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How does Google make money from Android?
Google manages to rake in billions of dollars worth of revenue from Android every single year. That figure has been rising ever since the operating system’s debut in 2008. However, Android is an open-source project — third-party manufacturers like Samsung can modify and use it for free. Moreover, Google doesn’t even sell as much first-party hardware as Apple does. The Pixel series has a significantly lower market share than the iPhone. So how exactly does Google make money from Android? Let’s break it down.
Where does Android’s revenue come from?
The Play Store represents Google’s largest and most direct revenue source for Android. That’s not too surprising if you think about the Play Store’s install base. More specifically, it’s pre-installed on every single Android-based smartphone and tablet. The Chinese market is the only exception, where Google has no foothold despite Android’s popularity. Elsewhere, the company takes a sizable cut — as much as 30% — on transactions that take place through the Play Store.
Every time you buy an app or game on the Play Store, the total amount is split between Google and the developer. The exact percentage varies, but Google takes a minimum of 15% in exchange for hosting the app and serving it to users. And while that might not sound like a lot, it quickly adds up when you consider that there are over a billion Android devices in use. Still, the actual profit is much lower than 15 or 30% due to operational expenditures and other factors.
Google makes as much as 30% on every transaction through the Play Store.
Besides one-off app sales, the company also gets a cut from in-app purchases and subscriptions. The latter includes third-party services like Netflix and Amazon Prime too, both of which pay Google for facilitating transactions through Play Store billing. Finally, even free apps can serve as indirect revenue sources since many of them rely on Google services for in-app ads and analytics.
Mobile advertising may make Google less money than desktop searches because of the limited screen real estate and chances of an accidental click. Still, mobile usage increases every year, and even a few cents per ad click can still net the company millions as well as valuable data.
Beyond the Play Store: Other revenue streams
While the Play Store is the most prominent source of revenue, it’s far from the only one. Android organically drives users to many other Google services, including search, YouTube, and Gmail. After all, when was the last time you saw an Android smartphone without these apps pre-installed?
Even if Google doesn’t directly make money from some of its apps, it can benefit in other ways too. For example, Google Maps relies on crowdsourced data to improve accuracy, while a significant chunk of YouTube users watch ads and add to the platform’s general appeal.
Manufacturers that want to include the Play Store have to sign Google’s Mobile Application Distribution Agreement (MADA). Among other things, it requires hardware makers to bundle the aforementioned Google apps and the Google Mobile Services (GMS) framework. The latter prompts you to log into your Google account when you set up an Android device. This, in turn, allows the company to analyze user activity and personalize ads across other platforms too.
Read more: What are Google Mobile Services (GMS)?
We know that Google goes to great lengths to ensure that it stays at the top of the search engine and advertising market. In 2014, the company paid Apple $1 billion to make its search engine the default on every iPhone. Similarly, Google also pays rival web browsers like Firefox hundreds of millions of dollars every single year to maintain its top position.
How much money does Google make from Android?
Estimating just how much money Google makes from Android is tricky. Every publicly-traded company has a legal responsibility to disclose its earnings to investors every quarter. However, since Google has so many ventures, it’s not easy to drill down exactly how much Android alone contributes to its bottom line.
In its earnings reports, the company combines revenue from multiple sources, under the sub-heading “Google Services”. This includes income from Android, Chrome, Maps, and hardware (like Pixel and Nest devices). In the first quarter of 2022, this “services” division brought in $6.8 billion in revenue for the company.
While the above number offers a glimpse into Android’s fortunes, it doesn’t quite paint a full picture. Make no mistake, though, the secrecy is completely intentional. Google doesn’t want the public to know how much money it makes from Android alone.
Google doesn't want the world to know how much money it makes off Android, but it can't hide everything.
In 2016, Google asked a judge to redact and seal documents that potentially revealed how much it makes from the Android ecosystem. It stated, “Google does not publicly allocate revenues or profits to Android separate and apart from Google’s general business.”
At that point, Oracle’s attorneys estimated that Android had generated a total of $31 billion in revenue and $22 billion in profit. Nearly half a decade has passed since those filings, however, so things have undoubtedly changed since then.
It’s also worth reiterating that direct revenue represents only a small fraction of the mobile operating system’s value proposition. Thanks to Android’s far-reaching scope and a cross-platform suite of apps, Google now has a network of capillaries extracting money out of the entire ecosystem.