Search

Google recently announced that partners are shipping 65,000 new units of Android each day. How much is that worth to Google – in revenues, not brand equity, rather real hard cash?  Some simple math will provide us the answer.

First, What % of Android Devices are Shipping with Google as Default?

Most users are default users.  They use the email service, search engine, browser, etc. put in front of them.   Of these 65,000 Android devices, how many have Google as the default search engine? Almost all.  Lets assume 95% because there are just a few Android devices shipping with Yahoo! Search as the default.  So, 61,750 Android devices ship each day with the home screen search box or built-in search button hardwired to Google.

How many searches per month does an Android user perform?

Last year Google and Stanford published an excellent report on mobile search query behavior comparing the search usage patterns across PC, iPhone, and feature phones.   The report discloses two important numbers: the average number of search sessions (8.06) the average number of queries per session (1.86) users perform on their iPhone over a 35 day period.

Multiplying those two numbers (search sessions by queries per session) produces the average number of queries (14.7) an iPhone user does per 35 days.  Lets adjust this number upwards by 50% for two reasons:

1. The data-set is from the summer of 2008. Since that time as the underlying devices and networks get faster the number of queries users perform increases.
2. Android devices ship with a search box sitting on the home screen or a built-in search button. Whereas, the iPhone the web search box is out of sight integrated into the Safari app.

After adjusting the number upwards by 50% an Android user is performing 22 queries per 35 days, or 19 per 30 days to keep our units similar.

65,000 New Android Devices are  Worth: $7,011/month

$7,000 a month — thats it.  Lets see how we get to this number.  The 61,750 Android devices with Google as the default are generating 1.2M queries per month (# of shipped Android devices times monthly searches per Android device).  At an RPM (revenue per thousand) of $20 that is $23,370 a month or $0.36 per device/month.   Now, hold on. Google does not keep all of this revenue.  Google is paying carriers a traffic acquisition cost (commonly referred to as TAC) anywhere between 60% to 80%.  Using a 70% TAC we get our answer:

Google earns $7,011 a month in search revenues from the 65,000 Android devices that ship each day.

Google earns $0.11 a month in search revenue per shipped Android device.

Looking Ahead: What is the Search Lifetime Value of an Android User?

Android users are worth more then just $0.11/month because they usually keep their phones for longer – twenty-four months or the average contract length.  Assuming twenty-four months the lifetime value of an Android user is $8.63 (monthly search revenues per device x 24 months).  Put simply, each Android device shipping is worth $8.63 in search revenues over the lifetime of their Android device.  As Google improves monetization of mobile search queries this number will go up.  Using a TAC of 70%  Google earns $2.6 in search revenues per user over the life of an Android device after paying the carriers.

So, why was Google trying to bypass carriers and sell Android phones directly to consumers?  Simple economics.  By selling directly they earn 3x more on each Android device, it’s the difference between $2.6 and $8.6.

Notes:

1. If you have better data you can change the assumptions, the spreadsheet is here
2. I did not calculate the search monetization opportunity from the Maps application.  I believe a significant percentage of local search queries are moving from web search to the Maps application, I am not aware of sufficient data to estimate this revenue.
3. Search monetization differs by market — I do not account for this.  I assume $20 RPM across all markets.