on their mobile devices far more than Android users and given that testimony from Susan Creighton it is reasonable to assume that the majority of Google’s mobile income comes from iOS rather than Android.

  • http://kaizenity.blogspot.com/ FalKirk

    Actually, the $550 million figure seems plausible.

    - In an earnings conference, Google stated that they anticipated making $2.5 billion from their mobile services in 2012.

    - Google also testified before Congress that two-thirds of their mobile services income came via iOS devices.

    - Using some rough math, that would mean that the maximum revenue Android could garner in 2012 would be $900 million. Since Android is only a part of Google’s mobile services, the actual amount could, of course, be less.

    The $550 million figure does not seem out of line with those figures.

  • http://searchengineland.com/ Danny Sullivan

    No, it’s not entirely reasonable to assume that.

    First, two-thirds of searches don’t mean that two-thirds of ad clicks come from iOS. You could have more ad clicks coming from Android.

    Second, let’s assume that it is two-thirds of mobile ad revenue is being generated by Google searches through iOS. Most speculation is that Apple keeps most of that income, as is common with partnership deals. So is the $2.5 billion figure including gross mobile revenues, including whatever happens on iOS. Or is it $2.5 billion net of what Google actually receives.

    Third, we still don’t know that “Android revenue” includes search revenue that happens within the browser on Android.

    iOS generates a lot of search traffic for Google. How much money that generates for Google in net revenue isn’t known. Whether search revenues are counted as Android revenues also isn’t known.

  • http://searchengineland.com/ Danny Sullivan

    See my other comments addressing this. They key question remains whether “android revenue” counts clicks on moble ads. We don’t know this.

  • http://www.maleenhancementguide.org/product-reviews/ Smith of Male Enhancer

    Excellent article you made. Good to read something like this.

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  • http://myindigolives.wordpress.com/ Ellie K

    Agreed, trying to back revenues out of court documents reduces to a guessing game. The relevant part in all of this is what you said down here in the comments, with the comparison to Chrome. 

    Google strategic planners, like most companies with some operating margin to spare, have a long term perspective. That’s reason enough to disregard whether or not Google makes 4x more from iPhone than Android, even if it were true (which I don’t believe is the case)!

    Question: Why not do financial statement analysis on Google’s earning releases, annual reports, 10K?  Wouldn’t that have been a better source for The Guardian than court documents? Or maybe not, as Google has those two share classes, and perhaps disclosure req’s are different for each? Or it could be even simpler: There are so many possible ways to attribute revenue that it is too difficult to figure it out based only on income statements and balance sheets.

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  • http://twitter.com/thetradedotcom The Trade

    Since it’s been referenced a few times, I just want to make the clarification that Susan Creighton testified that a 3rd party third party report released sometime before the hearing (I think Comscore?) stated that 2/3 of Google’s mobile revenue came from iOS — not that Google’s internal numbers stated tis.

    She didn’t offer specific internal metrics from Google, and even if she did, those numbers would be quite out of date by now.

  • http://twitter.com/WordWandering Jayesh Sharma

    Assuming the past payments are calculated on the same basis more or less as future payments is no great leap of faith as you seem to suggest.

    Also, we have to give credit to the people calculating these numbers that they have taken almost all relevant revenue in account when they talk of revenues from Android. When you say “ key question remains whether android revenue counts clicks on moble ads. We don’t know this” you are essentially saying they the experts you think calculated the revenues will essentially miss major sources of income. And that the 2.5 Bn figure that Larry Page stated uses some very different matrices to the ones used in patent litigation. 

    Of course there would be some discrepancies, but its safe to assume that they won’t be huge. After all, these are both legal matters and too much of difference between their definitions would open Google to litigation. So while there is some extrapolation involved, I see no reason why the guardian numbers are not in the right ballpark. 

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