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Summary:

When Google CEO Eric Schmidt was asked if Google was a “one trick pony”, relying too heavily on advertising revenues, he replied: If you’ve got a one-trick pony, you want the one we have. We’re in the ad business, and it’s growing rapidly. We picked the […]

When Google CEO Eric Schmidt was asked if Google was a “one trick pony”, relying too heavily on advertising revenues, he replied:

If you’ve got a one-trick pony, you want the one we have. We’re in the ad business, and it’s growing rapidly. We picked the right trick.

Schmidt hopes display advertising and mobile will turn into two $10-billion dollar opportunities for the company:

‘If we have a billion people using Android, you think we can’t make money from that?’ Schmidt asked rhetorically. All it would take, he said, is $10 per user per year. Among other things, Google might earn such sums from selling access to digital content from newspapers.

Damn shame, a vast majority of those billion would be using a version of Android that doesn’t have anything to do with Google. Or that most of those billion pay less than $5-a-month to their phone companies today.

Pony image courtesy of Flickr user, Mariacecita under Creative Commons

  1. He’d said this before. He was asked if Google would diversify its revenue source in the future, he said they like advertising, enterprise subscription (now you might add online retail) will contribute to the business in the future, maybe 10%. So basically they fully intend to continue to be a one trick pony. You can say the same about Microsoft(Software license) and Apple (consumer toys). Not everyone wants to be IBM or HP, nothing wrong with being a one trick pony.

    About Andriod in the China market, it’s a wider problem than just Google, the Chinese government just won’t let a foreign company dominate in any industry. Google obviously was very naughty with the censorship issue, but you’ve also heard similar complaint about IP theft and favoritism for home grown champions from other foreign companies operating in China.

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  2. “Damn shame, a vast majority of those billion would be using a version of Android that doesn’t have anything to do with Google. Or that most of those billion pay less than $5-a-month to their phone companies today”

    I will leave Baidu out of the discussion, but I’m triggered by the point on mobile ARPU.

    Pardon me, but what is the ARPU for newspapers? Or for terrestrial broadcast TV? Or for (most of)the internet? Near zero. But haven’t these business models been successful?

    Please understand that ARPU does not directly translate to revenues for Google. Penetration/Reach will drive creation of novel (and B2B) business models.

    When half a billion people have smart phones (and it will not take too long to get there), Google will laugh all the way to the bank. Not because these people will pay $5/year each to Google – surely they will not. But this kind of reach will trigger advertisers (and all sorts of other “monitizers”).

    Here comes what I call the “FTM switch”: What happened to entertainment (ex.TV) for baby boomers will happen to phones in this decade. And what happened to phones back then will happen to TV. In other words, free entertainment and paid phones will switch over.

    Think about it.

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    1. ARPU is an indirect measure of the value of the customer. The $5 ARPU customer is $5 because they don’t have much income and as such are not going to be so valuable as advertisement targets etc.
      One can construe that Google earns a lot because it has ~70% of the search market in the richest country on earth and a good share in most other developed countries.
      Android will not approach that share in the mobile market and as such it probably will not be able to reach $X per users as easily.
      Have looked at the value of TV companies in the US and India ? They reflect the ARPUs..

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    2. ARPU is an indirect measure of the value of the customer. The $5 ARPU customer is $5 because they don’t have much income and as such are not going to be so valuable as advertisement targets etc.
      One can construe that Google earns a lot because it has ~70% of the search market in the richest country on earth and a good share in most other developed countries.
      Android will not approach that share in the mobile market and as such it probably will not be able to reach $X per users as easily.
      Have looked at the value of TV companies in the US and India ? They reflect the ARPUs..

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      1. What do you mean by “TV companies in US and India”?

        If you mean TV equipment makers, then India is clearly lagging behind. It is only now moving from CRTs to LCDs. The coming 3 to 5 years will be high-growth for the LCD makers and the smart ones (think Koreans) are well poised for this. Of course the majority of LCDs sold will likely be 50Hz, less than 32 inch, with no more than USB for digital connectivity.

        So yes, the average USA buyer (looking to buy 200Hz, 50inch, internet enabled TVs) will deliver higher ARPU to the set makers.

        The point I’m making is something else altogether. It is about services and recurring revenues.

        TV services is BIG business in India. And loaded in cash. Not only are there well over 100 stations (thanks to over 20 languages) that every household receives over cable (and in a few cases, over satellite), every broadcaster makes entire bouquets – news, sport, movies, soaps each getting an entire channel.

        Remember this is about domestic economy – local content, local advertisements. This is money generated from within the country, from the gazillions watching TVs, even if the TVs themselves look “pre-historic” to western eyes. TV contributes a higher share to the Indian economy than in USA.

        Why? Because TV is infrastructure for monetizers. Coming back to the point – I believe mobiles will follow the same route. And then the ARPU for handset makers will become insignificant (and irrelevant) compared to the money generated by the services.

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      2. FTM, I meant the TV broadcasters in India etc. There are many of course (just as Bollywood is the biggest movie producer in the world) in India, but that does nto mean they are rich in revenue let alone profit. This is because any company that is based on advertisement can only be as rich as its viewer base – to whom the advertisers are advertising, as that will determine the ad rates that can be charged. And this is basically analogous to ARPU in mobile networks. That is all I meant – and what I think was meant in the column.

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  3. [...] is still primarily a search business with mobile a small but significant fraction of the pie. But as Schmidt has said before, mobile [...]

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  4. [...] this possibility last year, Schmidt effectively said that Google might be a one-trick pony, but it’s a hell of a trick (as Oracle founder Larry Ellison once put it). In other words, if you’re going to be a [...]

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