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4 Big Questions About Google Android's Success

During the Google (GOOG) Q2 earnings call, CEO Larry Page announced that users are activating 550,000 Android devices a day. To save a rush to the calculator, that translates into 49.5 million a quarter.

That's a whole lotta pieces of hardware shipping a month. Impressive as the number is, though, the lack of detail about what exactly is happening combined with some other information out there raise four big questions about Android and its future.

Can you trust the numbers?
These periodic proclamations of Android activations help get a sense of the platform's growth. The question is whether that sense is an accurate one, or just more smoke Google is blowing. In other words, perhaps there's a reason management doesn't put activation figures into financial reports to whose accuracy Page and the CFO must legally attest.

For example, about a month ago, Google vice president of engineering Andy Rubin said that Android activations were growing at 4.4 percent a week and that 500,000 devices were being activated a day. Now the company says the pace is up by ten percent.

Using some math and a standard exponential growth model based on a constant rate of compound interest, at that rate, the number of daily unit activations should be close to 600,000. For the change to be only 10 percent in four weeks means that the weekly growth rate is more like 2.4 percent.

That's hardly shabby, but it shows the danger of taking Google officials at their word when it comes to Android activations. Have activations ever gone down in a quarter? There's no way to tell, because Google only provides the information when it wants to. Presumably, the company wouldn't say a thing when the numbers didn't look good.

Just which devices are selling?
The uncertainty over the accuracy of the activation numbers that Google provides pales compared to how little detail there is about the type of devices being activated. Most everyone who analyzes the announcements -- and I've done this as well -- assumes that for all practical purposes, the number of activations is about equal to the number of handsets. But is that reasonable? I'm not so sure. For example, Jefferies analyst Peter Misek has this tally of tablet sales (click to enlarge):

Clearly the Apple (AAPL) iPad is kicking electronic rump so far. But forget projections for 2012 or beyond and concentrate instead on 2011. Remove Apple and RIM and you're still got about 24 million tablets, or 6 million a quarter. That would still leave a whole lot of smartphones, but it does take a chunk out of the quarterly count.

And what about other devices? The Barnes & Noble (BKS) Nook Color, which uses Android, doesn't appear, and at least one estimate pegged the number selling into stores as 3 million through only February. Now the Nook Color is the best-selling e-reader, according to market research firm IDC.

IDC also said that 6 million e-readers shipped in the last quarter of 2010 and sales have increased since then. How many were Android-based? No way to know without more information. It just gives us one more reason to wonder how many Android activations are for smartphones and how many for other types of devices.

Do apps matter?
Few things seem to make analysts, reporters, and fanbois go berserk more predictably that the topic of how many apps Android and iOS have, or whether developers are running away from Android to iOS.

I think the app effect has been grossly over calculated by virtually everyone in the industry. It's become a mantra: a smartphone platform is only as successful as the number of apps available for it. If that were true, how could Android handset sales have even caught the iPhone when the app count was so far behind? Maybe some of the guesses about whether such devices as the RIM PlayBook or Microsoft (MSFT) Windows Phone 7 handsets can succeed aren't looking at the right factors.

What happens if the patent hammer drops?
I've written about this often enough, but the point that patent lawsuits could have a significant impact on Android sales is clearly one of the platform's big unknowns. At some point, business can become too expensive for vendors, no matter how popular a platform seems to be.

In understanding an industry, the important point isn't necessarily to have all the answers, but to at least ask the important questions. And in mobile, these basic four questions seem frequently ignored.