Xiaomi never announced this in any of its press interactions or social channels, where it is normally quite active. Except for the company’s recent Android One series – the Mi A1 and Mi A2 – all Xiaomi smartphones run MIUI instead of stock Android.
The ads are in-your-face and almost everywhere, from the dashboard when you swipe right on the home screen (App Vault) to first-party apps like Mi Music and Mi Video to built-in tools like the File Manager.
Profits and “honest” pricing
A few months ago, Xiaomi CEO Lei Jun announced the company would forever cap net profit margins on hardware at five percent. Many thought this was generous and praised the company for not seeking egregious amounts of profit at our expense. In India, much of Xiaomi’s messaging is around its “honest pricing” and how the company gives back to its “fans” by launching phones at cheaper prices.
Most of that is PR and shouldn’t be given too much attention.
Xiaomi doesn’t make five percent net profit on hardware yet anyway — it may never. According to Counterpoint Research, Xiaomi makes an approximate $2 of profit per device, which is a little over one percent considering the average selling price of a Xiaomi smartphone is less than $150.
Only Apple and Samsung make big profits like that on smartphones.
Advertising and Services
Xiaomi has always said it can price its smartphones competitively because of its unique business model, which depends on monetized internet services. The company didn’t make any headway on that front in India — its biggest market — until May, when it launched Mi Music and Mi Video.
These services, and the new advertising approach lets Xiaomi leverage its large user base, selling a lot of devices for cheap and making a big profit out of each by steering the users towards its online retail offerings and ecosystem products.
We’ve seen this before…
Xiaomi is not the first Android OEM to try monetizing its users in other ways. Many bundle a lot of bloatware into their phones — it’s not advertising, but its an equally annoying money-making exercise. Even Samsung, which sells devices at a premium, has spammed users in the past.
Amazon actually struck a balance of doing it right, both from a business perspective and consumer one. Amazon sells devices like its tablets and e-readers at a slightly lower price to those who don’t mind ads.
These ads, mostly Amazon recommendations, are occasionally useful too. However, unlike Xiaomi’s case, the ads only appear on the lock screen and don’t disrupt your user experience. You can also just buy the device at full price — or pay Amazon a fee later — to avoid ads altogether.
… but it’s still not okay
Unlike Amazon, Xiaomi doesn’t sell an ad-free option or charge to turn them off. As it stands, there’s no getting rid of them.
The pushback the company might see after this move might make it alter its approach, but as a public company, Xiaomi is far more beholden to its revenues and profit margins.
Hopefully Xiaomi will share more details about the move and offer a more transparent insight into its business model. The company also has to allay doubts of users wondering if the advertising push impacts performance or data usage.
Nobody likes seeing a random ad selling life insurance slyly embedded across their smartphone. Xiaomi can do better.
The advertising push is a recent move and may not be seen across Xiaomi’s smartphone portfolio. All the screenshots above are from the new Redmi 6 Pro running MIUI Global 9.6 build.
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