Why Google has already won the tablet race

April 7, 2013
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Some might read that and call me crazy. After all, they say, Apple shipped nearly 23 million iPads during the fourth quarter, alone, giving the company 43.6% market share, according to research firm IDC. Samsung came in second place with 15.1% market share. Amazon, another Android vendor, took the third spot with 11.5 percent share.

But wait, there’s more, those folks might say. Apple last year owned 51% of the tablet operating system market, meaning it still owns the space. And as if that wasn’t enough, those folks have perhaps the trump card: Apple’s tablet shipments are expected to rise in the coming years and could eventually hit nearly 100 million units in a single 12-month period.

But such an argument fails to see the forest for the trees. Sure, Apple is currently winning the tablet market when it comes to unit sales and market share, and those battles are important to win. But it’s Google – not Apple – that’s actually winning the war.

Let’s start first with the expectation of Android’s success in the coming years. In 2010, Android owned a little over 20% of the tablet market, according to IDC. In 2011, that figure jumped to 32.3%. By the end of this year, IDC believes that Android will own 48.8% of the tablet market. Apple’s iOS will come in at 46%, relinquishing control over the tablet space.

By the end of 2017, Android will hold strong with 46% market share, according to IDC, but iOS will drop to 43.5 percent.

Smartphone deja vu

If this sounds familiar, it’s because a similar scenario played out in the smartphone market. When Apple launched the iPhone in 2007, its iOS platfom was on top of the world. But now years after Android has gained in markets all over the world, iOS is a distant second. And if IDC’s data is to be believed, the distance between iOS and Android will only increase in the coming years.

But there’s perhaps more to this story than just shipments. Too often, the industry focuses on which company is sending out the most products to store shelves. And as we’ve heard ad nauseum over the years, Apple wins out in that category. But let’s not forget that the true future revenue giant for any mobile company is not going to be in the sale of products, but in the ability to generate boatloads of cash on services and advertising.

And it’s for that reason that Google has already won the war.

The mobile industry is becoming the next, important frontier for advertisers. Companies are increasingly discovering that their customers are finding out about them through smartphones and tablets, and they want to make sure they’re delivering the right experience to capitalize on that. A key component in that is the sales pitch.

Mobile ad sales explode

Perhaps that’s why mobile ad spending is expected to explode in the coming years. In 2010, according to research firm eMarketer, just $2.34 billion was spent on mobile ads. Last year, that figure rose to $8.41 billion. And by the end of 2016, total mobile ad spending will reach $36.87 billion.

Now, Google, of course, is not generating all of that cash through its Mobile Ads and AdWords campaigns. However, the company is expected to land a lion’s share of the spending.

In fact, last year, Google generated $2.2 billion of the $4.1 billion spent on mobile ads in the U.S. By 2015, that figure is expected to soar to $9.3 billion. That’s before we factor in the cash the company is generating on mobile ads overseas and before we tally just how much it’s making on its Google Play marketplace when it takes its cut of app sales.

Booming iPad sales, but …

Apple, meanwhile, finds itself in a difficult position. Although the company will assuredly generate billions on iPad sales over the years, in the advertising space, it’s only expected to make $212.9 million this year on iAd. In 2015, that figure will jump to $622.8 million.

Oh, and here’s another issue for Apple: In 2015, mobile search ad revenue in the U.S., alone, will hit $7.8 billion. Google will generate $7.1 billion of that. So, in the U.S., alone, in 2015, Google can make $16 billion on mobile devices, and tablets will be a key piece of that.

So, maybe we’re all looking at things in the wrong way. Yes, Apple is successful and yes, Apple will continue to make billions of dollars.

But the company’s market share will fall behind that of Android, giving Google at least a leadership position in the tablet space. And when we consider the upside of all of the revenue Google will generate through advertising, search, and Google Play, it’s hard to see how Apple can be too happy with where it’s position the market is headed. 

Don't great me wrong, Apple's iPad business is going to continue to be huge, but sorry Apple fans, in the bigger scheme of things, Google has already won the tablet race. 

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