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 While Google should be happy with Android's success so far, they are showing signs to the contrary. Since Google gives Android away for free, they can only make money on selling ads on the Android platform. They don't talk about how much they make from these ads either.

Even though Android is increasing in market share, that does not mean Google is making money on all that market share. Since Android is open source and device makers can remove Google from the devices, this could be a danger for Android's future development if Google can't make enough money.

They are basically writing a free operating system and letting others make the money off of it. This is not a sustainable business model and Google knows it. Google might be beginning to understand they are not making enough money on Android through ads. They are starting to hire programmers to develop applications for their App Store. This presents two problems for Google though.

-First, it shows there are not enough developers building quality applications for Google's App Store. There might be quality applications on other Android app stores, but Google does not make any money there either.

-Second, Google knows that they can't make money by writing small applications for Android. So they must be hiring these developers to improve the popularity of Google's App Store.
It is not sustainable to create most of the applications for your own app store. It also drives developers to other app stores and other platforms.

While Android's market share is increasing, Google is still searching for ways to make money. They have only a very limited amount of opportunities to do so since Android is open source software. Unless Google can find a way to make money, the development of Android is in danger. Google's questionable profits from Android may prove to be its greatest weakness.

2 Comments

1. bmovie ~ February 3, 2011 17:15
   The state of the Economy and Unemployment, the irritation of Bing and Google's equivalent, the flood of pop ups and ad overload everywhere (take this page for instance), and the recent OpOut policies by Microsoft and Chrome to not have visited webpages tracked will only speed up deflation of Google. Some of the people who buy Android phones do so because of price. You may not find big ad-clickers here.
2. lrd ~ February 4, 2011 04:53
   Google's been outflanked by Apple. First, they ain't make any money from the huge effort they made on Android on the cell phone side, which Apple's making billions in profits. And to make matters worse, the iPad is now a carrier free device meaning that you see them at Verizon, AT&T, Best Buy, Target, Walmart and yes Apple stores. It's going to be nearly impossible to gain any traction with almost all the major outlets having iPads. Not to mention 60,000 native apps, iTunes, etc. And the icing on the cake is the iPhone coming to Verizon. You know it's going to bite deep into Motorola's & HTC's numbers. My guess 25 to 40% just in this quarter! That going to hurt. And when the iPad 2 comes out, you know Apple's going to lower the price of the original iPad by $100 or so. Competing with Apple at $400 for a 16 GB, WIFI & 3G unit is going to hard- plus the $15 a month data plan with no commitments.

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