As Mobile World Convenes, Android’s Dominance Quietly Grows

In Barcelona next week, 67,000 are expected for Mobile World Congress, where the focus will be on the latest in hardware, apps and mobile services.

But the most significant story in mobile this past year is arguably Android’s rapid domination of the smartphone OS market, and how Google is using Android to gain control over the mobile ecosystem that consumers increasingly rely on for their Internet experience.

Android’s share of the smartphone OS market grew to 70.1% by units shipped in Q4 of 2012, up from 52.9% in the same quarter a year earlier, IDC reported late last week (see here for the full report), mirroring numbers for the full-year.

Google’s payoff for ‘free’ Android licenses and Google Apps is more than 95% of mobile search ad dollars and 56% of mobile ad revenue – which makes up most of Google’s $8 billion in expected mobile revenue in 2013, the New York Times reported.

So, why at this year’s Mobile World will there be “No Cute Android Pins, No Schmidt, No Slide: Google Tones Down Its Presence At MWC This Year,” as TechCrunch reports: “We’ve heard from sources that Google these days is less keen on emphasizing the Android brand… You could also argue that part of the reason why Google does not need to make as big of a push at MWC is because it has already achieved market dominance.”

Just weeks before Mobile World, Google unveiled its latest effort to monetize the consumer mobile experience with a new program called ‘enhanced AdWords’ that most observers believe will drive up mobile advertising rates and spending for businesses across the board (see for more).

Google is writing rules that affect all others in the mobile ecosystem – from app developers, device-makers, mobile payment enablers, network operators, and of course, advertisers – to favor Google for the same reasons it steers users to its own products in desktop search. This has enormous implications for all players in mobile, and gives Google the power to shape the consumer mobile Internet experience long into the future.

Google uses a multi-pronged strategy to dominate mobile

Android’s predatory distribution strategy licenses the dominant smartphone OS for free to device-makers at below-cost pricing that no other company can compete against. Google uses Android to control the mobile ecosystem in the following ways:

Mobile/Smartphone OS: Google’s non-fragmentation clauses acts as a non-compete agreement, preventing device-makers from developing competing versions of the Android ecosystem.

Mobile Search: Android licenses require Google to be the default search provider on Android phones, and Google is the default search provider on iPhones in a deal with Apple reportedly worth $1 billion in 2014.

Advertisers: Companies have no choice but to rely on Google for mobile advertising to reach the majority of mobile phone users today – and ‘enhanced AdWords’ is Google’s latest attempt to drive up the mobile ad prices and spending.

Apps:

• Android devices have to offer all or none of Google’s suite of pre-loaded apps when shipped, and none from non-Google app developers.
• This has vaulted Google apps into #2-6 of the most visited apps in December 2012, according to comScore (Maps, Play, Search, Gmail, YouTube) – giving Google valuable personal data to strengthen its mobile ad revenue.
• Google Play is the default app store on Android phones, giving Google authority over which apps gain access to the market.
• Moreover, app developers have to give Google a license to use their source code to improve Google’s own products as a price of admission to the Google Play market

Payment: Google also forces app developers to collect payment for apps through Google Wallet, siphoning revenue from other innovators that they could use to reinvest in product development.