Google Looks to Emerging Markets for Android's Growth


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Published: July 4, 2010

PORTLAND, OREGON — Google plans to push its Android mobile software in India and China and is exploring ways for developers to make more money from applications, stepping up competition with Apple and Nokia.

To attract programmers to its Android operating system, Google may offer tools that help them sell subscriptions, virtual goods and other items from within applications on mobile phones, Andy Rubin, vice president for engineering at Google, said during an interview.

The company also aims to put its Android system on lower-priced phones made by Huawei and LG in parts of Asia and Europe, where it is taking on Nokia, the mobile market leader.

“The down-market opportunity is about to happen,” Mr. Rubin said. “It’s actually quite a revolution.”

Google is trying to get more of its software on mobile devices, opening up new opportunities to sell advertising, its main source of revenue. The total mobile ad market will grow to $13.5 billion in 2013, from less than $1 billion last year, according to the research firm Gartner.

Google lags behind Apple in mobile applications, which are a growing platform for ads and are helping to breed customer loyalty to devices. Android users have about 65,000 applications available, fewer than a third as many as Apple, which has more than 200,000.

Google is taking steps to hasten Android’s growth. By increasing its presence in new markets like South Korea, Google managed to drive up the number of users who activated Android devices to 160,000 a day in June, from 100,000 in May, the company said. The majority of the sales of Android-based phones were in the United States.

Gartner predicts that Android will pass Apple’s iOS system by 2012 to become the world’s second-most-popular mobile operating system behind Nokia’s Symbian.

Among the incentives for application developers, Mr. Rubin said, are making it easier to accept payments within the applications themselves or to sell subscriptions.

Most Android developers still make money from placing ads within their applications or from one-time fees. That makes it harder for them to earn as much as their Apple counterparts. Of the $4.4 billion that consumers will spend on application downloads this year, Apple’s App Store will receive at least 77 percent of the revenue, according to Futuresource Consulting in Dunstable, England. The Android Market application store will collect 9 percent.

While businesses like eBay’s PayPal already allow payments to be made within their Android applications, dealing with multiple companies increases the complexity, Mr. Rubin said. Since starting its in-application payments tool May 19, PayPal has been downloaded by more than 1,000 developers, said Osama Bedier, a vice president at PayPal. Most of the developers came from China.

In connection with efforts described by Mr. Rubin involving Huawei, a Chinese maker of wireless equipment, and LG of South Korea, Huawei released four Android phones and an Android-based tablet device in February.

Getting more of Google’s software on phones in China has the potential to increase ad revenue to help offset sales Google might lose if the Chinese government refuses to renew the company’s license to operate its Internet search engine there.

Smaller Chinese manufacturers, which account for about 10 percent of the global supply of mobile phones, are also adopting Android, seeking to gain market share with lower-priced devices.

Many pin their hopes on MediaTek of Taiwan, which supplies chips for lowcost phones sold in Asia, Africa and South America. The company has joined the Open Handset Alliance, the group that promotes Android, Google said. Devices based on MediaTek may cost carriers as little as $70 each, said Carolina Milanesi, an analyst at Gartner.

Today, the least expensive Android phones cost carriers about $200, while low-cost Symbian devices run to about $170, she said.

As more lower-priced phones reach the market, more carriers will offer the devices to consumers free.

That approach will help position Android against Nokia. While Nokia controls only a fraction of the U.S. market, it is the leading phone maker globally.

“As Android develops, the main vendor who is going to feel the pressure is Nokia,” Ms. Milanesi said.

In the first quarter, more than 41 percent of smartphones shipped worldwide were powered by Symbian. Almost 16 percent used Apple’s operating system and 10 percent ran Android, according to ABI Research, a consulting firm based in New York.

Bloomberg News
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