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March 21, 2016

Money is the root of all Android

by John_A


The world’s most popular free operating system rode to dominance on a tsunami of cash.

Android is the most popular computing platform in the world. More people use Android than use Apple’s OS X and iOS (combined), Microsoft’s Windows phone and desktop OS (again, combined), and even more than everything else all bundled together. This doesn’t mean Android is the best OS for things like desktop computers or Internet servers — it’s a reflection of the rise of the smartphone.

How Android was able to take the smartphone market by storm and grab over two-thirds of the market is an interesting study in economics and how it relates to technology. And, naturally, it’s all about the money.


Depending on when you look, Android-powered phones are between 75 percent and 80 percent of the worldwide total. While Apple makes the majority of the profit when talking about the folks who build smartphones, the sheer numbers of Android phones in the wild is staggering. The last “official” count was over 1.4 billion (and that’s only devices with Google services installed) and it comes from a Nexus press event in 2015 — we expect that the number will have grown significantly if Google makes a similar announcement at Google I/O 2016. Clearly, there’s money to be made by building (and more important) selling Android phones.

Android-powered phones have between 75 and 80 percent of the worldwide market.

In 2008 things looked a little different. Windows phones, Symbian phones and BlackBerries were slowly being phased out by the iPhone, players like Palm were trying to make a dent, and Google, in partnership with HTC, had released the Dream/G1. That partnership with HTC, just who had control over the operating system, and who was able to collect the money from sales is where everything was going to change.


Android is free. Google continues development of it all, then freely gives away the source code with a pretty liberal software license, and manufacturers like HTC were allowed to do anything they wanted with it. They then built out services and applications so that phones running Android could do the things we all want our devices to do.

Any company that built phones had a complete package of software they could use — and modify — and it didn’t cost them a dime to develop or license. Who actually controlled that software was quickly evident when HTC and Rogers decided that phones sold in Canada weren’t going to be upgraded to a new version of Android, while identical models in the United States and elsewhere would be. Unfortunately, fragmentation is a real thing, has been from the very first Android phone, and it is by design.

The era of City ID and Carrier IQ was not an accident.

It wasn’t long before companies like Samsung and Motorola got on board, taking the functional but sparse system Google offered and customizing it to their liking. The source code license allowed them to make any changes they wanted to make without releasing the modifications for anyone else to use, and meeting the requirements to use Google’s applications and services was fairly easy — Google wants as many phones as possible to use its services.

These early phones were completely functional smartphones with a minimum of development costs and very little software licensing fees. This means they had a pretty attractive price tag for manufacturers — savings over competing platforms that they could pocket or pass on to customers. Consumers and smartphone resellers and service providers soon caught on, and Android took off like a wildfire, especially in places where you couldn’t buy an iPhone, or where the price was more than the average person could afford.

More than anyone, cellular service providers like Verizon or AT&T loved the idea. The phones themselves were fairly cheap to buy in bulk, and the companies making them were more than happy to add any software the buyers — again, we’re talking the carriers, not individual customers — wanted. The era of City ID and Carrier IQ was not an accident. Not only could a company like Sprint fill its shelves with affordable and capable smartphones, but those phones were chock full of services they could make money from. And we bought them.

Even without any carrier involvement, adding software was profitable for Android manufacturers because they could score lucrative contracts with the companies that wrote mobile software. We still see that today when we buy an unlocked and unbranded phone and it comes with something like Clean Master or Lookout pre-installed. (Cheetah Mobile had done really well for itself the past couple years before its stock took a hit in mid-2015.) Google has no say in what extras are on a phone you buy as long as the minimum requirements are met.

Make no mistake, tragedies like the death of Palm were a direct result of Android being free to use.

It wasn’t just the major players that found that using Android was a way to stay competitive without budgeting the costs to build their own software or license it from someone else. Smaller companies like BLU or ZTE were able to leverage free software and turn out successful products by the millions, and many have become one of the aforementioned major players because they were able to use Android. Just because your year-end balance sheet doesn’t compare to Apple’s doesn’t mean it’s not profitable to stay in business.

verizon-fascinate-1.JPG?itok=KMf1y6wa Bing!

This meant that companies that build their own hardware and software in-house weren’t able to corner the emerging smartphone market. Some, like BlackBerry, fell on tough times. Apple was able to cater to the high-end market in the West by offering what many felt was a superior product worth paying more for. Microsoft can afford to weather bad times while they reinvent themselves. Consumers found value in lesser-priced products, and Android being “free” meant most of those products were using it. Make no mistake, tragedies like the death of Palm were a direct result of Android being free to use. Sprint stopped trying to sell you a Pre when they started stocking the HTC Hero, because the Hero was more profitable for them.

Android may be free to use, but it’s still a pay-to-play game if you want to win.

While inexpensive yet capable phones are mostly a benefit for consumers, there are some serious drawbacks, too. I use and enjoy Google’s services, and I’ll wager most everyone reading does as well. But because so many phones are reliant on them, it’s hard for new companies to get a foothold. Even if offered for free, it’s difficult to convince people to use a new service when they are already embedded in an existing one. With so many phones natively designed to use something like Gmail, we’ll never know if something better was developed and abandoned.

If you are in charge of Samsung’s phone division, what’s your incentive to bundle a client for something you’ve never heard of when so many of your loyal customers are satisfied with the existing software and how it works? Money, that’s what. Only companies that can afford to compete are able. A free market can be a good thing, but not when the deck is stacked against everyone else. Thankfully, Google has proven to be an innovative company who isn’t afraid to buy that better idea and incorporate it. Let’s hope they remain that way.


Android has evolved. Phones like the Galaxy S7 or Nexus 6P are amazing pieces of technology running software that have little user-facing resemblance to what we used in 2008. The Internet can argue over silly things like Touchwiz versus “stock” Android, but the reality is that both sides are wrong. That’s called choice, and Android brings it to the luxury smartphone market just as it does with the low-end.

The choices will continue to grow, because using Android is profitable at both ends of the spectrum. Companies that build phones will continue to use Android because it’s free. Carriers will continue to have their own special versions of phones built because they make more money from them. Google will continue to make copious amounts of cash from Android, not by directly selling or licensing it, but because so many people can easily use their services.

The rise of Android, like so many other things, followed a trail of money.


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