
Android Economics - shawndumas
http://www.asymco.com/2012/04/02/android-economics/
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Drbble
> I just don’t know how to adjust this value so by leaving it at the average,
> I can avoid introducing more assumptions.

This is a fallacy of assuming the midpoint equals the centroid. The correct
way to handle absence of key information is to widen the error interval, not
to assign zero weight to unknown factors. Either those factors have some
partially known weight limit and you can estimate a range for the average, or
those factors have completely unknown weight and you cannot make any rational
estimate of the average.

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siglesias
In business estimates, this is how it's done. You leave the reader to
construct the error margins by clearly delineating the assumptions. The
magnitude of the error bars would be left to his judgment anyway.

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justincormack
Google have an incentive to downplay revenues for this purpose, so I would
imagine that everything possible is removed.

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VengefulCynic
While they certainly have incentive to downplay revenue for the purposes of
paying Oracle, let's not forget that all of the contributing revenue factors
would be legally discoverable. I think that we can assume that the numbers
contributed in court reflect the revenue fairly accurately - Fortune 500
companies tend to have lawyers whose degrees don't come in specially-marked
boxes of cereal. Also, Google has a lot of very good incentives to state their
revenue exactly as is legally relevant (albeit, not a penny more, in this
case).

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johncoogan
This is a great analysis. I would be very interested to see the standard
deviation of Android revenues/device/yr compared with Facebook ARPU. Obviously
this is laughably unobtainable, but it's fun to speculate about who has more
upside compared to the mean. I wonder what the 95th percentile generates?

On a side note, has anyone thought about what Mail.ru might do before and
after the Facebook IPO? Sorry if that's off topic.

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huggyface
No one has provided any evidence at all that the $544 million figure (itself
essentially invented) is in any way a subset of the $2.5 billion "mobile run
rate". From a purely rational perspective, there is no reasonable reason why
Google needs to include in-game advertisements, or web ad revenue, in Android
revenue.

Does Microsoft include Google search revenue in Windows revenue? Does a
purchase of a hat in Team Fortress count as Windows revenue?

I suspect -- with no more evidence than anyone else -- that the $544 million
is but the sum of partner payments for the Google applications or accelerated
access, added with Google's cut of the Nexus line revenues. Advertising,
though....Android itself has zero advertisements. I don't see ads in Google
Maps, gmail, or in any system service or function.

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siglesias
I think what's salient is where that number is relative to Apple and Google's
revenues per iOS device, which also don't include in-game advertisements or ad
revenue.

Edit: Miscomprehended the derivation, see reply below

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huggyface
Those derived values are _based_ upon the likely erroneous assumption that I
just detailed. How does Google make any money on iOS devices if you excluded
advertisements? Quite the opposite -- they pay Apple to be the default search
engine.

~~~
siglesias
I see the point you are trying to make now, but I'd like to offer two points
about why this revenue derived from the lawsuit might include ad revenue
estimates:

1) I would imagine that regardless of whether it is in Google's interest to
count ad revenues in their public reports of profitability, it is most
certainly their internal metric for profitability. They simply must have some
metric for deciding if the Android investment is effort is worth pursuing, or
if certain Android strategies can be considered successful. Would Rubin's
declaration that Android is profitable be true if he were only counting early
access fees, and Nexsus sales, etc? I don't have the numbers, but I would
doubt it.

2) The 3 to 1 profitability of iOS against Android seems to make some sense if
you consider that iOS, as of October, commanded over 3x the mobile traffic
share of Android. (see <http://bit.ly/tHlYe6> )

