Google wants to increase its share of Play Store Android app revenue, new report says

June 28, 2013
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Google Play

A new report says that Google is interested in making more money from Play Store Android app sales, with the company currently negotiating its deals with carriers in certain markets.

Before developers get alarmed, we’ll tell you that Google is said to be interested in renegotiating its agreements with mobile operators alone, which means devs will still get 70% from every app sale.

The carriers

Business Insider says that Google is talking to South Korean carriers to increase Play Store revenue in the region – and possibly with other operators in other markets – at least according to Macquarie analysts Eugene Jung and Ben Schachter.

Apparently the current revenue scheme for app sales works like this: 70% of every sale goes to the developer, 25% goes to the carrier, and 5% goes to Google. The new deal would cut the carrier’s share to 15%, which is what Google would also get.

According to Schachter, based on data from app analysis company Distimo, the Google Play Store generated around $350 million in revenue in May alone, of which Google got $17.5 million, at 5% (that’s revenue, not profits). With a revenue share increase to 15%, that number would have been $52.5 million.

Schachter believes that Google could generate $500 million in Play Store profits in 2014.

Naturally, this is just speculation at this point, and it’s hardly likely that Google or the carriers will spill the beans on such financial details.

Hugo Barra

Since we’re talking about mobile operators, we’ll ask the obvious question: should carriers make money from Play Store Android app sales? That’s certainly a complex discussion, considering that carriers already make a lot of cash from voice and data services that come with smartphones and some tablets. Not to mention that Android is free of charge and customizable to such an extent that carriers get to lay down plenty of conditions when ordering new devices – which explains the bloatware on-contract handsets come packed with. On the other hand, carriers can always argue that they provide the access Google needs to Android users that get to download and use paid apps.

Google’s Play Store reports

Unfortunately, Play Store app-related financial details are not exactly transparent, in order for us to really understad what’s going on with this particular side of the Android business.

We’ll note that the company has never shared actual financial details about app sales. At I/O 2013, Google’s Hugo Barra said during the keynote that the Play Store has reached 48 billion app installs – later reports estimated that the store would surpass Apple’s App Store by October when it comes to downloads – and that 2.5 billion app installs have been registered in the month preceding the developers conference (I/O 2013 took place in mid-May).

Barra also said that, in the last four months (at the time of the event) – so we’ll assume that it’s the January–April period – the company paid more money to developers than in 2012. He also revealed that “revenue per user is 2.5 times what it was a year ago, globally.”

These are very interesting numbers, but Google did not actually reveal any actual figures concerning revenue generated by the Play Store. How much money have been paid to Android developers to date? That’s still a mystery.

WWDC 2013 - App Store revenue

Apple’s numbers

Naturally, we’ll compare Google’s Play Store financial reports with Apple’s App Store reports, because that’s (still) the main fight in the mobile ecosystem. Here’s what the iPhone maker said during its latest WWDC event (which took place in mid-June) regarding App Store revenue and profits:

  • $10 billion paid to developers since the App Store was launched
  • $5 billion paid to developers in 2012 or “three times more than all other platforms combined”
  • app download revenue by platform is at 74% for iOS, 20% for Android and 6% for others, according to a graph presented by the company (image above)

Apple’s share for App Store app sales is also 30%, and it’s not clear whether the company shares any of that revenue with carriers – we’d say it doesn’t, since the company has been portrayed to dictate terms to mobile operators and not the other way around.

Google’s mobile money

Google is indirectly making lots of money from the mobile business generated from ads shown in its web services. At one time, Google was said to have a run rate of over $8 billion from the mobile business, including Play Store earnings.

Interestingly, various reports said in the past that Apple devices are responsible for a lot of the mobile cash heading to Google each quarter – and that Apple is getting a share of that.

But since Android is available free of charge to OEMs, the company doesn’t really make money directly from device sales and has to find other ways of monetizing its own OS.

The company does sell its own Nexus devices – many of them at cost, but only in certain markets – and offers users access to other content including movies, music, books and magazines in addition to apps, at least in certain countries.

Nexus

In fact, Microsoft is also said to make plenty of cash off of Android given its various licensing deals with many Android device makers – at one point Microsoft was said to make more money from Android device sales than Google itself.

Wrap up

With all that in mind, we certainly shouldn’t be surprised to hear that Google would like to make more money from Android – the company is rumored to be interested in creating more hardware of its own, and to make Android available to other devices than just smartphones and tablets. After all, Android is business for Google and it should be profitable – there’s nothing wrong with such a line of thinking.

But then again, analysts like the ones quoted by Business Insider could always be wrong regarding the state of the Play Store financials and Google’s immediate related interests. What seems to be certain though is that Google’s Play Store revenues aren’t yet at the level the company wants them to be, considering that Google is not yet ready to mention actual numbers like Apple does. And that obviously means that Google would definitely like to see Play Store Android app sales increase, so it can pay more money to developers, so it can attract more devs and users to Android, and ultimately, so it makes more money itself.

How much are you spending on Android apps?

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