Photo: Android Market
Android is spreading like wildfire in Asia, but that doesn’t necessarily mean Google will start making billions in new revenue.That’s because, unlike the iPhone and other smartphones, “Android” phones can be dramatically different between countries, phone makers, and carriers — and not all of them link back to Google’s online services, which is where the company actually makes money.
As ZDNet Asia reports, Google chairman Eric Schmidt told an audience in Tokyo yesterday that he expects prices on Android handsets to drop as low as $50, which will help it reach billions of new customers.
He also said, “Every month, China and India are adding 10 million mobile subscribers and we expect to see amazing growth in markets with lower penetration rates such as Indonesia and the Philippines.”
That’s great news for the citizens of these countries who want cheap Internet access. But it doesn’t necessarily mean more money for Google.
First, Google doesn’t charge a licence fee for Android. (Microsoft, on the other hand, gets money from some Android resellers to licence Microsoft patents allegedly used in Android, and other companies like Oracle are seeking the same kinds of deals.)
Also, handset makers and wireless carriers in developing countries aren’t necessarily interested in using the latest version of Android or capitalising on the Google brand. They just want a cheap mobile platform. So instead of working with Google and getting certified, some of them simply take the latest available open source build of Android and customise it for their own needs.
In a particularly extreme example, China Mobile — the country’s state-owned wireless carrier with more than 600 million subscribers — took a version of Android and built its own operating system, Open Mobile System (OMS). Then it put out a phone called the oPhone that is basically an Android smartphone — only with links to China Mobile services instead of Google’s services.
The oPhone apparently isn’t selling well. But the point is that phone makers and wireless carriers can use Android without linking back to Google services — and many do exactly that.
In fact, the head of Chinese search engine Baidu’s wireless business recently claimed that 80% of Android phones sold in China will have their default set to Baidu.
Google doesn’t disclose how much money it makes from Asia today, but the company is still mostly a U.S. phenomenon — 46% of its revenue comes from the United States, with another 11% from the U.K. (The company did say on its last earnings call that it was seeing “enormous” growth in Brazil and Russia, but that’s mostly coming from display advertising on its Web sites — not mobile. And Asia is “just getting up the curve” in display.)
Of course, Google still benefits if its competitors lose, and Android is sucking up a lot of market share from Nokia, which used to rule in developing countries. But Android’s dominance in developing countries might not immediately translate to the new multibillion-dollar revenue streams that Larry Page is so interested in seeking.