Android Making Rapid Strides in Apps Business, Monetization Elusive

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At the LeWeb conference in Paris on Wednesday, Google’s (NASDAQ:GOOG) chairman Eric Schmidt said that he believes that mobile developers will prioritize the Android platform over Apple’s (NASDAQ:AAPL) iOS in the next six months. [1] His comments were driven by the belief that the high volume of Android based smartphones will drive this prioritization for developers. Android’s surge in the smartphone operating system market has been dramatic in the last one year and it’s market share increased from only 25% in Q3 2010 to 52% in Q3 2011. [2] Apple, Research in Motion (NASDAQ:RIMM) and Microsoft (NASDAQ:MSFT) have all been on the receiving end in the smartphone OS market during this period.

See our complete analysis for Google stock here

Google experiencing apps volume growth

The Android ecosystem has experienced faster growth of apps downloads in the past. The Android market has already crossed 10 billion downloads so far and is increasing at a rate of 1 billion apps per month. [3] This growth rate is comparable to the growth that Apple is experiencing with its ecosystem, although Apple still leads in the number of apps that developers have developed for Apple’s app store. [4]

Monetizing apps still an issue for Google

Apple has done well when it comes to monetizing the apps business. According to a report, Apple owns about 85 to 90% of total mobile app spending. This is likely to be still more than 70% of mobile app revenue share for the next three or four years. [5] This goes to show that although Google has been successfully able to grow its apps ecosystem in the terms of volume, it has failed to monetize it effectively.

Our $628 price estimate for Google stock is slightly above the market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

  1. Google’s Schmidt: Android leads the iPhone, Cnet, December 7th, 2011 []
  2. Worldwide Smartphone Sales to End Users by Operating System in 3Q11, Gartner, November 15th, 2011 []
  3. 10 Billion Android Market Downloads and Counting, Android Blogs, December 6th, 2011 []
  4. Commas, Zeros and the Number One: Apple’s iPhone 4S Event by the Numbers, AllThingsD, October 4th, 2011 []
  5. Apple blowing away Android with up to 90% of app revenue, GigaOm citing Piper Jaffray as the source, November 21st, 2011 []