Leaked Google Financials Tie EU Search and Android Antitrust Cases Together

Summary:  Google Android’s >70% monopoly-size gross profit margins were made public for the first time when Android’s 2014 summary financials were disclosed in the Oracle v. Google copyright case (as evidence of Android’s commercial success to rebut Google’s claim that Android’s unauthorized use of Oracle’s Java APIs was “fair use” not commercial activity.) Combining this newly disclosed information with what we already know, Android likely generated a little less than a third of Alphabet’s 2015 revenues, but over a third of its 2015 gross profits. It is now clearer that the formal EU antitrust investigation of Android contractually tying Google’s dominant search to gain >80% share of the world’s smartphones will result in another EU Statement of Objections that could eclipse the current EU abuse of search dominance case in antitrust liability over time.  


The last thing Alphabet needs, as it tries to pivot investor focus from the EU’s impending ruling that its core search business is an abusive monopoly to Alphabet’s PR-candy, “moon shot” businesses, was public disclosure of Android summary  financials that undercut Google’s spin that the EU antitrust case is “wrong as a matter of fact, law and economics,” and that inextricably link the impending Google Search self-dealing ruling with the fast-ripening Android self-dealing investigation.    

For the first time, the public and investors have learned that Alphabet-Google’s “free” Android operating system that contractually bundles Google’s search engine and its leading search-generating apps YouTube and Maps, has actually generated $31b in revenue and $22b in profit 2009-2014 (with a telling monopoly-size >70% profit margin). The public also learned that Google paid Apple $1b in 2014 for Google to be Apple’s default search engine and to foreclose search competition from emerging in mobile.

This analysis will show how essential Google’s tying of Android and search and it’s foreclosing of search competition from Apple devices was in: 1) maintaining its 90% search dominance through the potentially competitive transition from desktop to mobile search; 2) extending its search-tied dominance in mobile to other tied search-driven mobile apps like YouTube, Maps, etc., in order to extend Google’s dominance into adjacent markets; and 3) maintaining and extending its desktop data dominance into mobile Android metadata dominance.

Why Google’s Search and Android Cases Are Inextricably Linked

Google has misled many that the Google Search and Android cases are largely unrelated. Wrong. We now know better. They both center on the same abusive monopoly self-dealing behavior, abusing a dominant search position in one market to extend it into another market, via default preferencing of Google search and content over competitive offerings.  

Just like the EU charged Google in its Statement of Objections of preferencing Google-owned content over competitors’ content in Google Search for Shopping, Google is being investigated for preferencing its own search engine and apps most prominently on mobile devices’ first screen via Android tying and bundling contracts.  

Just like search, Android, YouTube, and Maps are “free” services “paid” via collection of users’ private “data currency” i.e. their personal information.

Just like Google’s 90% EU dominance in search creates an unbeatable advantage in user ad-profiling and machine learning, Android’s search-tied leverage to get >80% dominance of mobile operating systems creates an unbeatable advantage in the collection of real-time, location-driven, and connectivity-rich data for user ad-profiling and machine learning.

This unique Google and Android data dominance appears to be a logical target for EU Antitrust Chief Vestager’s recent warning that If just a few companies control the data you need to satisfy customers and cut costs, that could give them the power to drive their rivals out of the market, then we may have to step in, in order to restore the level playing field.”

Why Abuse of Data Protection Is an Abuse of Android Dominance

It is telling that in the same month in 2012 that Google introduced a new privacy policy that it would shortly implement over the strongest objections of EU privacy authorities for having no user opt out, Google reported ~250m Android users and CEO Larry Page said: "We see a lot of potential for us to make money on Android."  

In addition, how these new incriminating Google-Android revenue/profit financials became public is surprisingly relevant to the EU’s anticompetitive concerns over data protection and abuse of data dominance.  

We learned these new key and incriminating Google financials from a Bloomberg report covering the Oracle v. Google public court proceedings over whether Google’s Android operating system infringed Oracle’s Java API copyrights.

To help refute Google’s claim that its use of Java without a license or payment was benevolent and non-commercial “fair use,” an Oracle lawyer, Annette Hurst, effectively argued that Google’s Android revenues, profits and exclusive search agreement with Apple, were strong evidence of the “extraordinary magnitude of commerciality” of Android.

Google can’t legally win its “fair use” argument under court precedent, if it can be proven that Google commercially benefited from Android’s mass copyright infringement.

Clearly Google has benefited commercially to the tune of ~$31b in revenues and ~$22b in profits.

It is telling that Google did not refute the financials’ accuracy in court. It only ironically asserted a ‘right to be forgotten’ in asking that the court redact any mention of the financials in the court transcript because “that non-public financial data is highly sensitive and public disclosure could have significant negative effects on Google’s business” [and apparently public and investor perception of Google’s antitrust liabilities.] 

Just like Google believed it could ignore the U.S. legal requirement to get Oracle’s permission to use or pay for its necessary use of Oracle’s Java APIs to seize first-mover, high-profitability for its Android mobile operating system business, Google believed it could ignore the EU legal requirement to allow users to opt-out from its new 2012 privacy policy to mass-collect Android metadata to fuel its advertising business to seize first-mover high-profitability for its Android mobile operating system business.

Simply, is Google-Android’s use of consumers’ personal information without permission or payment “fair use” or anticompetitive abuse of a monopoly?

What Logical Google Business Inferences Flow from the new Android Summary Financials?

First, Google disclosed last October that >50% of Google searches worldwide are mobile. Given that search generates the lion’s share of Alphabet-Google’s revenues and profitability, and that Android and Apple (via Google’s $1b payment to Apple to be its default search engine) generate advertising from those >50% of searches that are mobile, we should not be surprised that through 2014, Google generated $31b in revenues and $22b in profits from Android, especially because Google did not refute them in court when given the chance, apparently because securities laws would prevent them from misrepresenting their real business to the investing public.

Second, to put these summary financials in more useful perspective, we need to overlay the revenue and profit figures with the history of Android adoption, because the overall number of Android users is the best rough proxy for allocating by year their likely advertising revenue from Android and for their revenues from selling Android apps via Google Play.

The first commercially available Android smartphone was available at the end of 2008. In January 2012, Google reported ~250m Android users, in mid-2013 538m,  and in mid-2014 over a billion Android users. Given the rough apparent annual growth rate here, this would suggest that roughly half of their $31b in revenues and $22b in profits occurred in 2014, which translates to ~$15b in 2014 Android-related revenues and ~$11b in 2014 Android-related profits.

Third, given a rough projection of Android’s 2009-2014  financial growth trajectory into 2015, Android’s 2015 revenues and profits could be in the ballpark of ~$20b and ~$15b respectively, which would represent a little less than a third of Alphabet’s 2015 revenues, but over a third of its 2015 profits. (Everyone should appreciate here that these are very rough estimates based on the assumption that the Android’s 2014 revenue and profit numbers that Oracle submitted as evidence in Federal Court are provable facts to the Judge.)

Why are new financials key to the EU’s Google Search antitrust case and Android investigation?

These summary Android financials were the critical missing public puzzle pieces for the public and investors. Without them, Google could hide the import of the Android investigation and its link to the EU’s antitrust case against Google Search. With them, the big picture monopoly dynamic between Google Search and Android becomes clear and obvious when put in a financial result perspective.

Please compare what the public and investors previously knew versus what they apparently know now.

For search, we know the EU estimates that Google commands of >90% share of search in the EU; and we know that Google has disclosed that >50% of Google searches overall occur in mobile via Android or Google’s exclusive search default deal with Apple.

For Android, we know Google-Android commands >80% of smartphone shipments globally per Statista. We also know from the EU’s Android investigation announcement and from The Information’s great scoop about Google’s confidential Android contract requirements, that Google’s contracts with manufacturs/OEMs mandate that Google Search and other apps be tied/bundled to Android and featured most prominently on the Android home screen.   

What we didn’t know previously, but we now can derive from what we learned from Oracle’s disclosures is that Google Android earns >70% monopoly-like profits from a very big Android business that generates a little less than a third of Alphabet’s revenues, but over a third of Alphabets’ gross profits.

This effectively proves that Google successfully has extended its 2008 dominance of desktop search to 2016 dominance of mobile and overall search.


It is for the EU antitrust investigators in their current investigation of Android to determine if Google has abused its dominance in search by tying/bundling Google Search and other search-driven Google apps (YouTube, Maps, etc.) to dominate metadata collection and mobile search.

It is hard to imagine how Android could have dominated the global operating system market in seven short years without abusing its search monopoly power to tie Google search to Android to foreclose the advent of mobile search competition.

Finally, it will be interesting to learn at Alphabet’s upcoming earnings call if Alphabet discusses, confirms or refutes its now public Android-related revenues and profits; and if investors ask any questions about Android’s financials or about its antitrust outlook in the EU, especially since this call has been touted by Alphabet as offering more transparency into Alphabet companies’ revenues costs and implicit profitability/loss.

My guess is most investors would prefer more transparency about Alphabet’s core business’ performance with Android, YouTube, Maps, Play, Gmail, Chrome, Translation, etc. that drive short-term investment performance than Google’s offered increased transparency about its “moon shot” businesses that are speculative, taking many years to succeed or fail as investments.  


Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an emergent enterprise risk consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google and also before the relevant House oversight subcommittee on Google’s privacy problems.