Android May Become A Substantial Revenue Earner For Google In the Future

NEW YORK (TheStreet) -- Google's (GOOG) mobile operating system Android already accounts for three-quarters of all smartphones sold in the world and dominates the ecosystem for app downloads.

Recent reports released by two research firms indicate that Google's Android could also become a substantial source of revenue for the company. According to a report by Opera Mediaworks, Android has surpassed Apple's (AAPL) iOS, a mobile operating system, in terms of revenue generated from mobile advertising. 

Android accounted for nearly 45.8% of the total mobile advertising market, as compared to iOS, which was responsible for approximately 45.3% of the market, according to Opera Mediaworks.

"Android overtook iOS in total monetization but still lags Apple's iOS in revenue per impression, as per our latest report," says Mahi De Silva, CEO of Opera Mediaworks. "The trend line suggests that Android will achieve parity with iOS over time."

If this happens, Google's mobile operating system could become a substantial revenue earner for the company. For comparison, Google's arch rival Apple generated sales of nearly half a billion dollars from its App Store in the form of apps and in-app purchases over New Year's Day 2015. In addition, the Cupertino, Calif.-based company paid out $10 billion to developers last year.    

Another recent report, this time by research firm Digi-Capital, states that Android generated more revenue than iOS in 2014. According to the report, the Chinese app store market, which consists of multiple versions of Android, tilted the scales in favor of Google's operating system.

Tim Merel, managing director at Digi-Capital, says the competition in China puts both Apple's App Store and Google's Google Play in the minority of app downloads globally. This is because China's Android app store is fragmented between four major players -Baidu, Qihoo 360, Tencent, and Wandoujia. 


The case for Android is further bolstered by its dominance in app downloads and sheer hardware platform numbers: the Android platform had 70% more app downloads as compared to the Apple iOS platform and was responsible for three-quarters of all smartphones sold in the world.

But, it will take time for Android to reach parity with Apple.

Apple's mobile operating system still holds the monetization lead with iOS app stores earning approximately 70% more revenue than Google Play. It turns out that iOS platform users also show deeper levels of engagement as compared to their Android counterparts. Again, this is offset by its limited reach. From the report by Opera Mediaworks: iOS devices reach higher monetization levels, primarily because those devices have a larger market share in regions where advertising rates are higher, such as Western Europe and the United States.

On the other hand, the Digi-Capital report states that Google Play apps require twice the download volumes of iOS store apps to generate the same revenue. Chinese app stores fared even worse, requiring download volumes that are eight times those of an iOS store to make the same amount of revenue.

Google does not break out numbers for its Android earnings. According to estimates, however, the company gets only 5% of the total revenue generated from its app stores. In comparison, Apple takes a hefty 30% cut from each app sale. What's more, Android has a head start over Apple in emerging mobile ecosystems, such as Asia and the Americas (excluding North America). 

These regions account for an increased share of mobile impressions and ad spending and Android has over 65% of market share here. For example, Android is the dominant mobile operating system in India, which ranks second only to the United States in the number of mobile impressions.   

"With the data they (Google) get from Android devices and users, they are in a position to improve their mobile display revenue and market share," says De Silva from Opera Mediaworks.

 

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