Back in the early days of Android, Google's competitors like Microsoft and Apple, had no idea how the company was going to make money off of Android. Since they were basically giving it away for free to other manufacturers. What Microsoft's CEO Steve Ballmer didn't realize was that Google is not a software company. They are an advertising company. The software and services they provide is just a way for Google to rake in even more advertising dollars. Think about it, the more people that visit a site with ads, the more money that site will make. That's basically what Google has done with Android.
Now there's a new research note coming out of Morgan Stanley showing that Google is poised to become bigger, even now that it's blown past Microsoft and is now the tech industry's second most valuable company, second only to Apple. Morgan Stanley is projecting that Google will actually add one percentage point to its total share of th global advertising market over the next three years. Business Insider is estimating that will give it around a 6% share of all advertising revenues in the world. In this instance we're talking about all advertisements, from all mediums. This includes TV ads, billboards and everything else. This hold on the advertising market, aided by Gogole's efforts in the mobile world, means that Google doesn't really need to worry about making a profit from the selling Android phones and tablets. This might even give them the flexibility to sell even more super-cheap devices like the Nexus 4, 7 and 10. Why? Well it all has to do with ads. They just need to find a way to get their cost-per-click rates up on mobile apps.
Not too long ago, we found out that ads were coming to Gmail on Android. Many people were upset. "Oh I hate ads",etc. But what they didn't seem to get is that is where Google makes its money. Looking at the earnings they announced yesterday afternoon, over 80% of their revenue came from ads. That's a big chunk of change right there. So we knew ads would come to Gmail on Android eventually, we just didn't know it'd take this long.