An update was made to this story at 10:02 a.m. PDT: Google denied that it is sharing revenue with partners based on their usage of Google applications. See explanation in update at bottom of article.
Google's Android handset and carriers partners might have more than one reason to work with the company.
In its deals with wireless carriers and device makers, Google has agreed to share a cut of its mobile advertising revenue with those companies, according to a report from MocoNews. That's a potentially powerful incentive for those companies to adopt Android, which has grown quite strongly over the past year.
As Daring Fireball's John Gruber aptly observed, "when handset makers use Windows Mobile, they pay Microsoft. When they use Android, they get paid by Google." (emphasis in original) Under the terms of the reported deal, those partners get the revenue in exchange for bundling Google applications such as Gmail, Google Maps, and search, which the Android project does not specifically require them to do.
A Google representative did not immediately respond to a request for comment. It's a bit of a stretch to assume that the revenue-sharing alone is responsible for Android's growth over the past year, as mobile advertising revenue is tiny compared to Google's overall advertising revenue. That's what Google argues every time someone complains about its pending acquisition of AdMob: in defending the AdMob deal, Google cites statistics from eMarketer pegging overall 2009 mobile advertising revenue at $416 million.
So it's not like Google could contribute all that much to the bottom line of its partners. At least, not right now: mobile advertising is expected to one day be very big as mobile usage continues to grow. That inspired Google's bid to acquire AdMob and Apple's successful acquisition of Quattro Wireless.
But if you're a carrier or handset maker weighing your options, Android was already a compelling choice, given the way Microsoft has let Windows Mobile age ahead of the Windows 7 Phone debut, the lack of momentum around Symbian and Palm's new strategies, and the fact that iPhone OS and BlackBerry OS are not available. A little extra revenue certainly can't hurt.
Updated 10:02 a.m. PDT: Google has confirmed that it shares ad revenue with mobile partners, but only based on their usage of Google search, not Google applications. This applies to both Android and non-Android devices--such as the iPhone--which use Google's search engine as the default on their phones, a representative said.