GOOGL - Google

[Palantir]

a lot. it drives usage of google services. it's why fb attempted, and failed miserably, to co-opt the android user interface.  users didn't much care for it.

 

Could you give me a number instead of "a lot"? If it is "a lot", how much is it specifically?

 

Or you could just say "I don't know".

[Liberty]

a lot. it drives usage of google services. it's why fb attempted, and failed miserably, to co-opt the android user interface.  users didn't much care for it.

 

Could you give me a number instead of "a lot"? If it is "a lot", how much is it specifically?

 

Or you could just say "I don't know".

 

I don't think it's something we can know precisely (even Google probably can't be sure), but there are two things to consider IMO:

 

1) Imagine a world in which Android doesn't exist, or exists but isn't controlled by Google. iOS would still be huge at the top, and either Windows and/or RIM would fill the rest, or some Google-less Android. In any case, I can't imagine any of those scenarios that are better for Google than controlling (mostly) the most popular mobile OS. Fewer people would have the Google search right on their home screen, fewer would use Google apps by default, and maybe those who control whatever OS would be popular would try to keep Google services out or make them pay for inclusion. Doesn't mean Google wouldn't be popular on mobile, but it wouldn't have nearly the favored position that it has now by influencing the OS directly.

 

So that counter-factual tells us that Android is quite valuable to Google.

 

2) The transition from desktop internet usage to mobile internet usage is challenging for Google. Hence the decline in CPC. That's definitely a big challenge for them. But the way I see it, in no ways would the situation be better if they didn't have Android. It's a challenge, but it would be even more challenging without Android.

 

That's value right there, and even if I can't tell you how much the man weighs, I can tell you he's pretty fat.

[Guest wellmont]

a lot. it drives usage of google services. it's why fb attempted, and failed miserably, to co-opt the android user interface.  users didn't much care for it.

 

Could you give me a number instead of "a lot"? If it is "a lot", how much is it specifically?

 

Or you could just say "I don't know".

 

they choose not to disclose how awesome it is. :)

[Palantir]

 

I don't think it's something we can know precisely (even Google probably can't be sure), but there are two things to consider

 

There is no doubt that there is strategic value in Android, and I think it has been a great decision to create Android for Google. However, Android is primarily a defensive move to prevent other manufacturers from dominating the mobile space, and growing strength in Android does not necessarily benefit Google that much. But the question is particularly aimed at Wellmont who has repeatedly been touting Android and its marketshare.

 

This is the relevant post:

 

that's the beauty of android though. it doesn't matter who wins and loses as long as the ecosystem gets stronger. as it seems to be doing. would not surprise me if goog got out of building handsets and just kept the moto ip.

 

Talk of huge marketshare and ecosystem is great, but let's see who's actually making money off this.

 

 

And the silence is deafening.

[Liberty]

 

I don't think it's something we can know precisely (even Google probably can't be sure), but there are two things to consider

 

There is no doubt that there is strategic value in Android, and I think it has been a great decision to create Android for Google. But the question is particularly aimed at Wellmont who has repeatedly been touting Android and it's marketshare.

 

And the silence is deafening.

 

The reason why I say that even Google probably can't know is because even if they have a way to track how many times people click on ads just on mobile Android, and say that number is $5 billion, that still doesn't tell you the value of Android.

 

In a world without Android, that 5 billion might go away, but maybe they'd lose a lot more than that 5 billion by not controlling the OS. What if Windows was the most popular mobile OS and everybody got used to Bing and depended on fewer Google Apps, making them less likely to also search on Google on both mobile and desktops? What if Bing built a critical mass of advertisers thanks to mobile OS control? That could be costly. What if RIM was tops and wanted a share of all ad revenue from its devices? If they were the most popular, they'd have a pretty good bargaining position to force them to do that.

 

So even if Google has some internal number, I think it would only partially state the value of Android for their business. They could disclose that number, but it wouldn't tell the whole story IMO. The important of things isn't always proportional with the ease of measuring them.

[Palantir]

Again, I'm not saying that Android is useless, but as I stated in my (now edited) post, Android is a primarily defensive move to prevent others from dominating the space. Point being, just because Android becomes a very strong ecosystem, as the poster above said, it doesn't mean that it will produce a lot of incremental profitability for Google.

[Guest wellmont]

the best defense is a good offense. :) android was a savage offensive broadside against apple that protects fort Google. and brings untold riches to the Kingdom.

 

http://en.wikipedia.org/wiki/The_best_defense_is_a_good_offense

[Liberty]

Again, I'm not saying that Android is useless, but as I stated in my (now edited) post, Android is a primarily defensive move to prevent others from dominating the space. Point being, just because Android becomes a very strong ecosystem, as the poster above said, it doesn't mean that it will produce a lot of incremental profitability for Google.

 

Functionally, what's the difference between a defensive and offensive move, though?

 

Say you make $100/year, and then something happens that would make you lose $10 a year. You figure out a "defensive" move that counters it and you stay at $100. Have you made $10 more than you would have otherwise ($10 profit?), or are you still in the same place?

 

Would you see it differently if you had fallen to $90/year and then made an "offensive" move that brought you back to $100?

 

I see them as the same.

 

Not losing money you would otherwise lose is a win in my book, same as making money you wouldn't otherwise make.

 

And it all depends on how you look at it. Android certainly could be seen as an "offensive" move that preempted a lot of competitors and hurt them, which made Google stronger.

[Palantir]

I repeat, I'm not saying that Android is a bad move. However, Wellmont keeps talking about how Android's marketshare growth will lead to a stronger ecosystem. However, my point is that even a stronger ecosystem doesn't really benefit Google all that much, at least not in the way it does for Apple - which due to a different business model truly benefits from a strengthening ecosystem because its margins on the hardware are so high.

[Liberty]

I repeat, I'm not saying that Android is a bad move. However, Wellmont keeps talking about how Android's marketshare growth will lead to a stronger ecosystem. However, my point is that even a stronger ecosystem doesn't really benefit Google all that much, at least not in the way it does for Apple - which due to a different business model truly benefits from a strengthening ecosystem because its margins on the hardware are so high.

 

I agree that nobody is better positioned than Apple in mobile. But with the cards it had to play, Google is also doing well.

[Guest wellmont]

android increases penetration of google search. this service has way higher margins than apple hardware, which are declining btw. thus the argument that a system which drives the use of goog highest margin product does not put coin in google's purse, seems seriously flawed.

[Palantir]

Not necessarily, a stronger ecosystem doesn't immediately mean that Google increases penetration of its search engine. On mobile, people spend most of their time inside apps, not searching on google, and in fact these apps may well take away Google's search traffic.

 

Apple's gross margins are declining?

 

Gross Margin %

27.50 (2003)

 

27.30

 

29.00

 

29.00

 

34.00

 

34.30

 

40.10

 

39.40

 

40.50

 

43.90 (2012)

 

 

[Guest wellmont]

your data is well, dated.

 

http://www.forbes.com/sites/afontevecchia/2013/07/23/apples-strong-iphone-sales-mask-falling-revenue-per-unit-as-gross-margins-contract/

[Guest valueInv]

Again, I'm not saying that Android is useless, but as I stated in my (now edited) post, Android is a primarily defensive move to prevent others from dominating the space. Point being, just because Android becomes a very strong ecosystem, as the poster above said, it doesn't mean that it will produce a lot of incremental profitability for Google.

 

Functionally, what's the difference between a defensive and offensive move, though?

 

Say you make $100/year, and then something happens that would make you lose $10 a year. You figure out a "defensive" move that counters it and you stay at $100. Have you made $10 more than you would have otherwise ($10 profit?), or are you still in the same place?

 

Would you see it differently if you had fallen to $90/year and then made an "offensive" move that brought you back to $100?

 

I see them as the same.

 

Not losing money you would otherwise lose is a win in my book, same as making money you wouldn't otherwise make.

 

And it all depends on how you look at it. Android certainly could be seen as an "offensive" move that preempted a lot of competitors and hurt them, which made Google stronger.

 

Android does little to protect Google against FB, Twitter, Pinterest,etc. these are the real threats. But Google has been too busy blowing money on Android to develop a defense against them.

[Palantir]

You realize that AAPL fixed that problem with the 5C? Ironically, you complained that the 5C was there to increase profit margin.

 

Anyways, it appears we have reached an impasse. I will exit before the mods start exercising the recently discussed punitive measures.  8)

 

 

[RichardGibbons]

Wellmont, how much money does Google make off Android?

 

To me as an investor, I think the more interesting question is, "how much money will Google make off Android?"

 

Not that I have an answer for it.

[Guest valueInv]

Wellmont, how much money does Google make off Android?

 

To me as an investor, I think the more interesting question is, "how much money will Google make off Android?"

 

Not that I have an answer for it.

 

Here's some back of the envelope numbers:

 

Google's mobile run rate was $8B. Android held 20% of web traffic share. Assume, that ad revenue was proportional to web traffic (which is being very generous to Android), then Google would have made less than $2B. Now subtract the losses at Motorola and other Android expenses to get a rough idea.

Then estimate a cannibalization on desktop ads.

[Guest valueInv]

android increases penetration of google search. this service has way higher margins than apple hardware, which are declining btw. thus the argument that a system which drives the use of goog highest margin product does not put coin in google's purse, seems seriously flawed.

 

Android brings the price point of mobile devices down and speeds up the transition from desktop to mobile. This replaces higher CPC desktop ads with lower CPC mobile ads, which in turn reduce margins. Take a look at Google's margins first.

[ilike]

This is interesting. Soon SEO will be much harder and potentially a lot more people want to advertise on adwords.

 

http://blog.hubspot.com/google-encrypting-all-searches-nj

[ItsAValueTrap]

I don't think that the move will make much of a difference to Google's revenues. 

 

The keyword data:

1- Helps website owners track the effectiveness of their SEO / organic search performance.  Making SEO harder to track would raise the cost of SEO slightly.  So this could make paid traffic more attractive as their time can be more effectively spent optimizing paid traffic than organic traffic.  But the effect of this will be really, really small.

 

2- Helps retargeting ad networks that compete with Google Adsense.  I think most Google users would prefer that their search keywords not be used in this manner (by Google or any of Google's competitors).  Ads that follow you around can reveal any embarrassing hobbies or problems that you have.  I think that most consumers would opt out of ad retargeting if they had the choice.

 

Of course, Google and other advertising companies will abuse your privacy anyways.  They'll all getting on the retargeting bandwagon because better ad targeting makes more money.

 

3- Could be used by the NSA or other intelligence agencies to spy on what you search for.

 

---

Google's move does help protect the privacy of its users (ironically, Google infringes upon the privacy of its users anyways) and happens to help Google make money.

 

Some more information on the subject:

http://searchenginewatch.com/article/2118494/SEOs-Strike-Out-as-Google-Encrypts-Signed-in-Search-Data

[ilike]

I do not think it will affect revenue hugely either but I will predict a few effects on the online marketing business in general.

 

1) Consultants and agencies selling SEO services will have an even harder time showing result making SEO investments from companies less desirable.

 

2) Google search engine results will improve when it gets harder to game. I do think that Google realize that qualitywise the competition is closer to them then ever and I think this is the main reason for them doing this as well as shutting down the keyword tool.

 

3) Everyone has to have at least a small adwords campaign to get some traffic data. You will still have keywords in those.

 

4) Google may include keyword in their $150 000 yearly professional subscription to analytics.

[Guest valueInv]

While I don't agree with everything, its basically the "throwing crap at the wall...." argument stated more elegantly:

 

http://aswathdamodaran.blogspot.com/2013/09/decline-and-denial-requiem-for.html

[Palantir]

From last year, but nevertheless, interesting.

 

Android Takes Off in China, But Google Has Little to Show for It

http://www.technologyreview.com/news/507961/android-takes-off-in-china-but-google-has-little-to-show-for-it/

[Palantir]

Another example of why increasing marketshare for Android doesn't really mean that much for Google.

 

Android is huge in China but it’s also out of Google’s control

 

http://bgr.com/2013/10/03/android-china-app-store-analysis/

[Guest valueInv]

Another example of why increasing marketshare for Android doesn't really mean that much for Google.

 

Android is huge in China but it’s also out of Google’s control

 

http://bgr.com/2013/10/03/android-china-app-store-analysis/

 

Makes you wonder about the whole Google got into Android for "control" theory.

 

- It is expected that Xaomi will expand out of China into international markets

- Android is losing share in the most lucrative market - US

- Amazon is expected to start selling non-Google Android phones

- Amazon's non-Google tablets are already a large share of Android sales in the US and expanding internationally

- Google Play's biggest market is Japan. Both NTT DoCoMo and the 5c are going to help Apple gain share there.

- Nokia/Windows seems to be gaining share in the lower end segment in Europe and Latin America - Android's safe haven

 

And we haven't even talked about advertising yet  ;)