Google Phone Could Drive Apple Into Allegiance With Microsoft

rsmiller510 writes "A BusinessWeek report suggests that the Nexus One release marks the latest volley in an escalating war between Google and Apple, one that could force Apple into working more closely with Microsoft. 'When companies start to imitate one another, it's usually either an extreme case of flattery—or war. In the case of Google and Apple, it's both. Separated by a mere 10 miles in Silicon Valley, the two have been on famously good terms for almost a decade. ... Now the companies have entered a new, more adversarial phase. With Nexus One, Google, which had been content to power multiple phonemakers' devices with Android, enters the hardware game, becoming a direct threat to the iPhone. With its Quattro purchase, Apple aims to create completely new kinds of mobile ads, say three sources familiar with Apple's thinking. The goal isn't so much to compete with Google in search as to make search on mobile phones obsolete. ... Some analysts believe the Apple-Google battle is likely to get much rougher in the months ahead. Ovum's Yarmis thinks Apple may soon decide to dump Google as the default search engine on its devices, primarily to cut Google off from mobile data that could be used to improve its advertising and Android technology. Jobs might cut a deal with—gasp!—Microsoft to make Bing Apple's engine of choice, or even launch its own search engine, Yarmis says."

Comments

This makes perfect sense

[Foredecker]

Apple is a great company, but they are not large enough to build their own search engine, advertising platform, and back end services to run them. Microsoft's search (bing), advertising platform, and back end services are all designed for partnering - its the core business model.

of course, Microsoft will compete with Apple in the phone space at some point in the future (we are clearly uncompetitive now...), but if Apple is going to be in bed with a competitor, its much better that it be Microsoft rather than google - better for both companies. I mentioed this to Symbolset in a post here.

Re:This makes perfect sense

[nine-times]

I don't think it makes sense, and I say this for a variety of types of reasons. First, Jobs seems like the sort of guy who holds a grudge, and he seems to not like Microsoft. That's just my read on the situation, but I wouldn't guess that he'd be eager to jump into bed with Microsoft without a strong reason.

Second, it doesn't make sense to jump to Bing just because Google releases a phone. It only makes sense if Bing is better than Google. If you think about it, as long as the iPhone and Google phones are using the same maps, searches, etc., then it can't be counted as an advantage for Google. People can't say, "Well I want to buy an Android phone because they use Google for their search engine. The iPhone uses [whatever], and I don't like it as much." So if Apple were to switch to something else, it really needs to be better. Not just arguably better or "some people think it's a little better," but decisively better in a way that Apple can count it as an advantage. I know Microsoft is offering payoffs for anyone who switches to Bing (not criticizing here, Google also pays for placement), but Apple tends to focus on customer experience as the most important thing, and I can't see Jobs opting for a substandard solution even if it came with a big cash bonus. Apple doesn't need the cash. And so far, I haven't seen anything that leads me to believe that Bing is decisively superior to Google.

Third, Apple makes a lot of hay from making Microsoft the butt of jokes. Whenever Microsoft screws up or fails at anything, it helps reinforce their image as bumbling idiots, which in turn helps reinforce Apple's image as slick/cool geniuses. Every partnership they have with Microsoft serves to undercut that, and announcing that Apple is actively switching to a Microsoft product because of its superiority would be dangerous to Apple's image.

I'm sure that Apple's relationship is uneasy, but I doubt it has turned to decisively to outright war that Apple would shoot itself in the foot to hurt Google. If I had to make a prediction, it would be that you'd see the introduction of Apple-branded alternatives without cutting out Google's products. Look at how they've dealt with Microsoft Office as an example (introducing iWork and supporting Exchange with Mail/iCal/Address book while still relying on MSOffice). I wouldn't doubt Apple's ability to create a search engine. I would sooner question whether they wanted to send people all over the country developing the maps for a Google Maps competitor, and whether they're actually interested in being as involved in advertising as Google is.

Re:This makes perfect sense

[NewbieProgrammerMan]

A search engine is nothing more than algorithms and marketing to get folks to use it and get the subsequent advertising revenue - the hardware and programming involved and its costs are not a factor.

Yes, the algorithms are probably the hardest bit, which is what confuses me about your statement: Google has spent a lot of time and money hiring smart people specifically to develop search algorithms, and Apple hasn't. How exactly does that put Apple in a spot to "crush" Google, again?

I also think Apple doesn't have the in-house expertise to build and maintain the hardware/software required to provide a search product equivalent to Google's. Maybe someone could make the case that it's "not a factor" to Google or Microsoft, but I think it would be really hard to build from scratch.

Actually, having a search engine driven by Macs would be a hell of a marketing gimmick.

How many people give a fuck what OS is on the backend? That gimmick would only work with about the same number of people that are really revved up over Google using some home-brewed Linux derivative on the backend--which is not many.

Re:This makes perfect sense

[Anonymous Coward]

...It makes sense until you consider that Apple really is jockeying to position themselves in a safe niche at the premium end of the device market and let Google battle Microsoft for the low end that serves the mass market. When he returned to Apple in 1997, Jobs remarked that Microsoft had won the desktop wars. If you go back and carefully listen to how he parsed his sentences in that speech, the passage of time now allows us to see how he already was looking ahead to a new war, which now is being conducted on converging computing and communications platforms.

So, I think Apple staked out the high end of the market and that Steve Jobs and Eric Schmidt developed a plan to marginalize Microsoft at the low end. It's the only explanation for Schmidt being allowed to sit on Apple's board as long as he did. As a result, Google is trying to unseat Microsoft for the next generation of (mobile) mass market devices. The result: Microsoft is now being squeezed by Google AND Apple, which remain allies, even if they are wary of one another. This plan in and of itself did not initially place Google in direct competition with Apple, but Google may be seizing an opportunity to establish a larger beachhead.

Re:This makes perfect sense

[fuzzyfuzzyfungus]

On the other hand, while Apple and MS are direct competitors on the PC side, they've settled into a fairly comfortable(for Apple) stalemate.

MS sells licences to the Wintel box-pushers who move product by the megapallet every year; but have shitty margins. Apple sells relatively modest volumes to people willing to pay for their substantial margins. Both parties lack the ability and/or interest to push into the other's camp. MS is largely incapable of capturing the "premium" market that Apple has(both because of its own software, and because of the PC OEMs' somewhat chintzy engineering). Apple has absoutely no way of substantially expanding its market share without ghastly violence against its margins, and Steve's attitude toward backwards compatibility would not be a hit in the corporate world.

Google, on the other hand, is basically interested in scorched-earthing the margins on hardware, software, and connectivity in order to make it cheaper for consumers to look at Adwords.

I'm not saying that an MS alliance is in Apple's future. There are plenty of wannabe search engines that don't completely suck, and could be made to work well enough for phone purposes that Apple could chose from. However, I would say that MS is less counter-intuitive than it looks. The Apple/MS rivalry is dramatic; but largely stable. It is basically just a dispute over how to divide up the PC market. Google, on the other hand, would be happy to nuke that entire market if it made access to their internet advertising incrementally cheaper.

Re:This makes perfect sense

[dogzilla]

Advertising is a critical part of launching a new publishing platform that includes magazines and newspapers. I don't think that necessarily means that Apple is launching a search engine, but even if it does, it doesn't necessarily follow that Apple will follow Google's model and extract ad revenue from the search engine - Apple could be perfectly happy with simply keeping the data out of Google's hands.

Also, Apple recently acquired Placebase, a Google competitor. Not sure if they have street view, but they have excellent maps.

Not the MS-Apple deal I would expect

[LoudMusic]

I see very little chance of Apple using Bing as the default search provider on the iPhone. More likely they'd want MS to provide ultra compatible Office apps for the iPhone to help them get into the business smartphone market, competing directly with RIM / Blackberry.

Why on earth is everyone so hung up on Nexus One?

[jabbathewocket]

granted its 'new to google' to be you know selling phones directly .. but this is not a "war" with carriers or handset makers, its more of a war on.. noone?
Its really not that much different from going to the HTC website and clicking buy now and being directed to a web seller of any given phone as well as the carriers who sell them.. all google is REALLY doing here is creating a platform they can use to advertise android.. by that I mean.. when Verizon is done spamming millions of Droid Does! ads.. Android is left with being just another handset in the carriers collection of handsets.. by creating a direct way of buying , they have more importantly created a direct "sales conduit" that showcases Android and only android devices..
For all intents and purposes this is no different than the ADP1 and ADP2 only now rather than buying unlocked, you buy them with tmobile service, which was the only place the unlocked dev phones worked in 3g anyhow.
If Google was trying to be a gamechanger, they would have become an MVNO buying bandwidth from t-mobile, and reselling it (at reduced rates) in exchange for advertising/collecting demographic data from all the buyers, possibly even going with a pure GoogleVoice device that was IP only and no actual telephone service..
Now if they would just fix the fragmented Android mess of a landscape, do away with the half-assed java applets and move to entirely native apps.. as well as license SenseUI from HTC OR convince HTC to offer its app stack over the marketplace.. they could almost become a decent size player in the mobile space.. until then.. MS/Nokia and Apple will contine to eat their lunch.. Pity that Google didn't buy Palm and kill the Pre before it shipped as it too is hurting Android's long term viability as a platform.

Buy, not build

[TubeSteak]

Google bought a mobile ad company called AdMob.
Apple bought a mobile ad company called Quattro.

Whatever happened to doing things in-house?

Re:Buy, not build

[alvinrod]

Sometimes companies purchase another smaller company just to keep it out of the hands of the competition.

From what I've heard, Apple was in talks with AdMob before Google purchased them. I also heard a rumor that Apple bought Lala because Google was in negotiations to purchase them.

Neither company has much overlap into the business areas of the other, but both are large and experiencing incredible growth. I believe that they're both very afraid of each other, though. If Apple were to run away with mobile phones like they have with the iPod, what's to stop them from creating their own alternative to Google and putting them out of business. I'm sure Apple also sees Google as a threat in some similar way as well.

It seems as though this simple pissing contest is turning into a full out arms race.

Google versus Everyone?

[jaypifer]

Google cannot keep fighting Microsoft/Apple/US DOJ/China/Evil at once and win. They are going to have to find allies at some point or go bankrupt.

And what is it with people loving to predict the demise of the iPhone? Years ago it was the iPod killer and the only company that was able to kill the iPod was Apple.

Re:Bing on an Apple product?

[GIL_Dude]

I don't know. I've always used Google for search the last several years. I also have a Droid phone. But just yesterday I was writing some documentation for some code I wrote to help manage the driver store on Windows. I needed to add some links to further information about driver INF files on the MS site. I went to google and did a search. I realized quickly that at some point over the last few years Google has changed the way their links work. They no longer are a link to the site you want - they are a link to something at Google that then redirects to your chosen site. Since I have no idea how long those links will work, they were useless to me (I wanted to right-click and copy shortcut / copy link and paste it into my documentation as further reading - but some link to Google that may work fine for today and maybe not work fine next year isn't all that handy). I copied my search from Google and pasted it into Bing. I got pretty much the same results, but a right-click and copy shortcut actually got me the real URL and I could then paste it into my doc. I don't even know when Google changed this so that their links aren't real links to sites - but stuff like that could drive me permanently to Bing.

Ain't Gonna Happen

[SkydiverFL]

Apple has shown a clear desire to not remain glued to Microsoft. This is evident with the release of iWork and the dead-end path of the Office products on the Apple platform.

Because of my position, I have almost every handheld and PDA device that hits the market. As a seasoned .NET developer, I am biased towards Microsoft. However, that being said, the Windows Mobile platform is horrible. Even on devices like Samsung's Omnia, it is sluggish and cumbersome at best. Memory management is a nightmare.

The only realistic path is for the Windows Mobile platform to die off or be revamped from scratch. At most they may build a mobile version of Office for iPhone and Android but even that is a stretch.

Re:Ain't Gonna Happen

[tyrione]

Apple has shown a clear desire to not remain glued to Microsoft. This is evident with the release of iWork and the dead-end path of the Office products on the Apple platform.

Because of my position, I have almost every handheld and PDA device that hits the market. As a seasoned .NET developer, I am biased towards Microsoft. However, that being said, the Windows Mobile platform is horrible. Even on devices like Samsung's Omnia, it is sluggish and cumbersome at best. Memory management is a nightmare.

The only realistic path is for the Windows Mobile platform to die off or be revamped from scratch. At most they may build a mobile version of Office for iPhone and Android but even that is a stretch.

You're correct on all fronts. Apple no longer needs Microsoft, period. This is a desperate plea for BusinessWeek investors long on Microsoft hoping Apple will save a dead ship floating in the ocean spinning in a circle. Microsoft has burned out all of it's fuel and is just going in circles. The stock is in a holding pattern [it's split too many times] between 25-32 for the past 5+ years. It's going no where.

This makes no sense at all

[alexhs]

[Apple] are not large enough to build their own search engine

Completely wrong. Actually, they already have their own search engine, it's called Spotlight and it works well.

I'm pretty sure they could build some data centers and have a product quickly.

Now, Apple has always worked on profitable markets. I'm pretty sure web search has not enough profit margins for them to consider to enter into that market.

If anything, you will get applesearch through your MobileMe account : paying customers, smaller datacenters because not anyone can access the search engine; no ads, integration with the platform as additional features, that's the only move that can make sense to them.

Apple and MS have worked together for years!

[MostAwesomeDude]

Well, not overtly, but consider Apple's market position: They make shiny white boxes that are overpriced and pander to a small segment of the market. They have a fifth of the computer market and are not trying to expand, mostly because their vertically integrated business model makes it difficult to increase manufacturing. The Mac Mini proved that they had a cap on their production, and they cannot sell their OS alone without suffering greatly in their business model.

And Microsoft's position: They hold 80% of the market and cannot change. This isn't a problem because many large segments of customers are businesses that strongly desire an unchanging OS. MS has demonstrated a near-unbelievable commitment to binary compatibility and enterprise support, cementing its position. It hasn't been able to keep a strong grasp on the netbook and desktop market in recent years, though.

Now, where's the cooperation? Simple. Microsoft uses its deep pockets and inertia to continue to push itself as the dominant, common, utilitarian operating system, while Apple continually compares its products favorably to Microsoft's and portrays its systems as being hip, cool, modern, and fun. We've all seen the "I'm a Mac, I'm a PC" commercials, and they're representative of the mentality Apple tries to inspire in its commercials, being the small underdog fighting against the big man. Remember "Think Different?"

One Slashdotter has a mangled Voltaire quote in his sig about Apple and MS, but in my opinion it's backward. "If there were no Microsoft, it would be necessary for Apple to create one." However, this will never happen, because Microsoft's power to endure is ridiculous. Just like IBM wasn't destroyed in the decades prior, Microsoft can't be brought down by hordes of Apple fans, or waves of Linux supporters.

Of course, I'm really just re-analysing the premises of World Domination 201 here, but it's not like anybody here has read it, right?

Switching to Bing would cost too many customers

[fadir]

A good chunk of the iPhone market share stems from customers that are fed up with Windows Mobile and similar crap. I doubt that those would be too happy to be driven back into the hell hole they've just escaped.

Jobs is clever enough not to risk that. He might be tempted but he's not an idiot.

Doubtful.

[MaWeiTao]

This story sounds like fluff intended to stir the pot. I'm sure people at Apple are keeping their eye on Google and certainly they must realize that your average consumer can only remain loyal so long before they start craving something new and different. However, to suggest that they'll somehow be driven to work with Microsoft simply because of a threat from Google seems ridiculous at best.

Apple is a hardware maker, first and foremost, while both Google and Microsoft are software companies. And Apple has the advantage over the other two that they do also very good resources on the software side. This ensures that in this market Apple will always have the advantage because of far superior integration. Software and hardware is developed concurrently under a unified visions. The other guys basically develop the software then find a vendor to provide a phone that meets certain requirements. And because both Microsoft and Google provide their OSs for a variety of phones it inherently means their systems are compromised. It's far more difficult to provide a unified, closely maintained platform and an integrated app store. And Apple has managed to keep very tight control over their phone despite offering it on AT&T. Most other smartphones are crippled by the garbage service providers dump on there, and I'm not sure the hardware makers have the luxury of making demands.

For Microsoft, and presumably Google once their OS becomes more widespread we are going to see the same kinds of issues with PCs. Apple again wins with integration. The others have to make do with whatever the hardware makers decide to include with the OS.

As for the search engines, those are pretty much irrelevant. Google and Bing are pretty much the only top tier search engines out there. From my experience they produce results of comparable quality. What matters, however is advertising and web apps especially for businesses. One of the big reasons we use Google at my company is because the analytics and extensive marketing resources, and obviously, because it's currently got the biggest market share. I think Microsoft is at a disadvantage here mainly because they're still a more traditional software developer although they obviously have the resources and the experience. In this market Apple is really a non-entity. They've got great OSs and perhaps an app or two that stand out and that's it. I routinely use their iWork suite and am not impressed by it at all. It's no more intuitive than Office and is generally less powerful. Office is still the better suite.

I think ultimately the question is, is Apple looking to compete directly with Google and MS. I realize that the pundits are always clamoring for this sort of direct competition with anything that's even remotely similar but at this point I don't yet see it. It would be a very different focus for Apple. I do think if they were going to take this route it would make sense that they acquired a smaller search engine company and then work on it internally. Partnerships don't always turn out well for Apple and they don't really sync well with the company's focus on integration.

Re:Bing on an Apple product?

[wootest]

The onmousedown bit calls a JavaScript function to do that.

Don't Belive the hype

[tuppe666]

Having got a nexus one, and owned an apple Iphone I have to say you need to take a second look at the google apps. Having the ability to navigate using streetview; identify items by phone; make VOIP calls. Where Google wins is the cloud and Apple need to catch up, as for playing bought tunes apple wins, but for streaming them they have to catch up. Maybe if Apple hadn't rejected some of these apps Apple iPhone would have better software.

What about RIM?

[esarjeant]

I don't see Apple doing this, while I think MS might make a step in this direction the culture at Apple is typically to avoid these kinds of partnerships. The few times they have tried this, the results have been less than satisfactory.

It's more likely Microsoft will buy someone outright like RIM -- the Windows Mobile platform isn't going anywhere, so the best play is to acquire the industry leader and integrate that with the Windows operating system. There are a few technical barriers for a roadmap like this (eg: BlackBerry is a Java platform), but it will give MS the mindshare it needs to dominate the mobile space.

It remains to be seen what kind of role Google can play in the mobile device market. While Android has some compelling features, it's not nearly as polished as the Apple iPhone nor does it have the maturity of something like the BlackBerry. More importantly, Google is not yet an innovator in the mobile device market - they have copied may of the ideas that are already there and may in fact still be technologically outpaced by the next generation of Apple's iPhone.