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Solving Advertising Revenue on Android [Opinion]

Purple RAZR

Google has come a long way from their humble Stanford beginnings, but the search giant is still an advertising company at heart. Google is not making their billions by selling Nexus devices; they are making the vast majority of their money on advertisements. It is because of those advertisement sales that Google is able to be as ambitious as they are with projects like Android, Loon, and Glass, but that success is a double edged sword.

Google, like many other advertising companies, has been working through the how to make money from advertisements on mobile devices. While Apple may have ushered in the modern smartphone era with the iPhone, it was Google who commoditized it with Android. Taking Microsoft and Palm’s licensing model and twisting it, Google offered Android to device manufacturers for free. This plan solved the first major problem Google faced when entering the smartphone market, gaining market share, but it did nothing to determine how to make money from advertising on mobile.

The Value of Market Share

Google has the majority of smartphone market share in the world, but report after report continues to indicate that advertisers (Google or otherwise) continue to make more money on iOS than they do on Android. The question is, if Android is the dominant platform in the world, why do we keep seeing reports that Google is making more money on iOS than on Android?

The answer is simple: Android users tend to browse the web far less than iOS users. While advertisers are able to make money on Android in apps, web usage (and therefore web advertisements) on Android continues to trail behind iOS. If Google wants to really utilize Android’s market share to sell advertisements then they have two options: change Android users’ web browsing habits or start showing Android users advertisements in ways that do not involve web browsing. The former is nearly impossible, but the latter requires a lot of unprecedented, innovative work.

Advertising on Mobile

It is easy to assume that advertising strategies that worked on the desktop will work on mobile. Unfortunately (for advertisers) the increased variables and generally decreased screen real estate make mobile advertisements far more difficult to implement in ways that do not offend users.1 Sure, we still have the equivalent to pop up advertisements on the mobile web, but those are precisely the kinds of ads that annoy users regardless of the content.

In the past few years we’ve seen companies like Facebook, Instagram, Twitter, and Tumblr introduce advertisements into their respective news feeds with differing levels of outcry and success. Instagram, like Tumblr, is trying to ensure that advertisements are attractive, easily identified as ads, and unobtrusive. Google has traditionally tended to follow similar criteria in the way they present advertisements to users.

Google is in a slightly different predicament than Facebook, Instagram, Twitter, and Tumblr, though. The social network giants have to try to sell advertisements within one app, but Google needs to monetize a whole operating system. Even if Google decided to try showing users ads in their suite of apps, there would be no way to change users’ habits to use those applications in ways that favor Google’s advertising revenue. Google needs to come to where the users are, not try to bring the users to them.

Google Now with Text

Searching for Answers

I think Google began to show their cards (no pun intended) for their plan to monetize Android with Android 4.4 KitKat.2 I think Google is planning on integrating Google search (and therefore Google ads) into more and more parts of Android so that web usage will not matter. If Google is able to integrate ads into more nooks and crannies within Android then Google should be able to finally utilize the sleeping potential in their market share dominance.

The first step has been to make Google Search deeply integrated in the new Google launcher. Google Search started as a widget and has now become the left-most screen on the launcher on the Nexus 5.3 Google Now is the one place where Google can utilize similar strategies to Tumblr or Instagram to serve users with gorgeous, compelling advertisements. Unlike Tumblr and Instagram, however, Google has a wealth of information to radically personalize the ads users see.

Google Now already shows some advertisements for content on Google Play, but it could easily take things a step further. For example, maybe a band wants to promote a new album they just released. For a fee, Google could add a link to watch the band’s latest video from their new album in Google Now for users who already listen to that band or who listen to similar bands. At the end of the video the user could be asked if they want to add the album to their All Access subscription.

At a more basic level Google is underutilizing responses to queries in Google Now. When I ask Google Now how old Katy Perry is, it tells me her age and shows me the ages of similar artists. That is a great response to my question, but would it not make more sense to utilize that space below my answer better? Show me the ages of other artists, but also show me that Perry had a new album this year that I can buy from the Play Store. Or if I ask Google Now when Start Trek II: The Wrath of Khan came out, why doesn’t it show me that I can rent the film on Google Play? Why doesn’t it mention that I can buy Into Darkness?4

Maybe you just want to settle a bet about how tall the Eiffel Tower is. You ask Google Now and it tells you that the French icon is 1063 feet tall. Below the results it also gives the Wikipedia entry and Google Maps gives directions and contact information, which is great. What if Google took things a step further, though? Google knows that you’ve been searching about France every now and then for some time. Google knows that you check the exchange rate for the dollar and the Euro every once in a while. Google knows when you’ve searched for flights. Google even knows if you have the app Duolingo installed. What if Google partnered with airlines and let them bid to show what it would cost to visit France this time of year in addition to showing you the height of the tower?

Google Now is this incredible piece of technology that is completely underused by Google to sell advertisements in a meaningful way. Anyone can shove marginally relatable ads on top of content, but Google has your physical context, your email, your schedule, your search history, your app selection, and so much more personal information to determine what kinds of advertisements would not only be appealing to you, but that might get a click (or tap as the case may be).

Dialer with Text

Dialing it In

Android 4.4 on Nexus and Google Play Edition phones also includes a redesigned dialer5 that has Google Search integration. Having search built into the phone app today means that Google is able to look up a phone number when it is dialed, match it to a business, and update your call history with that company’s name. It also means that a user is able to type in a query like “coffee” right in the phone app to get numbers for coffee shops in the area.

Right now it is unclear how Google is organizing the results outside of location, but potentially Google could allow companies in the area to bid to be the first result for a search query in the dialer for specific words associated with their business. These top results would have to be identified as paid for like in Google search, but it would give businesses the option to stay on top of the results. This is the kind of slow, evolutionary change that we should expect Google to implement as a way to monetize Android, but they could do so much more.

The key to understanding where Google could go with advertisements in Android is looking for ways to show ads to consumers in places that are expected, helpful, and pleasant. Putting advertisements in the dialer may seem insidious at first, but there is actually a huge potential to make the dialer an incredibly powerful tool on Android.

Right now when you call a company you haven’t called before a stock image of a building appears above the call controls. There’s nothing wrong with that, but it’s a waste of space. Imagine dialing your local pizzeria and seeing an advertisement for their current deals above the call controls. Google could also partner with companies (for a fee) and show the entire menu in scrollable cards above the call controls to help the caller decide on the entrées they want to order.

Google could also charge a fee to businesses to show the call directory in that space. Instead of having to wait and listen to messages like “Please listen carefully because our extensions have changed. For Customer Support, press 3, for…” users could scroll through a directory and tap on the department or person they want to contact. While this isn’t an advertisement, it is a way to create connections between users and businesses in a way that Google is well positioned to provide. Once the connection to the right department is made that space could be used again to show an advertisement from the company.

The possibilities with utilizing that space are endless6 and best of all, it would be a win for users, advertisers, and Google. Users would be getting helpful information when they call a company, advertisers would have opportunities to highlight important information for callers, and Google is able to easily sell these ads because they would appear on the world’s most popular mobile operating system.

The Potential

It is completely understandable why Google has held off on advertising within Android. Even though many users are happy to use apps with advertisements instead of paying for them, having a phone with overt advertisements is a completely different story. It is easy to see how Google could take things overboard and put advertisements on the lock screen of Android devices or in the notification tray.

At the same time, there is this potential to integrate advertisements in a way that would benefit users, advertisers, and Google. Google is exactly the kind of company that has the resources and talent to make compelling ads that users actually want to see by leveraging the information they have from users and the massive existing connections with advertisers. Best of all for Google, it would provide a way to reach all these Android users with advertisements without having to alter their web browsing behavior. Personally, I would prefer to see Google sell products in exchange for money instead of information and advertisements, but the potential to make a better operating system that responds to how people use it in meaningful ways through targeted advertisements is incredible.

Endnotes

1. Of course there will always be a contingent of users that don’t ever want to see an advertisement. For every positive comment on one of Instagram’s new ads there are a dozen negative comments demanding that the ad be removed from their feed.

2. I don’t have any knowledge of Google’s actual plans. It could very well be that Google is not concerned about the discrepancy in advertisement revenue between iOS and Android users or it could be that Google is planning on addressing that problem in a completely different way.

3. I expect Google to release this launcher on the Play Store as part of a Google experience bundle for any Android phone.

4. If you expand the results for Into Darkness then it does mention that you can buy or rent Into Darkness on Google Play. It mentions nothing for Wrath of Khan even though it is available. Also, Into Darkness is definitely the best Star Trek film to date. #ShotsFired

5. I would love to know why this feature was not included in the 4.4 update on the Moto X.

6. There are some exciting possibilities to using this extended functionality with contacts you already have. Instead of just showing a picture of the person you’re calling, the dialer could also show any upcoming events you have with them, remind you if their birthday is a week away, etc.

  • subiedude85

    I like the way you think and wish Google would steer in that direction. I want my phone to be more intuitive, it has all the information it needs. Thank you for the article.

  • Ej McCarty

    Of course ron googles katy perry. I bet his favorite song is firework.

    • http://ronoffringa.me/ Ron Offringa

      I prefer Roar.

      • Ej McCarty

        I prefer the nip slips

  • NBM

    Good article Ron. Opinion articles like this really add to Droid Life (imo).

  • googlyeyedfrog

    And I do think that the majority of Ron’s opinions are merely comparing Android to IOS and asking, what does IOS do that Android doesn’t do? Sometimes it is helpful and useful, other times it is just annoying. I don’t mind him though, as at least he tries to use logic and rationality in his arguments.

  • googlyeyedfrog

    So the reason why iphone users use the web more is because iphone users tend to have more money and therefore have mobile plans that give them more data. Android users tend to have lower incomes and therefore have less data to use. Less data means you will browse the web less, and therefore be exposed to fewer ads. Instead of mucking up the google now experience, google should continue its strategy of market share domination. Eventually, the VAST majority of smartphone users will be using Android (just like the VAST majority of people use google as a search engine) and their profits will continue to rise. Google didn’t become the number one search engine by becoming annoying, they did it by becoming the best, and everyone ended up using it. They should employ the same strategy with regards to Android.

    • http://ronoffringa.me/ Ron Offringa

      Google has the market share, but that market share doesn’t mean anything if they can’t monetize it. Profits won’t continue to rise if they continue to make four times more money from a different operating system. http://gizmodo.com/5897457/google-makes-four-times-more-money-from-ios-than-android

      • googlyeyedfrog

        Those data are almost 3 yrs. Old. I bet yahoo was making more money than Google once upon a time too, but now almost no one uses yahoo and Google continues to dominate. I think Google knows what they’re doing.

        • http://ronoffringa.me/ Ron Offringa

          I agree that Google knows what they’re doing. The question is whether or not they care about monetizing Android and if those usage numbers have changed in a meaningful way since 2011. There hasn’t been any definitive data to indicate a significant change in web usage that I’ve seen since the Oracle case revealed that data in 2012. Regardless, the features I recommend would help Google monetize Android in a much more significant way then they can on iOS.

          • googlyeyedfrog

            Needless, you continue to imply, both overtly and covertly, that Android should follow a marketing and revenue strategy akin to Apple’s. Google is not, and will never be Apple, and henceforth will not simply benefit from your opinions because Apple did. There is a reason Android is slowly dominating the global market, and it is certainly NOT due to following Apple’s lead.

          • http://ronoffringa.me/ Ron Offringa

            I don’t want Google to be Apple. I never said that I did, overtly or covertly. I have said that I wish they would sell products for money instead of for information, but that’s not a reference to Apple; it’s a reference to any company that exchanges good and services for money. Everything in this article, save the last sentence, is about how Google can monetize Android in a completely different way than Apple makes money.

  • Sam Freistedt

    Great read.

  • A. Norman

    Wow, didn’t think anyone else thought so highly of Into Darkness! Oh, and good points on Google/Android, as always!

    • http://ronoffringa.me/ Ron Offringa

      It’s definitely a minority opinion, but Into Darkness was incredible.

  • Mike

    Lol @footnote #2. “The whole premise of this article is based upon an unverified, never backed up assumption and I am likely wrong.” At least he admitted it this time. In the other baseless articles he kept acting like he actually knew Google’s internal thoughts and plans.

    • http://ronoffringa.me/ Ron Offringa

      I wasn’t trying to act like I knew Google’s plans, I was giving an opinion about what I thought Google’s next moves were. I’m not assuming things in this article about how Google could monetize Android; I’m offering a possible way that Google could utilize. I also wouldn’t write something if I thought it was likely that I was wrong; I hate being wrong.

      • Mike

        Ron, you write well and I have to give props for anyone whom can put together long feature pieces. I like what DL is doing with this, but you really do get a lot of grief from people like me when you start to act like a business analyst/industry prognosticator. I don’t know much about your background, but form the articles it doesn’t look like you have a lot of business experience in the industry, that you’ve ever productized something, put together strategic and tactical business plans and made those decisions. It just doesn’t seem that that’s your strength, and to be honest it also really showed in the Nexus article and grates some against those of us whom do do that type of thing. I very much more like your pieces that talk more about the state of Android, where things need to improve, where manufacturers are headed, etc. That’s where your stronger points actually are. I think that given some more experience/practice/focus/effort your pieces could be ArsTechnica lite or stand up against their well-thought out in depth pieces on your own.

        Now back to the original comment, article:

        The bottom line is that no one knows Google’s targets for advertising revenue per handset. You admit that, and in that light there’s not a lot to talk about. There hasn’t been any indication that they feel the need to close a gap or get more revenue per handset or that their costs on Android are high enough that they have to consider pushing up revenue or anything. Literally nothing, and in fact public statements indicating that they’re currently fine with their Android ROI making this move even more unlikely.

        They really might be fine with what they have right now, making the whole article moot. Yea, if they wanted to put advertisements into the OS there are lots of places to do that. That’s great. It’s also worth talking about as much as say…….the Motorola division starting to put ads into their active notifications or HTC incorporating them into some of the Sense transitions and screens. Both actually need the money more :)

        • http://ronoffringa.me/ Ron Offringa

          Mike,
          I really appreciate your feedback about the types of articles I put out. Feel free to shoot me an email with more specific feedback.

          You’re right that no one knows their ARPU for sure, but these reports aren’t new and they aren’t completely unfounded. You’re also right that Google hasn’t given any indication that they feel the need to close that gap, but Google also doesn’t give any indication why Google Play Edition devices exist. It’s conceivable that they’re happy with what they have now. Assuming the reports are accurate, Google may be perfectly content with iOS making more money for them than Android because it pulls in plenty of revenue (which would also explain their renewed devotion to making great iOS apps for the past year and a half or so).

          Like I said in the footnotes, it’s totally possible that Google doesn’t care; that wouldn’t surprise me in the least. There are plenty of things that Google is apathetic about that drive me crazy, but it’s not my business to run and they seem to have a pretty good handle on what works. I do think it’s really different from talking about HTC or Motorola needing to put in advertisements, though. HTC and Motorola don’t have the same information resources that Google has and both companies make money on device sales, unlike Google. Most importantly of all, if Google is leaving money on the table because Android users aren’t browsing the web enough, it makes sense to adjust their strategy to monetize Android. They may not need the money, but boosting their revenue because of changes in Android that make users happy can only affect them positively.

  • Good_Ole_Pinocchio

    Ron is back!

  • Justin Kollert

    Great article Google should just write you a check now

  • Alexander Ruiz

    Very good read! I loved all the different ideas you brought with this piece, Ron.

    I did notice a couple things that got me, though.

    1. Google Now is the one place where Google can utilize similar strategies to Tumblr or Instagram to server users with gorgeous, compelling advertisements.
    2. Google knows when you’ve search for flights.

    Just little grammar things (; Again, awesome article!

    • http://ronoffringa.me/ Ron Offringa

      Thanks! I’ve updated the post with corrections.

      • Alexander Ruiz

        Nice to see. Again, great piece, Ron!

  • Stnkycheezman

    I think Android is more of a data farm for google than anything else. and they’re taking the data and applying it to help in developing whatever endeavor they wish to get into or bettering the current services they provide. Just like goog411 was a free service but was basically a way to farm voice data in order to better voice recognition services. Android knows every step you take, every song you hear, every restaurant you like, and if you use wallet, they’ll know exactly how much you spend and where you spend it. With just a few seconds of brainstorming I’m sure we can all come up with a couple profitable ideas if you had this type of information on millions of people…..so I’m sure google has some crazy plans, they haven’t shown us to be a company that rests on their laurels

    • zurginator

      The thing is that data farm is effectively losing them money. They pay to build and maintain it, yet have less and less users to market to, as less and less people are using laptops and desktops. Google needs to find an effective way to market through Android, or it will effectively become a money pit.

      • Stnkycheezman

        But you’re still assuming that Android is only made to benefit Google monetarily as a an advertisement platform. My “theory” is that yes, they’d like to get more ads through android since that’s what their current MO is, but more importantly, they now have an opportunity to be more a part of our lives than any other company in the world. Android can help them go further into robotics, antonymous cars, medical industry, etc…I don’t think they’re betting all they have on ads (in fact I’m willing to bet all that I have that they’re not)…they’re looking to do more. Google’s search engine was built off of “AI/machine learning”, they’re taking things further….they’re gonna make some real life androids one day hahaha. “theory”. I don’t think they’ve been buying all these robotics companies lately just to sell ads is all I’m saying….

  • TC Infantino

    Great article, and a lot of really good ideas. I would not mind advertisements such as what you have suggested, because they all sound like they would enhance the user experience instead of intruding on what you want to do. I hope Google is reading DL and takes these suggestions to bring them to us in the near future. Plus you could get a nice royalty if they use your ideas.

  • burpootus

    I’m paying a premium retail price for the phone and a premium retail price for the cell and data service, I don’t want extra ads too.

    • Alan Paone

      You pay a premium retail price for your laptop, and you pay a premium retail price for your internet service, yet the internet has ads on it, and if its windows 8, a whole bunch of built-in apps have more intrusive, less helpful ads. He’s talking about bringing the ads you already see on Google’s corner of the web to Android, in a way that feels the same.

      • burpootus

        I have no problem with web content being financed through advertising, whether mobile or desktop. But the native apps on my phone, such as the dialer? I don’t appreciate advertising in that space and think Google is overstepping their bounds.

        • http://ronoffringa.me/ Ron Offringa

          Google isn’t doing this. It’s an opinion piece about how Google could monetize Android. They could possibly do something like this in the future, but it’s entirely theoretical at this point.

          • burpootus

            When I say “Google is overstepping their bounds”, I’m coming from the theoretical structure the opinion piece has created. I’m running 4.4.2 and there is no advertising in say, the dialer, so I realize Google hasn’t implemented these ideas in reality and they belong to the author. My point is that I’ve paid a good price and therefore there is a certain space in the phone that shouldn’t be exposed to advertising. That’s my opinion. iOS is used as an example for higher advertising revenue, and there is zero advertising in their native apps. I’m saying there is no need for it and it is actually unwanted. Again, my opinion.

          • http://ronoffringa.me/ Ron Offringa

            Okay, I see what you’re saying now. I agree that certain types of advertising would be unwanted (I mentioned the lock screen and notification tray as sacred places), but I think it’s possible to have advertisements in apps like the dialer in a meaningful way. Like I said in the conclusion though, I would rather just see Google sell products for money instead of information.

        • Alan Paone

          I leave gmail dot com open all the time, a lot of these websites take the role of the primary ‘apps’ on our computers. It’s an odd distinction to make between an HTML webapp and a web-connected Java app.

          • burpootus

            I don’t necessarily make a distinction between between those two types of apps. So, if I want to watch a video on youtube, whether through a browser or on the mobile app, I understand that advertising revenue is what makes that possible and I think it’s a good tradeoff to endure the advertising to watch the video. And you mentioned gmail, which is another good example. It’s a great web mail system to have when all you have to do is endure the advertising as “payment” for it. And there are many more examples that I’m perfectly fine with, in areas where I’m seeking something out or benefiting from it it’s fair to endure the advertising. But when you start talking about the dialer, or the calculator, or any number of native apps that I’ve already paid for, then I shouldn’t have to also endure advertising there as well. It’s a double whammy.

        • HotRodJohnson

          That’s like saying your Yellow Pages or White pages (that free big book you get every year) is over stepping it’s bounds.

          • burpootus

            I don’t see the logic. The phone book that used to come every year when we had a land line wasn’t free, it was part of the overhead of expensive legacy land line phone service. It provided the ability to look up someone’s phone number by their last name without seeing any advertising whatsoever. The Yellow Pages provided a way to look up businesses by subject, so you had to actively be looking for something to see the advertisements that businesses paid to place there. Neither of these were inherent to using your land line phone, you had to be wanting to look something up.

          • Oluwakorede

            True, on the yellow and white pages. Perhaps adserving on the scale proposed by the author, should be based on a strict philosophy of relevance to the user and should give the user the option to not see the ads (unlike it is on the web).

  • Daniel Tifft

    Great article, Ron! A lot of great points were brought up that I had never considered or thought of.

  • Alex Boro

    No Ron, we do not want iAds on Android.

    • Alan Paone

      He’s really obviously talking about doing ads in a not-iAds kind of way

      • Alex Boro

        I was being sarcastic haha.

  • http://droid-life.com/ Rthvk

    Yah Ron!

  • starscream

    Great article Ron. I would love to see you post more often.

    • El_Big_CHRIS

      Yeah I wish he’d post more

    • http://ronoffringa.me/ Ron Offringa

      I would love to do it more often. This isn’t my main job, so trying to squeeze in the 10 plus hours it takes to make a post like this happen is difficult. I’ll try and increase the volume this coming year.

    • darioqqo948

      my Aunty Peyton got a year old Audi RS 5
      Convertible by working from the internet. he said J­a­m­2­0­.­ℂ­o­m

  • skinja

    I feel like the whole reason Ron posts on DL is to drive animosity which drives people to read and comment. So a roundabout version of click baiting.

    http://www.droid-life.com/author/ron/

  • Matthew Rebmann

    You had me at “Fission ROM” a few days ago <3 but really: That was insightful and thought-provoking. The idea of advertisements in the dialer made me cringe until I read your article. If they were to implement them in such a way as to not be disruptive but helpful? I'd be completely okay with that.

  • Morbid138

    That bezel!

    • http://ronoffringa.me/ Ron Offringa

      It’s monstrous.

  • skinja99

    Ron,
    Why do you keep submitting to DL?

    I feel like the only reason your articles are posted here is to incite animosity and therefore click-baiting people into reading and commenting on these articles.

    • Matthew Rebmann

      In what way was this article a vehicle for creating chaos or animosity? Truly, I don’t follow your statement.

    • Menger40

      I didn’t have any issue with this Ron article. I thought it was good.

  • Justin Foster

    Great ideas. Even a “Did you know” pop up when closing Google Now or certain other Google Apps might be cool

  • Eric G Canoy

    Razr Maxx has kit kat already?

    • HI_MAYNE

      CM 11

    • Matthew Rebmann

      That dialer and the notification icons are very much not kitkat. He’s probably running Nova Launcher or some other launcher with Kitkat icons.

      • http://ronoffringa.me/ Ron Offringa

        It’s CM 10.1.3 with the new Google Experience launcher, no icon pack.

  • KleenDroid

    Amazing

    • Ej McCarty

      This is that one time this comment doesn’t apply to the article.

      • KleenDroid

        I disagree. I am amazed at how long this article was.

        • Ej McCarty

          His articles are always long and often overly detailed and boring. Ahh the opinions of someone who prefers IOS on an android blog. I just don’t enjoy his presence here.