Why Is the Android Logo Green? Revenue Sharing!

How do you grow a business? There are many ways, but one is to pay others to help you. And according to paidContent and “sources who are familiar with the deals,” that’s how Google is growing it’s Android business. Apparently, Google (s goog) is sharing advertising revenues with handset makers that build Android handsets. And here I thought that Android was simply a solid operating system.

I don’t know if the report is true, but I’m not sure I care all that much and more importantly, I wouldn’t be surprised by such a deal. Google’s core competency from a revenue perspective is in advertising. But it can’t simply earn advertising dollars on it’s own — it has to partner with other entities in some way. Today, Google matches up ad content with created content to show contextual, targeted ads. It makes a cut and so does the content partner. There’s a precedent for “browser money” too — Google pays Mozilla to be the default search engine in Firefox, for example. There could even be revenue sharing at work here, but even if not, Google is essentially paying Mozilla to get its product in front of more eyeballs, which in turn, potentially generates more ad revenue for Google. With that approach, why would anyone be surprised that Google could be sharing advertising revenues with handset makers? It’s the Google way and it’s also worth noting that it accounts for nearly 90% of Mozilla’s revenue.

Now the other question is — should Google be doing this? That’s not an easy one to answer and opinions are going to vary wildly. I’d rather see a product deployed solely because it’s a good product, but maybe that’s an old-school mindset. Times are changing, as are business models. And the reality is, Android actually is a good product. If it wasn’t, handset makers wouldn’t continue using it no matter how much they were getting paid — and I doubt that they’re making a mint off of mobile ad revenue sharing just yet, anyway. If they put out a crap hardware product due to a poor operating system, sooner or later, their reputation would be shot to pieces and their hardware business would slowly die.

Instead, I see more handset makers adopting Android and — more importantly — more consumers buying Android phones. Is that because Google is paying companies to build Android devices? It could be part of the reason, but don’t overlook the fact that Android isn’t a bad mobile platform. And aside from the fact that we’re potentially talking about revenue sharing for hardware and not software, how is this different than the business model Google has followed for years? Personally, if it’s true, I think it’s ingenious and it explains why the Android logo is green.

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