Piper: Android to become billion dollar business in 2011

From CNN/Fortune, predictions are that Android users will contribute US$9.85 each to Google by 2012 through advertising revenue.

When you have two separate internal businesses, mobile and advertising, who do you give credit to when money is made in mobile advertising?  Do you give full credit to the mobile business and take the revenue out of the advertising wing?  Or, do you split it up  between the two with some arbitrary percentage allotted to each? Google (GOOG) and its analysts are stuck in that conundrum.

To that end, Piper Jaffay’s Gene Munster thinks they’ve worked out some sort of basis for allotting money to their mobile operating system and has assigned Android a dollar amount per Android phone of $5.90 this year and $9.85 next year.

We believe Android could provide over $1 billion in revenue from advertising to Google in 2012. We believe that Android generated $5.90 per user in mobile advertising in 2010 and expect ARPU to increase to $9.85 in 2012. In comparison, Google search generated $18.85 per user and Google advertising in total generated $25.77. Additionally, we expect Google’s revamped Android Market will enable users to download apps on Android more easily and could increase monetization per user from in-app advertising over the next two years. We maintain our Overweight rating on GOOG.

The article also featured an interesting graph showing how search is still, and for the meantime remain to be the main source of Google advertising revenue per user.

Click here for the full article.

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