“Never let accountants or lawyers run your business,” some of us tend to believe, as such professions are, by design, risk averse, and business growth often requires embracing some amount of risk. So perhaps only lawyers could come up with the idea that separating Android or Chrome from Google search is a workable idea.
Some of us would probably point out that neither Android nor Chrome actually produces much direct revenue--if any--for Alphabet or Google, and it is questionable whether either product, if owned by new and standalone companies, would be able to sustain a profitable business model very easily, if at all.
How many firms--if any--would be able to invest in and sustain a global and “free” smartphone operating system if it is required to create a new revenue model because Google does not subsidize it? One might ask whether revenue earned by the Google Play Store would be sufficient to sustain Android.
By some industry estimates the Google Play Store generated between $40 billion to $50 billion in 2023, from app sales, in-app purchases, subscriptions and ad revenue from apps distributed on the platform.
As with any retailer, Google earns a commission or percentage of such sales. Google typically takes a 30 percent share of app sales and in-app purchases (reduced to 15 percent for developers making under $1 million per year), amounts similar to Apple’s App Store model.
Google also earns 15 percent on subscriptions after the first year, encouraging developers to build long-term subscription models.
So if the Google Play Store generated $40-50 billion in 2023, Google’s share would likely be in the range of $12 billion to $15 billion. Assuming nothing else were to change, any independent Android company might hope to hang on to most of that revenue stream.
But if independent Android and Chrome companies were created, there is no assurance all else would remain the same, as the Google app and device ecosystem could very well change if the operating systems and browser were no longer integrated within the broader Google application ecosystem.
Consider costs for Apple to support iOS, the equivalent to Android.
Apple employs thousands of engineers and developers to work on iOS. Salaries, benefits, and overhead for these teams could total between $750 million to $1.5 billion annually.
Apple’s total cloud spending is estimated to be around $4 billion to $5 billion per year, with a portion allocated specifically to iOS services.
Apple invests heavily in marketing to promote new iOS features, updates, and devices. Apple’s annual marketing budget is estimated to be around $2 billion to $3 billion, with a significant portion allocated to iOS.
Apple provides customer support for iOS devices, which includes call centers, online support, and in-store assistance. This could range from $500 million to $1 billion annually.
Apple’s overall research and development spending was around $27 billion in recent years, with a significant portion directed toward iOS development.
Based on those assumptions, Apple iOS costs might range from a low of $4 billion annually up to perhaps $10 billion annually.
If those figures are anywhere comparable to Android costs, an argument might be made that Android is viable as a stand-alone company.
If an independent Android did not suffer marketplace erosion, and did not incur new costs for access to the rest of the Google ecosystem, one might argue an independent Android could be profitable.
It is far harder to see how an independent Chrome would fare, as new payment flows would have to be created between Google search and Chrome, for example. And we have at least one good example of a formerly-dominant browser simply disappearing: Netscape Navigator, which was a stand-alone browser with no direct affiliations to a larger entity.
Netscape was dominant between 1994 and 1997. It was crushed by Internet Explorer, which in turn was surpassed by Chrome.
Microsoft Internet Explorer, launched around 1997, took about 90 percent of the market.
Mozilla Firefox launched in 2004 and by 2010, had captured around 30 percent of the market,
Google Chrome launched in 2008 and became the market share leader, though Microsoft Edge, Safari (Apple), Opera and Brave have some share.
But Google Chrome remains the dominant browser with over 60 percent global market share across all platforms. Safari holds the second-largest share (approximately 20 percent), largely thanks to Apple’s ecosystem.
The point is that structural separation of some parts of the Alphabet ecosystem, such as Android or Chrome, might not be so smart. The browser market, for example, has seen many changes of market leadership.
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