quote: So in terms of returns, Android is sustainable. However, in relative terms the value created leaves much to be desired. Whereas Android generates $1.70/device/year and thus an Android device with a two year life generates about $3.5 to Google over its life, Apple obtained $576.3 for each iOS device it sold in 2011. The economics of Android are nothing like the economics of iOS.
quote: Where I think we are seeing weaknesses, however, of the kind directly related to the smartphone wars, are in the following areas: • 46% of their revenues are from the US. • • Average cost per click declined a significant 12% over Q1 2011 (a 6% decrease from the previous quarter, Q4 2011). • • Traffic acquisition costs, in large part what Google pays others to make Google search prominent on their sites/platforms, were up slightly. • Smartphoens are altering how we search. It's typically easier to activate a highly specific app on a smartphone rather than go to a mobile web browser and search on Google. This has created legitimate opportunities for more and more applications to cut into more and more types of search. Despite Google search and Google maps, for example, the smartphone makes it far easier and better to search for a restaurant using Yelp, say, than using Google. Smartphones are linked with platforms. The web is no longer the web. To "google" is no longer as simple as typing in a phrase in the open web browser. Carriers and device makers have more power than before over how accessible a search engine is both in the device and on its browser.For example, Google has to pay Apple to make Google search the default on iPhones and iPads. This will not change. However, as I've said many times, when you look at the numbers you realize there is no iPhone vs Android war -- it's Apple iPhone vs Samsung Android.This gives both companies leverage over Google. I would not be surprised if Samsung increases its demands on Google. Such as, to start, increasingly large direct payments to incorporate Google search and all the other 'sanctioned' Google applications on its devices.There's also that massive US number. Almost half of all Google's revenues come from the United States. iPhone is strongest in the United States. It's share of the US smartphone market stands at about 30%. It is the most popular device across the three largest carriers in the nation. As iPhone grows in function, expect it to also demand higher payments from Google. We should also expect the iPhone platform to offer more/superior alternatives to Google. Lastly, there's the issue of the cost per click, which fell for the second quarter in a row. Cost-per-click (CPC) is the amount Google charges advertisers when a user clicks on an ad. Though Google refuses, still, to break out numbers, it's widely accepted that cost-per-click is down because of the shift from PC search to mobile search.Isn't this backwards? That is, shouldn't the cost per click for mobile search be higher than PC search?In theory, yes. Smartphones are always on, highly social, location aware. The results they return should therefore be much more specific -- more "relevant" as Google states.A more relevant result ought to result in higher margin clicks. Only, they do not. In fact, I don't believe they ever will. The cost-per-click business model is a relic of the PC age. While Google's Page is correct in stating that Android is growing, and we all know that smartphone device growth will far surpass PCs, the business model that has allowed Google to earn around $40 billion a year in revenues and over $10 billion a year in profit, is dying.Cost per click on a smartphone screen is, frankly, silly. The smartphone allows for extremely specific results and that is what the smartphone user demands. Smartphones are simply better at search than PCs. They present information based on the exact time, the exact location and the exact need. But the Google model, built for PCs, is likely not the model that will win out. By owning the Android platform and by having the leading smartphone mapping service, Google is well positioned to offer superior search services. It's just that their primary method, the one they've used to become a global web giant, is increasingly irrelevant. In addition, another core strength, the ease of use of their service, where an always-open (PC) browser allowed for rapid search -- on Google -- is no longer the preferred (or even sensible) method of searching.Fact is, only a couple years ago, Google owned search. Now, because of the smartphone wars, new forms of search are exploding across devices and platforms. Certainly, Google is well positioned for this. But they are not the only legitimate solution nor do they control the superior business model for this ew era of search. It's a whole new world. Over the past decade, Google went from a noun to a verb. This is now reversing itself.