Google's Android Revenue is Still Difficult to Determine

Google develops the Android operating system and gives it away for free as an open source project. Manufacturers have to meet certain standards in order to get the official Google apps like GMail and the Google Play store (formerly Android Marketplace), but those standards don't involve fees.

Google makes money via taking a cut of paid apps and running an advertising platform that developers can use. According to documents that have come out thanks to Oracle's lawsuit against Google, from 2009-11 Android made $543 million for the company that develops it. The Guardian estimates based on the rough numbers of activations Google has released that it comes out to a little over $10 per device. By comparison, Microsoft makes at least $5 per device on 70% over Androids out there thanks to patent royalties.

So is Android a business failure? It's still difficult to say even when you compare that $543 million over three years to the $38 billion of revenue the company brought in during 2011 alone (and consider that it's probably not the full amount of direct revenue anyway).

Google is not like most companies. It doesn't make most of its money by producing products and services and then selling them for more than they cost to make. It is perfectly content to pour money into products that it doesn't charge for so long as it can collect information about users and their habits and sometimes serve ads on them. It then uses that information to tune its advertising algorithms, the real core of the company. Serving up the most relevant ads possible to its users increases the likelihood of people clicking on them, which then maximizes revenue on the ads.

Android is a both an offensive and defensive play for the company. It's offensive in that Google can get information about users to use in its ad algorithms on top of the app and ad income. It's also a defensive play because Google wants to make sure there's a major mobile OS out there that won't shut out its services.

Google bought Android in 2005, well before the iPhone in a time when Windows Mobile was rapidly growing in the smartphone space. Google probably could envision a future where Windows Mobile dominated smartphones like regular Windows did on PCs, and the default search setting on there would be Microsoft's competing search engine. With mobile the future of computing, such a future would hurt Google's growth prospects drastically.

Windows Mobile obviously tanked and Windows Phone 7 is out there to replace it, but Apple is the big rival on mobile now. Apple does use Google Maps in iOS, but that may not last for too much longer. It also uses Google as the default search engine in Mobile Safari, but there's no guarantee that will last. It was even rumored heavily a couple years ago that Bing would replace Google as the search default.

I really wonder how long a play Android is for Google. I really think the company has already shown us what it wants the future of computing to be with Chrome OS: everything is on the web where Google can track users and serve up ads. If everything does become a web page or app, it doesn't matter which hardware or OS you use because Google could still track and serve ads to everyone. That vision can't come to fruition yet because web technologies can't match the functionality or speed of native code yet, so the company must develop Android in the meantime.

In any event, Android may have indirectly provided the company more revenue than was reported in the court documents thanks to information from tracked Android users helping to hone the ad algorithms. It might also have kept the company from losing revenue. RIM's Blackberry would probably be No. 2 behind iOS absent Android and, for instance, the Blackberry Bold I have for work has Bing as the default search provider.

Google is probably content not to include such considerations when it comes to how much it might have to pay to Oracle in royalties for Java patents, but it does go into the consideration for the value proposition of Android to the company. Because Android provides some sense of security for the company's core business in the fast-changing and uncertain mobile computing market, its value to Google cannot be distilled down to a single number.

Two Reasons a 4.6-Inch iPhone is Unlikely

Reuters has picked up a story about how there supposedly will be a 4.6-inch iPhone coming out this year. It attributes the rumor to a South Korean publication called the Maeli Business Newspaper, which itself heard this from an "unnamed industry source". Nothing like third-hand information to get everyone going on a Thursday.

The kernel of truth to this that makes it worth considering is that the South Korea-based Samsung is the supplier for the third-gen iPad Retina displays. It's a major supplier of components to Apple, so there are, in fact, some people in South Korea who are familiar with Apple's future roadmap.

There are two big reasons why I am very skeptical of this rumor. One is complicated, while the other is simple.

Let's start with the complicated one. The iPhone screen has always used a 3:2 aspect ratio, first at 480x320 and then at 960x640. The reason why Apple used the same ratio when going to a Retina display is that it wouldn't require developers to re-code their apps. Everything would just scale up 2X, and that would do nicely until developers double the size of all of their raster image resources.

Using a different aspect ratio for the screen would have added a lot of headaches for developers as the layout would have to be tweaked. That is part of the fragmentation problem with Android; it's not just about a wide range of OS versions in the wild but also different screen sizes. The screen dimensions matter greatly when all apps are full-screen apps. Apple took the same tack with the third-gen iPad's Retina display, as it is double the resolution of the first two iPads' displays.

When Apple introduced the "Retina display" term for the iPhone 4, it claimed that for the distance that phones are typically held from the eye, the screen must have 300ppi to qualify for the "Retina" title. A 4.6-inch screen at 960x640 computes to about 251ppi. In order for this mythical, monstrous iPhone to keep the Retina designation and maintain the same aspect ratio as previous models, the resolution would have to be doubled again to 1920x1280. That comes out to a ridiculous 502ppi, clearing the "retina" bar with ease.

While the A5X is certainly capable of driving that many pixels, as the third-gen iPad has more than that, I don't know if it could do it in a phone form factor without draining the battery too quickly. Let's imagine that it could though, granting that the larger frame of the phone would give more room for a sufficiently large battery.

App developers would have to put three different sizes of their images in their packages, one for the iPhone 3GS's 480x320 screen, one for the iPhone 4/4S's 960x640 resolution, and yet another for the new 1920x1280 screen. Not only would that be a pain for developers, but each app would take up a lot more room (especially photo-heavy apps). The 3GS and 4 models still on sale only have 8 GB of flash memory on them, and the 4S starts at 16 GB. Storage space is a significant constraint, and forcing apps to have three different sizes of images would be untenable.

So that's the complicated reason. The simple one is that a 4.6-inch phone is simply too big for most people.

The iPhone's 3.5-inch screen wasn't chosen at random. It's roughly the biggest screen you can have where everything can be operated by a single, normal-sized adult hand. It's unlikely that anything will be out of your thumb's reach while holding an iPhone. On 4-inch and larger phones, it becomes difficult to impossible to operate one-handed, in particular being able to access both toolbars at the bottom of apps and the notification drawer at the top of the screen. That is the kind of detail that Apple considers when building these things.

I'll never say never about a larger iPhone in the future, but jumping to a 4.6-inch display this year isn't likely. At the very least, such a jump would probably require that most of the non-Retina display and 8GB iPhone models be cycled out of use, and that won't happen for at least two years following 2012's new iPhone announcement.

For what it's worth, the largest a 960x640 screen can go while still being above 300dpi is 3.8 inches. That might still be small enough to operate in one hand, but it would feel like change for change's sake. Change for change's sake is not the sort of business Apple is in.

Apple's Dividend and Its Future Opportunities

It's becoming clearer and clearer over time that for an outlet to have proper coverage of Apple as a company, it must assign someone to focus almost if not entirely exclusively on the firm. Apple has become an edge case where normal analytical rules either don't apply or require detailed knowledge to be applied properly.

For instance, consider this article about Apple's newly-announced dividend and stock buy-back program that was the biggest headline on Yahoo! Finance today. The main analysis comes from a "senior stock analyst" from Morningstar named Michael Holt. He's merely quoted as noting that Apple's cash (and cash equivalents) hoard had gotten to the "definitely excessive" figure of $100 billion and that the company needed to do something about that. A question I would ask is this: if $100 billion is excessive, what is $122 billion?

Apple added $38 billion in cash during calendar year 2011, including $16 billion in 2011's holiday quarter alone. The dividend and stock buy-back program will cost the company roughly $13.21 billion per year. If Apple's cash growth continues at 2011's pace, and it'll likely speed up as the company's sales continue to grow, Apple will finish 2012 with about $122 billion in cash. It had about $97.6 billion at the end of 2011, and adding another $38 billion minus the dividend and buy-back costs gets you to around $122 billion. Holt acts as though this new program solves the "problem" of having too much cash. Instead, it only slows the rate of cash growth. Apple's so-called war chest will just keep growing.

Or, consider this howler also from Yahoo! Finance. It's by a staff writer named Matt Nesto, and he promises five suggestings for how Apple could have better used its cash (though he only actually gives four). Never mind the merits of those ideas, which are opinions and are fine for him to have. He expresses anger at Apple for agreeing to part with 20% of its cash pile in an entirely conventional manner. He makes the same problem of ignoring the rate of cash growth. Apple isn't going to be giving up 20% of its cash; it's going to be parting with roughly one third of its annual cash growth based on 2011's figure. That percentage will fall with each subsequent year of course as sales continue to rise.

Apple already spends a lot of money each year. Its quarterly report divulges that its fiscal 2012 1Q (ended December 31, 2011) included a 32% year-over-year increase in R&D spending to $758 million for that quarter alone, and its spending on Selling, General & Administrative Expense rose $709 million year-over-year to $2.6 billion in the quarter largely due to opening new retail stores. It spent another $1.4 billion on property, plant and equipment. Among that spending is the solar farm for its recently completed North Carolina data center, which will soon be joined by another data center in Oregon and its upcoming new "spaceship" campus. It's also well known that the company pays big money up front for supplies of integral components like flash memory and high-quality displays.

Apple is already using its cash effectively, and it will keep accumulating more as long as its products keep selling at heavy profit margins. So what could possibly be next?

That question is one that Wired's Jon Phillips asks in his third generation iPad review. He wants to know what precisely Apple can do to improve on the iPad concept now that it has put a Retina display in it. I think this is a very poor approach. The iPad will not change much cosmetically because there's only so many ways you can do "just a big ol' touchscreen", but that doesn't matter too much. The iMac exterior hasn't changed except in materials since the iMac G5 introduction in 2004. The MacBook Pro has barely changed since the switch to unibody construction in 2008, and the MacBook Air is roughly the same as it was externally when introduced the very same year. The lack of external changes with both the iPhone 3GS and 4S versus the 3G and 4 did nothing to slow that product's growth.

We'll see if the long-rumored Apple television set comes out, but an area of differentiation with massive potential is one that the average stock analyst knows nothing about. It's one that Apple has been working on since the release of Snow Leopard: parallel computing.

Grand Central Dispatch is Apple's foray into helping developers make their applications better for multi-core environments. It doesn't solve the hard problems for you, but once you have solved the hard problems, it makes it easy to implement the solutions. If Apple can get all of its third party developers using GCD, and continue developing it to make it more and more friendly to those developers, then it will be a huge advantage for the OS X and iOS platforms. It's no big deal that the third-gen iPad doesn't have a quad-core CPU because most applications aren't multithreaded. However, it's been obvious for years that the future is more about a proliferation of cores than gigahertz increases. Having a truly developer-friendly and widely-used multithreading solution for best using that ever expanding number of cores would be a tremendous competitive advantage.

Beyond that, it's not hard to see where other growth areas are. Apple is only scratching the surface of what it can do with iCloud, which is understandable given that it only went live six months ago. Apple is modernizing under-the-hood aspects of Objective-C, but it's nowhere near finished there. At some point HFS+ will need to be replaced, and its successor could enable better and more efficient methods for backup and file versioning (to say nothing about data security). All of that has to do with software, and it's far more important than the cosmetic aspects of what has to be affixed behind a touchscreen to make a functioning device.

For as much room to grow in market share as Apple has, and Tim Cook likes to point out that it's quite a lot every time he gets a chance, it has plenty of room to grow technologically as well. We're nowhere near an end-of-history moment when it comes to personal computing, and everyone, not just Apple, has tremendous opportunities for improvement. The only way to come to the conclusion that Apple is out of ideas or is somehow done with big innovations is to know almost nothing about where the company is at.

This dividend and stock buy-back program is not a sign that the company is transitioning out of a high growth phase. It means that the company is executing at such a high level that it can part with an extra $13 billion a year and still stockpile over $20 billion a year in cash. As long as Apple's senior management doesn't rest on the laurels of its current product line, and it doesn't appear to be in the post-Jobs era, then there's no reason to think that returning some of its cash to shareholders has any deeper meaning than its mere face value.

The new iPad vs. Android Tablets

There was a time not too long ago when I could give decent reasons as to why someone might want to get an Android tablet over an iPad 2. Many Android tablets have high definition screens, HD cameras, voice recognition software, and 4G cellular networking. I suppose all of that is still valid in a comparison with the iPad 2.

But the new iPad? It has all of those things and more. I can only think of two reasons why someone might buy an Android tablet over the third gen iPad: if having a widescreen display is absolutely, positively, unequivocally your top priority and nothing else is close, and if you have some kind of problem with Apple stylistically, philosophically, or what have you.

The gap in the software ecosystems is gigantic. I've heard good things about Ice Cream Sandwich, but it is nigh impossible to find in the wild. With as scattershot as Android updates are, there's no way of knowing when devices will get the upgrade to it as well. Honeycomb just isn't that good, and the third party software support for Android tablets is worse. Go into the Android Market (Google Play Store?) and hit the category of staff picks for tablets. It's impossible to determine which apps are actually tablet apps and which are just phone apps that happen to scale nicely. Dont worry about it though; any given app is more than likely to be a phone app.

The new iPhoto only increases the gap between the platforms. It's a tough case to be made that a single app is a big point of differentiation, but bear with me on this one. You can get a browser, email, and Angry Birds on anything these days. The iWork apps are nice to have, but I don't think an office suite is a make or break thing on tablets just yet. iMovie and Garage Band are impressive, but I don't know how many people do heavy video editing, and even fewer do much with audio recordings.

But photos? Everyone does photos. The new iPhoto is incredible, and people's iPhone pictures will be coming into it automatically via Photo Steam. If, as rumored, Microsoft Office ends up on iOS, then you might as well turn out the lights in the Android tablet development department.

Look, I think it's very generous for Verizon to have loaned me this Droid Xyboard 8.2 as a part of its ambassadors program. That it came with unlimited 4G and tethering only makes it more so. I like the hardware (except the button placement) and the network is incredibly fast. I want to like this thing. I even wrote this post using Google's Blogger app on it with only a little cleanup done later on my laptop.

The problem is that Android and its ecosystem let the hardware and network down. The process of writing this illustrated the problem perfectly. Blogger is one of Google's A+ properties, but the app for it is a phone app that only has extremely basic post composition and editing features. You can't use it to look at stats, manage comments, or adjust the blog layout. If the developer for Android itself is going to have a shabby app for one of its top services, then what does that say about the platform as a whole?

I cannot in good conscience recommend this device to anyone now. I was on the fence about it before this iPad announcement, but when this tablet is only $30 less than the new iPad off contract, forget it. I can recommend Verizon's 4G network for the new iPad if you go with a model with cellular connectivity, though.  That is one part of the Droid Xyboard experience that has been anything but a disappointment.

Droid Xyboard 8.2 Unboxing and First Impressions

Verizon has sent me a second device as a part of its ambassadors program: a Droid Xyboard 8.2. I was particularly excited to get it, more than the Droid RAZR, because I've not had any real experience with tablet devices. I've had Blackberry phones for work and have extensively used an iPod Touch, but I've not owned an iPad or any other tablet.

The unboxing process was simple and straightforward as there wasn't much in the box. The tablet was on top with a wall charger, USB cable, and some booklets underneath. That's about all that anything comes with these days.

As the "8.2" part of the device's name would suggest, it's an 8-inch tablet. The smaller dimension is just a hair wider than a CD, if that gives you an indication of size.

I have almost nothing but good things to say about the hardware so far. The screen is bright and clear. It's just the right weight: not as heavy as you might guess for its size, but not so light that it feels cheap. The backing is aluminum with a rubber ring around it, and the rubber feels good for gripping in your hand. The only bad part is that the sleep/wake button and volume controls are on the back. You can kind of feel for them once you know where they're at, but you can't know on the first try which button you're about to push. If you don't want to turn the thing over to look, you have to slide your fingers up and down to be sure you're doing the right thing.

The software is where things go off the rails a bit.

In many ways, Android Honeycomb is most comfortable in landscape orientation. The initial setup screens are in landscape, one of the built-in keyboards offers a split configuration for landscape, and sometimes apps that can do both portrait and landscape launch in landscape despite me holding it in portrait orientation. That's another problem with where the hardware buttons are at: they're in the perfect spot for accessing with the fingers on your right hand when holding it portrait. When holding it in landscape, you have to move your hand to access them.

Honeycomb itself is not so great coming from Gingerbread on the RAZR because many of the interface elements are in completely different positions. The home and back buttons are on the left side instead of the middle, and the search button and app drawer launcher are now at the top instead of the bottom. The status bar was moved from the top to the bottom right, and everything in it is unreadable at a glance thanks to dark colors on top of a black background. I've run into issues here and there where it's not obvious how to dismiss some kind of info box and have done unintended things trying to get rid of them. The menu button for Honeycomb-ready apps is in the top right, while the menu button for non-Honeycomb ready apps is in the bottom left. Who in the world thought that was a good idea?

Not that you'll run into that last problem too often, as there are almost no tablet-optimized apps. I've heard for a while that there aren't many Honeycomb-ready apps, but it's worse than I thought. Even in the app market section titled "Staff Picks for Tablet", most of the apps I've tried from it are just phone apps that scale nicely.

On top of the rarity problem, many of the Honeycomb-ready apps I've tried just aren't great. Twitter client TweetCaster has potential, but it doesn't support conversations. Pulse seems to be a nice newsy app that takes RSS feeds and makes a grid layout of the stories, but it crashed when I tried to view a YouTube video. The Engadget app is a design nightmare, as its use of the extra screen real estate is puzzling at best. It's a bad, bad situation.

I've found that the device is very nice for browsing the Internet and playing some games, but I'm not sure yet what else I'm going to do with it. As I said, the hardware (buttons aside) is really nice. The software completely lets it down though, and the third party app situation is dire. If you've got any recommendations for good tablet apps, I'm all ears.

The Droid RAZR Has Undeniably Bad Battery Life

I've had some time now with the Droid RAZR that Verizon sent me for review. One thing stands out more than anything else: the battery life is terrible.

Early on, I decided to see if everything I had heard about the awful battery life on the 4G LTE network was true. So, I turned off WiFi for a Saturday morning to simulate being out and about (I'm a hermit) and used it for some consistent Twitter activity and podcast downloads.

I woke up that morning at 8:40 am. I checked in again on the battery at 12:40 pm. In that time, it probably had about three hours of consistent use and one hour of idling. It was down to 50% already. I turned WiFi back on, and the battery drained a bit slower. Yes, you read that right: this is a phone that can actually save battery life by turning WiFi on.

I tweeted about that experience, and someone recommended an app called Juice Defender. It turns the radios on and off automatically based on whether the phone is in use, and it allows connections every 15 minutes (by default; that's configurable) for things like email checking. I installed it and kept the defaults, and it did help when not in heavy use. It wouldn't do a thing in the usage case above though because the 4G data usage is what was draining the battery so much.

The second thing I tested in relation to battery life is turn-by-turn navigation. I used it this past weekend on a short trip my wife and I took to north Georgia.

The particular drive I used it on was for about an hour, and it wasn't in perfect conditions. It was in an area with only 3G data, so the 4G was not a factor. It also was an area with signal coming and going (but never lost entirely). The GPS was on the whole time, obviously.

The app Battery Indicator said it had 97% battery when we left, and it was at 64% when we arrived. One hour sucked down a full third of the battery's capacity. I don't have a car charger because Verizon didn't supply one, but I have a feeling that having it plugged in would only slow the battery drain rather than halt it or even recharge it while navigating.

The phone comes with a Smart Actions app (which automates settings changes), and the first one it suggested to me was a battery saver action. It comes with a Guided Tours app from Verizon, and under "Basic Setup and Usage Videos" is "Battery Conservation Tips and Tricks". The rest in that section are basic orientation videos that are nowhere near as technical. On top of that, Motorola and Verizon released the Droid RAZR Maxx a mere three months after the RAZR, and it actually does have acceptable battery life. Someone knew this thing had poor battery life prospects.

The bottom line: unless you always have a charger nearby or are almost always in WiFi range, you will have to constantly worry about battery life with a Droid RAZR.

Droid RAZR First Impressions

My first review device from Verizon came in yesterday, and it's the Droid RAZR. It's my first Android smartphone, after having used a Blackberry for work and iPod Touches for years. As I understand it, this is not the current flagship Android device, that being the Galaxy Nexus, but it's still supposed to be one of the top-of-the-line devices.

Or, at least it was until the Droid RAZR Maxx launched yesterday. That device is basically the same thing except that instead of having a camera bulge and really thin body, it has a uniform thickness and larger battery. The teaser video for the RAZR Maxx hammers on the battery element, pretty much implying that the RAZR's battery life is unacceptable. Motorola's CEO Sanjay Jha himself proclaimed the RAZR "too thin". Perhaps I'm looking a gift horse in the mouth by even bringing this up, but Moto's CEO said that, not me.

It is remarkably thin, even slightly slimmer than my 3rd gen iPod Touch. The tapered edges on the Touch make them feel about the same thickness in my hand though.

The face-down RAZR is on the right; the iPod is on the left.

For as thin as it is, though, it's not small. It feels like a monster compared to the iPod Touches and Blackberry phones I've had. I have about average sized hands for an adult male, and it's too big for me to fully use in one hand. I can reach the entire screen with my thumb if I grip it completely on the sides, but then it falls out the bottom thanks to gravity and a slick backing. If I grip it more from the bottom with my pinkie underneath to prevent it from falling, I can't reach the top of the screen to bring down the notifications drawer.

The device came with unlimited 4G LTE, which was awfully nice of Verizon to supply. The SpeedTest.net app clocked in at 7.98 Mbps down and 4.47 Mbps up, which blows away my home Internet from Time Warner. That's pretty awesome.

Some of the defaults were a little weird. It has haptic feedback turned on automatically, which makes it vibrate any time you use the four Android buttons or type on the keyboard. I thought everyone decided that wasn't a good idea after the first Blackberry Storm, but I guess not. I had to go to two different places to turn it off entirely. Also, the notification sound was very high by default. That led to me getting woken up at 4:45 am this morning by the sound of this thing shouting "DROID!!" at me to let me know the Motorola skin had an update available. Not cool.

I'm still getting used to Android, and I've barely even touched the market yet. I don't have a complete picture of it just yet. Here are a few more random things before more comprehensive review-like substances come in the future.

• The first time I pressed the dedicated search button, Motorola's home screen skin (process com.motorola.home) crashed. In fact, it reliably crashes when you press the search button while in the app browser. Whoops.
• Bloatware fiesta! Not counting Google's apps, it came preloaded with Amazon Kindle, Blockbuster, Verizon device setup, Flash player, GoToMeeting, Verizon IM, Let's Golf 2, Madden NFL 12, Motoactv, Motoprint, Motorola Music, Netflix, NFL Mobile, Quickoffice, Slacker radio, Social Location, Social Networking, V Cast ringtones, Verizon Video, VideoSurf, VZ Navigator, and Webtop. Toss in the Motorola skin, and that's 23 pieces of software that don't come with stock Android. That I know of, at least. I am not sure about some of the others.
• Only some of the bloatware can be removed. I was able to junk GoToMeeting, Blockbuster and Let's Golf 2, but, no shock here, none of the Verizon or Motorola apps can be uninstalled without rooting the device. Surprisingly, some of the third party apps couldn't be removed either like the Kindle and Slacker apps.
• I miss some of the niceties of iOS, like the rubber banding on scrolling and tapping at the top of the screen to go to the top of a list view.
• Most iOS users when going to Android complain most about the system-wide back button being unpredictable. I've had no such issues so far.
• Call quality is excellent, but I have never had issues with call quality in the many years I've been on Verizon.