Original URL: http://www.theregister.co.uk/2010/10/05/google_android_profit/

Android is turning a profit for Google

Google says so, so it must be true

By Bill Ray

Posted in Mobile, 5th October 2010 13:17 GMT

Eric Schmidt, Google CEO, reckons that Android is making money for the search giant, and claims it has already covered the cost of its development in increased advertising revenue.

The detail comes in a fawning article about the open-source OS from Newsweek, covering how Android was developed by one man with a vision (Andy Rubin) who now has "virtually unlimited resources" to make it great. But the interesting part of the piece is Eric Schmidt's assertion that despite giving the OS away, Google still turns a profit on it.

The premise is that Android makes it easier for mobile users to get onto the internet, and that every internet user generates advertising revenue for Google. The corporation reasons, therefore, that if there were no Androids, there would be fewer people online and thus less revenue for Google.

All of which is enormously arrogant, even for Google - playing on the assumption that those who bought Android handsets would have shunned Symbian, BlackBerry and iOS devices, not even bothering with a smartphone, if Google hadn't provided an OS for them.

But even if the availability of Android has increased the use of the internet, it is, on the surface of it, hard to see how it's contributing significantly to the chocolate factory's bottom line. Mobile versions of web sites, including our own, rarely feature as much advertising as the desktop incarnations - a situation which will have to change if mobile web consumption starts to cannibalise desktop browsing.

In-app advertising is similarly nascent, despite Google's huge investment in AdMob. Today most of the advertisements embedded in free applications appear to be promoting other applications - a somewhat narcissistic model which will also have to change if the industry is to become self-supporting.

It's hard to doubt mobile advertising will certainly make Google a lot of money, and Google is prepared to make a long-term investment in that field to prevent Apple having too much control. The idea that Android has already paid off its investment would seem unlikely in the extreme, but Eric Schmidt felt it necessary to make such a claim, so surely it must be true. ®