What makes him powerful: The sun never sets on Google's mobile empire. While the astounding, game-changing growth of its Android operating system captures most of the headlines, the reality is that Google applications and services are virtually synonymous with the mobile user experience across all major platforms. Consider that Google's mobile search traffic has increased 500 percent over the past two years--search queries across Android smartphones alone grew 300 percent over the first half of 2010, but digital ad network Chitika recently reported that Google now carries about 97 percent of all search traffic on rival Apple's (NASDAQ:AAPL) iPhone as well. Its Google Maps navigation service tops 100 million users per month, emerging not only the most popular application on Android, but also as the third most popular on both iPhone and Research In Motion's (NASDAQ:RIMM) BlackBerry platform, behind only Facebook and The Weather Channel. And don't forget Google's mobile advertising efforts, bolstered by the addition of mobile ad network AdMob, which Google acquired for $750 million in late 2009. Research firm IDC forecasts that Google will represent 21 percent of the total U.S. mobile ad market by the end of 2010, running neck and neck with Apple for the overall segment lead.
But it's Android, the open-source OS Google first introduced in October 2008, that represents the pinnacle of Eric Schmidt's nine-year tenure at the company's helm. Based on mobile technologies developed by Android Inc., purchased by Google in mid-2005, the Android platform now powers dozens of smartphones and tablets from a growing number of manufacturers. As of the third quarter of 2010, Android accounts for 21.4 percent of U.S. smartphone market share--up a staggering 6.5 percentage points over the second quarter--according to data issued by digital measurement firm comScore. No less impressive, Android was the only operating system to gain market share in the third quarter. Although RIM's BlackBerry remains the overall U.S. leader at 37.3 percent, it fell from 40.1 percent in the second quarter, while Apple's iOS remained unchanged at 24.3 percent. Research firm NPD Group reports that devices running Android accounted for 44 percent of all smartphones sold in the U.S. during the third quarter, up 11 percentage points quarter-over-quarter. According to Schmidt, Google now activates more than 200,000 Android units each day. Android has grown "well past anything that I had ever hoped for" Schmidt said in October 2010, calling it "probably the largest single platform play available in the market today."
Although Android devices span all four of the nationwide U.S. operators, Google's most important carrier ally is Verizon Wireless (NYSE:VZ). Not only is Verizon home to Motorola's (NYSE:MOT) Droid, arguably the most successful Android smartphone to date, but Google and the operator's parent company Verizon Communications have banded together to create a net neutrality policy proposal that forbids any kind of prioritization--including paid prioritization--of Internet traffic over wired networks, while at the same time exempting the wireless broadband from regulation because of the bandwidth constraints inherent in mobile network architectures. According to Google and Verizon, their alliance is not a business deal, but instead creates a public policy framework they hope other carriers and public interest groups will examine and endorse. "Our basic goal is to set aside the very divisive debate that everyone is engaging in and instead recognize that we are extremely dependent upon each other," Schmidt said.
Despite Google's reach and scope, not everything the company touches turns to gold. In January Google unveiled the Nexus One, a branded Android smartphone manufactured by HTC, available unlocked for $529 or locked via T-Mobile USA for $179. The Nexus One never found footing among consumers, however, and operators proved resistant to Google's sales and distributions plans. Within six months, the firm scrapped the initiative, although Schmidt defended the effort, contending "[the Nexus One] was so successful, we didn't have to do a second one."
Google's Android Market application storefront is also the target of frequent criticism as developers struggle to monetize their software: Not only is app discovery is a challenge, but prior to a recent expansion, developers in only nine countries were able to distribute premium apps via Android Market, with premium apps available in just 14 of the 46 countries that the storefront serves. Even so, consumers still must register for a Google Checkout to download paid Android applications, except in locations where operator billing is available. It's no wonder that despite Android's phenomenal growth, developers remain more focused on Apple's iOS. While Apple's App Store boasts over 300,000 iPhone applications, Android Market stands at about 100,000.
Most problematic of all are the challenges posed by Android fragmentation: With so many manufacturers and operators in the mix, all working at different speeds, the Android ecosystem is a crazy quilt of opposing updates and iterations, creating massive headaches for developers looking to deliver a uniformly satisfying experience to all consumers. As of Nov. 1, 40.8 percent of Android smartphones run Android 2.1, 36.2 percent run 2.2, 15 percent run 1.6 and 7.9 percent run 1.5--0.1 percent even run obsolete versions of the OS. Google has already said it will slow the pace of Android's development as the platform matures. Regardless, the issue seems to have little impact on consumer enthusiasm, and wherever users go, developers are bound to follow. Android's continued growth now seems inevitable--and as it expands, so too will Schmidt's power and influence. --Jason