How Much Revenue Can Google Fi Add To Alphabet’s Top Line?
Google Fi is a mobile virtual network operator (MVNO) service operated by Alphabet (NASDAQ:GOOG) that uses networks operated by T-Mobile, Sprint, and U.S. Cellular and over 2 million Wi-Fi hotspots. Google Fi will be switching between these networks to enable best connectivity services to its end users. While initially started on Nexus phones, Google Fi was extended to Android phones manufactured by popular OEMs and even to the iPhone. We estimate that Fi contributed around 0.3% in 2018 to the company’s top line.
The pricing plan for the service is $20 per month for unlimited calling and text messages, with $10 per GB up to 6 GB. Post 6 GB of consumption, data usage is free for the month. However, speeds are slowed down for using in excess of 15 GB.
Since Google does not provide details of the number of Fi subscribers, or even the number of hardware units sold, we use the following approach to estimate the contribution of Google Fi to Google:
- Estimating the active devices compatible with Fi (number of phones designed for Fi and compatible with Fi). As of Feb 2019, the following phones were designed for Fi and compatible with Fi.
- Designed for Fi: Pixel, LG G7, LG V35, Moto G6, One Moto X4, Nexus 5X, Nexus 6P and Nexus 6
- Android: Google notes that all models running Android 7.0 with certain bands would be compatible with Fi. Per this definition, on the basis of the Android distribution report, at the end of Oct 26, 2018, ~50% of devices were compatible with Fi.
- Apple: Per Google’s website, all phones running iOS 11.0 or higher would be compatible with Fi. According to industry reports, as of October 2018, 89% of iPhones were running version 11 or higher.
- Estimating active users: Not all downloaded Fi users would be using the app. We have seen the active usage to download ratio vary between 0% to 80-90% depending on the popularity and age of the app.
- Estimating average revenue per user (ARPU): Per Fi’s pricing plan, the minimum monthly bill is likely to be $20 for a voice only user, and could go up to a maximum of $80 for heavy data usage. We estimate the average revenue per user roughly at the midpoint of that range, as most users are likely using data.
- Estimating total annual revenue from Google Fi: This is simply the number of active users per year multiplied by the ARPU.
- Estimating the contribution to total Google revenue: We estimate that 0.3% of Google’s revenue was attributable to Fi. Further, we expect this number to increase to 3.2% in 2020 as the company continues to roll out and improve its service.
Our interactive dashboard on Google Fi’s Contribution to Google outlines our forecasts and estimates for the MVNO and the company. You can modify any of the key drivers to visualize the impact of changes on its revenue, and see all of our technology company data here.
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