Carriers

Google doesn’t make money from the Android Market, so why is Verizon building a store?

September 20, 2010 | by Andrew Kameka

Verizon

verizon-v-cast

Verizon is reportedly building its own Android Market alternative to be featured in its V Cast content system. While some have suggested that Big Red have opted to build its own market to get a cut of app revenues, that’s an unlikely excuse.

Why? Because Verizon is already getting money from the standard Android Market currently available on its phones.

The Android Market divides revenue into two piles: 70 percent for developers and 30 percent for operating costs (processing costs and money for carriers).  That was the explanation first offered when Google began discussing paid app support back in 2008, and when I reached out to Google to confirm that is still the case, I received this response:

Google does not make money off app sales in [the] Android Market, and developers receive 70% of the revenues from each download while the rest goes to operating costs. We believe this revenue model creates a fair and positive experience for users, developers, and carriers.

SO WHAT’S WITH VERIZON’S STORE?

The Google spokesperson I communicated with declined to state how much of the 30 percent goes to carriers, but there’s definitely money being funneled to them, so I doubt direct money from apps could be the primary motivation for a Verizon-branded app store – though, I’m sure it doesn’t hurt.

Verizon probably sees value in the belief that a V Cast purchase is more likely to lock customers into carrier. The Android Market ties purchases to a Google account, so that app is accessible as long as you have a compatible device. I may have purchased Twidroyd Pro while on a T-Mobile G1, but it was still in my paid apps list when I upgraded to a Sprint HTC EVO 4G. It doesn’t appear that V Cast Apps will have any link to the Market’s system, so customers who leave Verizon for another carrier must be willing to forgo the money they’ve spent in the V Cast store.

Plenty of Verizon customers will still be willing to leave, but it’s tougher to switch sources when you have already invested so much into one. I’m sure there are BlackBerry, iPhone, webOS, and Windows users who won’t migrate for that very reason. Verizon, like most businesses, wants to make as much money as possible, so a V Cast store that unifies ringtone, wallpapers, media, and app purchases in one place may be their way of doing that.

It’s also possible that Verizon feels a better and easier to use app store is in the company’s best interests. According to AndroidAndMe’s story on this issue, V Cast will require approval and feature direct carrier billing. That will eliminate two Market headaches – a disorganized, crowded mess and user aversion to Google Checkout – in one swoop. This could be Verizon’s attempt to simplify the experience of acquiring apps and wrestle control from Google. The British operation of Verizon’s partner, Vodafone, employed a similar tactic.

Sophisticated Android users will opt for the more flexible and portable Android Market, but if Verizon is confident enough to invest in its own store, you can bet that it will be a prominent feature on upcoming devices.