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Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.

Android is Pulling Ahead

With XR continuing to gain popularity, Android has found a new and likely quite lucrative opportunity

Android is Pulling Ahead, Again

Google has experienced a bumpy road entering the gaming market. YouTube has done well competing with market incumbent, Twitch, while Stadia, their cloud gaming platform, has struggled to gain traction and shut down their internal game studios earlier this year (The Verge). In a product suite that gets a lot of attention from the public, one product under the Google umbrella that has powered billions of gaming experiences - and will continue to in the future - is the Android operating system.

The History of Android

Android was originally founded in 2003 to develop an operating system (OS) for digital cameras, but quickly pivoted to build an operating system for mobile phones before being acquired by Google in 2005.

Android became open source (meaning: anyone could build on it, not just Android/Google employees) in 2007 when Google announced the founding of the Open Handset Alliance, backed by Intel, Samsung, NVIDIA, Sprint, T-Mobile, and a number of other technology and telecom companies. The consortium was created for the purpose of promoting Android as a free open source operating system with support for third-party applications.

The first phone to feature Android was the T-Mobile G1 in October 2008 (3 years after Google acquired them). By 2012, Android became the most popular operating system for mobile phones after surpassing Apple’s iOS (Britannica).

Android is arguably one of the best tech acquisitions in history. Google acquired the 8-person team building Android for $50m (with incentives) and it has paid off massively. Today, Android has around a 72% share of the global mobile market (Tech Republic), and according to court documents in 2017, is estimated to have generated $31b in lifetime revenue and $22b in lifetime profit for Google (Android Authority). The acquisition also enabled Google to integrate and promote the use of other services and applications like the Google Play Store, YouTube, Google Maps, and Gmail.

Market Expansion: What’s Next for Android?

While mobile phones will be Android’s focus for the time being, the almost two decade old technology is quickly becoming the most popular operating system for the next frontier of gaming: augmented reality (AR) and virtual reality (VR) – or “extended reality” (XR) as a term that encompasses both AR + VR. While most consumers may not be aware of the operating system behind the devices they game on, Android powers the vast majority of XR devices.

When it comes to operating systems, there are only three legitimate options for original equipment manufacturers (OEMs): Android (Google), Linux, and Windows (Microsoft). These operating systems have incredible barriers to entry, platform lock-in, and moats around each of them (read more about our views on operating systems here).

Meta’s failed attempt: Meta is a strong example of how complex it is to build an operating system. Meta is one of the most lucrative businesses in the world and has invested heavily in a wide variety of projects related to XR and gaming (in 2021 Meta spent $10b on their “metaverse” efforts). Meta had been actively exploring the production of an XR operating system (deemed “XROS”) but in February of this year the company had reportedly “broken up the around 300-person team tasked with working on an operating system for AR and VR headsets, moving some of the engineers to teams working on AR glasses and Oculus (The Verge).” As of today, the Oculus runs on the Android operating system (Android Central).

Android’s opportunity: Android has essentially been handed the perfect opportunity to be the core operating system for XR. Apple will most likely never open up its operating system and Windows has not succeeded outside of personal computers (where they are still the market leader). Windows does power the Valve Index (VR headset) and their own internal headsets, but outside of those they have not gained adoption from other OEMs.

Thanks, Qualcomm: Another major reason for Android’s adoption is because of Qualcomm’s Snapdragon XR2 chipset. Qualcomm’s chipsets are integral to the growth of XR and are the foundation of these immersive experiences. Android has become the leading operating system for headsets powered by Qualcomm Snapdragon chipsets. Additionally, when building XR applications in Unity or Unreal, applications can be shipped as an “APK”, which is an Android file package format that many developers are familiar with and find easy to work with.

When looking at the popular XR brands, you’ll see in the graph above that Oculus, Sony, HTC, DPVR, and Pico combine for around 81.4% global market share. Of those five, only Sony does not use Android. Sony uses their own proprietary operating system, Orbis, which also powers the PlayStation. These market leaders also all use Qualcomm’s Snapdragon chipset. Similar to their dominance in the mobile market, Android is the clear leader for XR operating systems.

Takeaway: With XR continuing to gain popularity, Android has found a new and likely quite lucrative opportunity. Outside of proprietary operating systems being built by some of the largest tech companies, there are few options that allow for OEMs to offer both a strong experience for users as well as a powerful and seamless platform for developers. We fully expect that XR will continue to see adoption and increased monetization in the next few years. Google is well positioned to monetize this opportunity through continued developer adoption of the Android operating system.