Android brings in $1 billion a year to Google, helps drive soaring profits

Google's third quarter results, announced yesterday, was spectacular on all fronts. But what may have been the brightest spot is its soaring revenue from Android, which if extrapolated over an entire year, would already reach $1 billion. Microsoft's Steve Ballmer, who once said Google had no business plan for Android, is undoubtedly not a happy man today.

Google's total revenue for the third quarter was $7.29 billion, up 23% compared to a year ago. Net income was up 32% over the previous quarter.

In an analysis of the earnings, CNN has this to day about Android:

Mobile advertising revenue -- driven by adoption of Google's open-source Android smartphone operating system -- is at $1 billion a year, extropolating from the most recent quarter's results.

During a conference call about the earnings, Google CEO Eric Schmidt made clear that Android is at the centerpiece of Google's future:

"Android is much bigger than I could ever have hoped for. Android can become a hugely profitable business for us. Search on mobile will eventually exceed that of PCs...so, eventually, mobile will be a very, very strong revenue stream in comparison to PCs."

This is in line with what Schmidt has been saying for some time. He expects Android revenue to reach $10 billion a year, driven not just by mobile advertising, but by other services such as selling music and videos.

Steve Ballmer has said that Android will be failure for Google, although there's no doubt he doesn't believe that any more. In November of 2008, he had this to say about Google's plans for Android:

"I don't really understand their strategy. Maybe somebody else does. If I went to my shareholder meeting, my analyst meeting, and said, 'hey, we've just launched a new product that has no revenue model!'...I'm not sure that my investors would take that very well. But that's kind of what Google's telling their investors about Android."

I'm not sure what Ballmer would be telling his investors today, given that Android now brings in $1 billion a year to Google, and that Microsoft is fighting for its life in mobile with the just-launched Windows 7 phones. It's clear, though, whose strategy has paid off.

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