Android advertising revenue could potentially generate $1 billion for Google next year. Piper Jaffray analyst Gene Munster says Android generated $5.90 per user in mobile advertising in 2010, and that number is expected to jump to $9.85 in 2012, aided in part by in-app advertising from the Android Market app store.
Here's the breakdown via Fortune:
Pointing out that Google has said it is on a $1 billion annual run-rate in mobile advertising, he estimates that the company had $850 million total mobile revenue in 2010, with Android generating about 16% of the total, or around $130 million, which would translate to $5.90 per Android user. (That implies about 22 million Android users for 2010.) By 2012, he thinks there could be 133 million Android users generating $9.85 a year, which would mean $1.3 billion in Android-related revenue.
Earlier, Canalys reported that Android became the best-selling smartphone worldwide in the fourth quarter of 2010.
Since that time, two other reports indicate that may not be the case. Regardless, both reports show that Android usage is surging.
Android, which had a market share of 3.9 percent in 2009, now has 22.7 percent market share, according to Gartner's report on worldwide sales to end users in 2010. Android sales grew 888.8 percent.
Also, Android passed Apple in the U.S. for smartphone market share (28.7 percent vs. 25 percent), according to the latest comScore data. Android grew 7.3 percentage points since September.
Eric Schmidt told the Wall Street Journal back in July that Google was positioning itself to generate $10 billion or more per year by giving away the Android software free to device makers. Schmidt's goal was to hit $10 per user per year -- not very far from this $9.85 estimate for 2012.
"If we have a billion people using Android, you think we can't make money from that?" Schmidt said.