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How much do they make in search-related ad revenue over the life of a device? How much is it worth to them to stop people from getting a Surface with Bing or a

How much do they make in search-related ad revenue over the life of a device? How much is it worth to them to stop people from getting a Surface with Bing or an iPad where Google has to pay to get the default search option set to Google (and the future of the default seems uncertain)?

saurik 14y ago
Search is a much more reasonable avenue, but I'm still not so certain. I've seen "$1bn/yr" quoted as Google's TAC (traffic acquisition cost) paid to Apple to be the default search provider. However, I've also heard that that deal is tight and carefully negotiated. With hundreds of millions of iOS devices and that kind of TAC, it would then be reasonable to guess that Google's revenue, per iPhone user, on the order of dollars, maybe tens of dollars, but not hundreds of dollars. Honestly, though, Google has never sold that many Nexus devices before... they might just want to take a loss on the whole thing to demonstrate that the device is reasonable to manufacturers, try to bootstrap the market by getting initial devices cheaply to users, or even just to make friends with Asus. My guess is that they just want to screw Apple. Apple makes money by convincing people that they need to purchase and then replace expensive hardware. This hardware has a lot of margin in it, enough to provide outstanding customer service and to generally spend time on software improvements. In the world of PC's, there are tons of competitors figuring out how to drive the price down, but then they don't bother to compete on design. Companies like Dell make almost no money per computer: the margins in that industry don't exist. So, I contend that if Google occasionally does some "charity" work, maintaining an OS (at a loss) an then partnering with the currently best-scaled lower-margin device manufacturer to inject some reasonable design, they can gut Apple's business "where it hurts", even though they probably get almost no money from it themselves. This is advantageous to Google as it allows them to keep an advantage over Apple in those negations over TAC, or make it less enticing for Apple to spend a bunch of time attempting to rebuild thigs like Maps. Put differently: Google doesn't need this market: they have an already bootstrapped and epic profit model. This doesn't need to make them money directly, or even tangentially: it just needs to give them an advantage somehow, somewhere, that can be leveraged to make money.

saurik 14y ago

Search is a much more reasonable avenue, but I'm still not so certain. I've seen "$1bn/yr" quoted as Google's TAC (traffic acquisition cost) paid to Apple to be the default search provider. However, I've also heard that that deal is tight and carefully negotiated. With hundreds of millions of iOS devices and that kind of TAC, it would then be reasonable to guess that Google's revenue, per iPhone user, on the order of dollars, maybe tens of dollars, but not hundreds of dollars. Honestly, though, Google has never sold that many Nexus devices before... they might just want to take a loss on the whole thing to demonstrate that the device is reasonable to manufacturers, try to bootstrap the market by getting initial devices cheaply to users, or even just to make friends with Asus. My guess is that they just want to screw Apple. Apple makes money by convincing people that they need to purchase and then replace expensive hardware. This hardware has a lot of margin in it, enough to provide outstanding customer service and to generally spend time on software improvements. In the world of PC's, there are tons of competitors figuring out how to drive the price down, but then they don't bother to compete on design. Companies like Dell make almost no money per computer: the margins in that industry don't exist. So, I contend that if Google occasionally does some "charity" work, maintaining an OS (at a loss) an then partnering with the currently best-scaled lower-margin device manufacturer to inject some reasonable design, they can gut Apple's business "where it hurts", even though they probably get almost no money from it themselves. This is advantageous to Google as it allows them to keep an advantage over Apple in those negations over TAC, or make it less enticing for Apple to spend a bunch of time attempting to rebuild thigs like Maps. Put differently: Google doesn't need this market: they have an already bootstrapped and epic profit model. This doesn't need to make them money directly, or even tangentially: it just needs to give them an advantage somehow, somewhere, that can be leveraged to make money.