What is Android worth to Google? Horace Dediu tries to figure that one out:
Android entered the market after the iPhone and I tracked its share since January 2009 when Android devices became more widely available. Unfortunately that period of time was in the depths of a recession so Google’s price was quite depressed and perhaps not reflective of inherent value. The stock price recovered back to $500 within three quarters. During that time Android share increased from zero to 3%.
After that, Google’s share price has remained uncorrelated with Android. Platform share grew monotonically to nearly 60% but the stock price remained in a narrow band. The data shows that Android created $1.23/point of market share/year over the market life of Android. However if we measure value creation from October 2009 after the recession lifted, we get about 21c of share price appreciation for every point of market share gained for Android per year. That’s a very small impact given the share price of more than $500.
Since Google’s non-Android business has grown throughout the period, it would seem that Android as an independent business has in fact been an overall value destroyer. Those pennies per share are very likely not higher than what the effort cost.
Android is a defensive move to keep people using Google on their mobile devices. I haven’t used Google even once since getting an iPhone 4s, with Siri to find things for me.
So in that sense, Android is something of a necessary operating expense for Google.