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Why Google never needs to make a dime from Android device sales

Google Mobile Advertising Revenue Analysis

Much as he dismissed the significance of the iPhone when it first released, Microsoft CEO Steve Ballmer also dismissed Google’s free-to-use Android platform when it launched because Google wasn’t charging any money for OEMs to use it. In the five years since launching Android, however, it’s clear that making money from the direct sales of Android devices was never part of Google’s plan. To understand why this is, take a look at eMarketer’s new report on mobile advertising showing that Google took home $4.61 billion in mobile advertising revenues in 2012, or more than half of all mobile advertising revenues in the world.

To get a sense of how dominating this is, consider that no other company made even $1 billion in mobile advertising revenues in 2012 — Facebook and its $470 million came the closest. And in 2013, eMarketer projects that Google will take home $8.85 billion in mobile advertising revenues, which will account for around 56% of all global advertising revenues in the world, while Facebook is again expected to trail behind in second place by generating a total of $2.04 billion. When you consider that mobile advertising revenues doubled between 2011 and 2012 and are projected to do the same this year, then it seems that Google has put itself in a dominant position in a rapidly growing market.

How was Google able to do this, you ask? A big reason is clearly Android — Google was able to spread its revenue-generating mobile services across the globe because its own mobile operating system features them prominently on its default home screen. And sure, Google has also benefitted from its services’ continued popularity on iOS-based devices but there’s simply no way Google could have cornered the market on mobile advertising the way it has without also having the most widely used mobile operating system in the world.

All of which is a long way of saying that Google’s decision to not charge licensing fees for Android wasn’t a mistake — it was all part of the plan.

Prior to joining BGR as News Editor, Brad Reed spent five years covering the wireless industry for Network World. His first smartphone was a BlackBerry but he has since become a loyal Android user.