A marketing company responsible for publishing Google’s quarterly financial reports recently committed a major gaff by publishing an unedited press release ahead of schedule. The press release revealed that Google has been losing a substantial amount of money from mobile advertising as more consumers switch to mobile based web browsing. The news caused Google’s stock prices to drop by 9%.
In just 14 years Google has gone from a small scale university project to the biggest website on the internet, and in the process has become a household name in many countries. Needless to say, Google has a lot of money at its disposal, and virtually all of that money comes from online advertising.
Mobile Advertising and Android
Google recognised several years back that consumers would start turning to smartphones and tablets more and more to meet their online demands, and that if the company did not have some control over the way that people connected online from these devices they could potentially lose a great deal of advertising revenue. This was Google’s principal motivation for acquiring and developing the Android operating system.
Android would allow Google to control the mobile ecosystem on phones and guarantee that people saw their adverts when they went online. While Google has enjoyed enormous success with the popularity of Android, with the OS being installed on more than half of all smartphones in many markets, Google has had some difficulty in producing effective ads for the mobile OS.
Part of the problem is that the smaller screens used on Android handsets allow for far less room for ads. Many of the leading Android phones tend to have larger than average screens, but they are still not large enough to provide the same sort of advertising space as a desktop computer. While Google may be able to display 20 or so adverts on a typical PC screen, they can only realistically include one advert on a phone screen without dramatically impinging on user experience.
So while Google’s prophecy is coming true, more and more people are using phones to go online, the company has not managed to achieve success with mobile advertising in the way that it had hoped when it first purchased Android back in 2005.
Was Android a mistake?
Android costs a lot of money to develop and improve, yet is provided to phone manufacturers for virtually nothing. Google had never intended to make money from Android by selling it to phone developers, as it had expected to make large profits from mobile advertising instead.
On top of this, Apple’s former CEO and founder Steve Jobs had such a hatred for Google’s operating system that the company he created has launched a series of lawsuits in recent years against Android vendors in an attempt to bring the OS to its knees. These lawsuits have become a headache for many Android vendors, in particular Samsung, and in many ways have affected the design and development of Android.
Ad Revenues on iOS
Apple’s hatred for Android is even more ironic as, for a number of years now, Google has derived more advertising revenue from iOS users than Android users, even though there are supposedly far more of the latter. Owners of iPhones and iPads spend much longer online than their Android counterparts, and are also more likely to click on adverts, it would seem.
Even though Google has no control over iOS it has been a bigger cash cow for the company in terms of online advertising than Android. Far from creating new advertising revenue streams for Google, Android has merely served to annoy Apple so much that the latter has in recent months attempted to remove Google’s influence from iOS as much as possible. The removal of Google Maps and YouTube as standard iOS features has been part of this effort, and Steve Jobs reportedly also wanted to remove Google Search.
While it is true that in the coming years smartphones will become the primary devices through which people connect to the internet, Google has yet to find a way to make advertising on Android as profitable as it is on PCs. Apple’s anger towards Google could also serve to undermine the success of its mobile adverts on iOS. Google wanted to control the way people connected to the internet through phones so that it could maximise its income, but it seems from this quarter’s financial reports that they may have chosen the wrong tactic.
Should Google Abandon Android?
If Google were to ditch Android now it would not put the company back in Apple’s good books, and it would still lack control over the way people connect online through iOS. Besides which, Android has become extremely popular with consumers. Google will simply need to find a viable way to make its mobile advertising more profitable, and a way to encourage Android users to click on more adverts.