When I heard about Android being positioned against the iPhone, I thought about how that decision must have been justified internally at Google. I wondered how Andy Rubin added up the benefits of his product vs. the risks of losing whatever value Google derived from the iPhone.
On the benefits side, Android’s original business plan called for zero direct revenues with indirect revenues from search. The actual value would be somewhat dubious during the half decade it will take to get a significant installed base. Of course, with the Google-as-retailer model, Android can also be justified as earning some margin from devices, but as we’ve seen, these numbers don’t add up to much.
On the risk side there is the potential loss of the screen real estate on the iPhone (see photo above). Being the default search engine in mobile Safari might be worth hundreds of millions to Google.
Silicon Alley Insider reports a rumor that Apple’s current deal with Google to provide default search functionality for the iPhone is currently worth over $100 million per year to Apple in revenue sharing.
So the iPhone may be a bigger money maker for Google than Android will, at least for a long time.
Which begs the question of whether by picking a fight with Apple, Android is biting the hand that feeds it.
If there is any logic to this Android adventure it might be that Google really feels it needs to have an option on the future mobile computing platform and that Android is worth the risk of losing placement on the iPhone.
I, for one, don’t think this is a risk worth taking.