Two days ago, the knives came out in full view between Apple and Google. On the same day that Google launched its latest Nexus One Android phone, Apple announced the $275 million acquisition of Quattro Wireless, a mobile advertising platform. It was as if Steve Jobs was sending Eric Schmidt a very public message: You mess with my business, and I’ll mess with yours.
With the Nexus One, Google basically designed its own phone and is selling it directly to consumers through a new Google online phone store. It is getting into Apple’s territory: making devices and merchandising them. Likewise, by buying Quattro, Apple is moving into Google’s territory: namely, advertising. The Quattro deal was also a response to Google’s previously announced $750 million acquisition of mobile advertising network AdMob, which Apple also tried to buy.
Apple and Google have been warily circling each other since last summer when Eric Schmidt left Apple’s board of directors because Google was becoming too much of a direct competitor. As I noted back then:
Asked to choose between furthering Apple’s mobile agenda or Google’s, Schmidt must choose Google’s. It is his fiduciary duty. That conflict is only going to grow.
This week that conflict came to a head. Both companies are on uncertain ground. Google is not a device company any more than Apple is an advertising company. Of course, Apple doesn’t like the threat that Android represents. It’s Windows all over again: a single OS on many devices.
But Apple is also afraid of Google’s blade coming dangerously close to its own heart. Many of the iPhone’s core apps are made by Google, such as Gmail, Maps, and YouTube. Apple cannot afford to cede more control of the iPhone over to Google. This is the reason why it blocked the Google Voice app from the iPhone, and it is the reason why it bought Quattro. To the extent that advertising is going to be a revenue stream for iPhone apps, Apple needs to have a play there. And that is what the Quattro deal is about—ads in apps, not on mobile Websites. If Apple hadn’t bought Quattro, it would just be handing over advertising dollars on the iPhone to Google and AdMob. Now watch as Apple tries to make Quattro the preferred advertising network for iPhone apps.
Google is equally out of its element. I’s taking a huge risk by pushing its own Android phones at the expense of its partners like Motorola. That strategy could backfire if other mobile phone manufacturers decide Android is just not worth supporting. You know how most knife fights end. Both parties usually end up pretty bloody.
Photo credit: Flickr/Daniel R. Blume.
Anyone else have a feeling that Google is going to end up the winner of this fight?
While this Google vs Apple war is just starting, I don’t see Apple losing anything to Google, Apple is about to trash all Google’s iPhone apps, Apple has fended up Adobe from getting into the iPhone and you may believe that because a Godzillion of mobile phones use Flash Adobe is not suffering a lost with the iPhone. This is the same to Google, no more Google based apps on the iPhone Home, Apple will provide the Maps, the Advertising and why not, Bing or Yahoo as a search replacement on Safari…. Apple has its own agenda for the iPhone and this is what Google is trying to do with the Android, control its own Mobile OS. It is all about control and control provides a long stream of money.
Except realistically Google wins if everyone buys an iphone, and apple loses if everyone buys android. Android is here just to make sure that everyone and their grandmother can get access to, and afford a smart phone and access to search and the web wherever they are.
And to keep Apple honest.
Apple will most likely stick with being the premium product which means you pay more for it, directly or indirectly e.g., through higher plan rates due to at&t lock in, but as long as it gives you better experience, top 10% of the market will pay for it. and it may be more profitable than the lower 90%. That said, google already renounced the profits from the lower 90%, as it is giving the os for free, so they are not playing the same game.
Google has not “renounced profits from the other 90%” — they profit from all of us through advertising. They took the legs out from under competitors like Microsoft by taking the margin to zero on the operating system, ensuring adoption by OEMs. They also quietly hit geolocation provider below the belt the same way – they are building their own geo databases and offer much of the data for free through their APIs. (See Bill Gurley’s excellent “above the crowd” post on this).
Don’t be surprised to see Apple fight back the same way. They took much of the margin out of the album-oriented music business with $0.99 individual iTunes song sales to drive iPod adoption. With the Quattro buy it’s clear to me they will forgo their own rev share and perhaps give all ad revenue to developers thereby undercutting Google (who won’t give follow suit because ads the core of their business model).
This is just getting good…
Frank Guillen : suddenly i realize that buying an ad platform is the best way for apple to attract developers.
If Apple shares its revenues at a higher level than Google does… hey, you remember why all website used Adsense at first, right ? I remember that a few years ago, i had a 3x higher CPM.
It’s time to react for Apple : if they have the store that sells the best, the largest user base and the most paying mobile ad platform, they still can win. A better iPhone hardware, a better iPhone OS and Android could be the new Windows Mobile… why not ?
I would drop my iPhone if it had Bing.
Seriously.
Probably not. And you CAN use Bing on the iPhone.
What’s that sound I hear? Nothing. You didn’t drop your iPhone.
Seriously.
He obviously meant if it ONLY supported Bing and not google. And his point is good, because Bing sucks massive cocks. Almost none of the results Bing has served me have even been slightly relevant. I seriously don’t think microsoft even really tried to bother.
not really, apple knows how to make good products and they also have a tremendous amount of money in da bank.
One of the weakness or let’s say cons of Nexus one is its still futile music store. Compare to Apple’s gargantuan iTunes store. Google on the other hand is the ‘king’ in terms of its advertising power both on desktop web, mobile web. Apple know’s this and that’s why they bought quattro.
Question is how does BIG G really market their SUPER DUPER PHONE? Nexus one marketing details: http://bit.ly/nexus-one-updates-mashup-details
Enter Spotify…
here here…
Spotfify, Slacker, Pandora — music is (finally) moving beyond the iTunes ownership model. Give it to Apple for following a cardinal rule of good tech marketing — don’t make consumers change their behavior. Customers used to buying and owning CDs easily transitioned into buying digital tracks. But the world has changed. Netflix is a growing $3bn rental business as DVD sales are in decline.
Folks, have no clue who runs the internet and the world. It doesn’t matter who comes on top, it has already been decided.
Don’t worry, you will still get a crappy battery life for another 10 years…when the US military has much more advanced technology.
stve jobs and eric are both members of freemasonary
Maybe Jobs but not Schmidt.
You really believe in us?
You are an Idiot.
-Steve
(sent from my iPhone)
My grandfather was in the freemasons. At his funeral absolutely loads of people showed up, most of whom we had never even seen before. Some freaky shit.
I am. Although it’s not a law of nature, it does seam to happen that whenever there’s competition, the consumer wins. (Unless the competition is among consumers).
the notion of “consumers win when there is competition between companies” seems incorrect argument, in fact still consumers will be ripped-off and consumers will be more confused because the competitors are coming from different intentions
Location Based Services will decide who wins the mobile wars.
It would have been better for Apple if they had not rejected Google voice.
still google would have entered into Apple’s territory…
May the best product win which is iPhone
Gmail is not a core application on the iPhone and I don’t believe that the YouTube application is built by Google. It isn’t even clear that the Maps application was built by Google.
you’re right about gmail, but very wrong about the other two
none of the applications are built by google, but are given significant support by google. Example, youtube re-encoded all their videos specifically for iphone youtube app.
Concerning maps, apple did build the maps application but uses google maps for the images. They have recently bought a company and will be phasing google out of this as well.
Hello, Google owns Youtube caveman.
Yeah, I’m noticing a distinct “know nothing and can’t spell” slant to the iPhone fans in this discussion. Some of the core Mac addicts need to jump in – they tend to be brighter than the newb iPhone converts.
Some may find our transaction assessments on both the Quattro and Admob interesting. http://bit.ly/4suFbA and http://bit.ly/Im3eg, respectively.
I see Apple faring much worse in this fight. I don’t think the Nexus One threatens to cause other manufacturers to walk away from Android. The Nexus One is just another handset by most accounts, especially for people buying it with a two year contract, and the price tag for an unlocked one won’t make that an overly popular option. Android is a rapidly growing platform, with an exploding app market, that is gaining plenty of popularity with consumers. Google appears to be doing very well, and I don’t think that’s likely to change with the Nexus One. To top it all off, they’ve been doing the advertising thing for years, and have arguably the largest and strongest ad network on the Internet. The AdMob acquisition will just be putting them in position to expand that already successful business model.
Apple, on the other hand, is the victim. 18 months ago Android was an obscure platform only known by geeks and tech journalists. Apple reigned supreme in the smartphone world and everyone wanted an iPhone. The App Store was (and is) booming, and the sky was the limit for Apple. Now, the App Store is still expanding rapidly, but the Android Market is growing faster. Developers are constantly frustrated and confused by Apple’s vetting process, and Android is quickly becoming a strong alternative. In fact, the one gripe about the Android Market is its interface and app marketing, but that’s bound to change soon as Google gains market share (and developer share). Apple is a newcomer to the ad network world, and it may be a challenge to get companies and developers to use their ad network without pissing them off.
As you said, knife fights are bloody for all parties involved, but in the end there’s always a winner, and I think Google’s in a much better position for the long term win.
Let’s face it: Android is *still* “an obscure platform only known by geeks and tech journalists”.
On what basis can you claim that the Android Market is “growing faster” that the iPhone app store?
You’re very brave to call Apple a “victim”. Steve Jobs has disrupted so many industries in the last decade, you can’t discount his ability to make things happen. Eric Schmidt is a one-trick pony.
“Let’s face it: Android is *still* “an obscure platform only known by geeks and tech journalists”.”
Let’s face it: you haven’t been reading any news that didn’t come from Apple. Android’s the fastest-growing platform in the the space in terms of consumer recognition, and at this point, about as many Americans who want to buy smart phones this year want Android as want iPhones.
There was this one device that Verizon launched and it had a big ad campaign, can’t remember what it was called…
I love the crazy logic of the Machead. Android has grown faster in its first year than the iPhone did in its first year. Yet where the iPhone, at this point in its lifecycle was “dominating the mobile industry” with a whopping 2% of smartphones sold, Android is supposedly “an obscure platform only known by geeks and tech journalists” with 3.5% of the market.
I don’t actually expect rationality from Macheads, but you could at least try to give the appearance of consistency.
No shit sherlock.
How many phones and carriers is Android on? You are comparing the growth of a software platform vs growth of a hardware device.
Read the post I was responding to, crazy Apple person. He is specifically talking about Android as a platform, and the Android market as a distribution channel. The only way this is about a single device is in your addled “how can I spin this so Apple wins” brain.
By the way, here’s a tip, “the iPhone” is a platform too, not a single device. There have been multiple SKUs of iPhone with different specs, and different capabilities, and this year there will no doubt be another one. It is only in the completely intellectually dishonest realm of Apple shills where “the iPhone” is any more one device than is “the Blackberry.”
Doesn’t this Google vs. Apple knife remind anyone else of Steve Jobs long ago fight with Bill Gates. Steve Jobs had the computer industry by the nape of its neck and he lost to the tougher/meaner Bill Gates. Now tough and mean tuy is Eric Schmidt, who Steve Jobs let stay in the henhouse for way too long. Now Google is breathing down Apple’s neck w/ the Nexus One. Google is amazing – they are going to marginalize both Microsoft and Apple. Who would have believed that!!
Just take one look at the two execs – Schmidt wears a flak jacket!
Let’s not forget that Apple already has success with the iPhone and its ecosystem. We’re dealing with a hypothetically successful Google ’superphone’ and an already-proven Apple iPhone.
Google has a lot to prove: traditionally, it has made money from advertising, with little revenue from other innovations.
Apple controls its hardware and software end-to-end, supported by a very mature ecosystem that includes all the iTunes content. Not to mention a very loyal customer base.
Google, despite its ubiquity in search, doesn’t have the same loyalty beyond its core search. I’m not confident that Android will make it to the mainstream or provide the kind of revenues that threaten Apple’s dominance in this field.
Is anyone beyond the geek community talking about Nexus One, except a little mainstream attention on the BBC et al?
Apple has a lot of real cash in the bank and a CEO with a very singular vision and a tight product line that has disrupted a range of industries. Google is finding it’s feet and despite claims to have created a ’superphone’, will find it hard to get the same sense of wonderment behind it that Apple attracts.
Google has diversified its software lineup, casting its net very wide to find something that works to pull in new revenue streams. Apple is much more focussed and it’s almost a miracle that Apple has caused so much disruption with each new platform. Few of Apple’s products miss their mark. Perhaps only Apple TV has failed to really take off.
“Perhaps only Apple TV has failed to really take off.”
What about the Pippin, the Newton, the Quicktake, the PowerCD, the G4, the eMac or the Workgroup Server line?
I’d add a quip about the choice of selling -only- PowerPC-chip computers until 2006, and by 2009 already dropping support for them since they’re “legacy” products, but that wouldn’t be nice. I mean, it’s not like if you spent $2K in July 2006 on a non-mac personal computer you’d have ongoing support. Oh, wait, you would.
Google has a pretty mature and proven ecosystem as well: a lineup of products integrating well with each other to provide seamless search, email (Gmail), entertainment (YouTube), Navigation (Maps Navigation), Phone Services (Voice), News…
……and electricity
You must be kidding Google.
I love the ever-shifting metrics by which people measure Apple. Compare Apple to Nokia, and it doesn’t matter than Nokia has 100x the sales, or 1000x the experience, all that matters is that Apple is more profitable and growing faster. Compare Apple to Google though (a literally unstoppable profit machine with a platform growing much faster than the iPhone) and suddenly profit margins and growth mean nothing, and it is about proven track record, and how ‘disruptive’ a company has been in the past.
Yeah, whatever it takes to keep your hero Steve on the pedestal.
I just got my Nexus One in the mail. It very awesome. Anybody want my “old” iphone? Email me at quan.nguyen1967@yahoo.com
2010 will be Nexus year
It won’t. At the end of January it will be all apple again
It’s almost like watching Mommy and Daddy fight. It’s hard to choose a side. Don’t make me choose!
good one. +1
visit http://www.techlimit.blogspot.com/
get your own domain name first
I think that we are forgetting what Apple did with the iPhone which was move into an unfimiliar territory and gain significant market share in a short time.
Whats to say they cannot do this with the Quattro aquisition?
Google getting into Retail, and Apple getting into Advertising.
2010 will be a interesting year.
Great, I see it now. Buy your mac, and you only have to see two ads before you’re allowed to use it…okay, I don’t see this going very far for apple.
That’s a cogent argument Leif.
The advertising play here is mobile. Ads are going to run on mobile services. Try thinking through your statements.
So, how is it any better? Before using the phone you’re going to see ads. Is that it?
think location based services that serve ads
What no one seems to want to discuss is the fact that Eric Schmidt was on the Apple board for SO MUCH of the time that Google was working on a phone, while proclaiming loudly, in his evil ‘do no evil’ voice that Google had no plans for a phone.
EVeryone is entitled to secrecy until the point where it makes you act unethically at your job (board member at Apple)
Perhaps “Don’t be evil” only applies to users?
1) He always had excused himself from iPhone discussions
2) When did Google decide to brand their own phones? To date, I’m still unclear how much design was done by HTC versus Google. – for all we know, the decision to have a Google phone store was made after Schmidt quit.
how do you know? Its not too long Eric was Apple’s board. You can just design a phone in 6 months time…
Google’s “do no evil” applies only to others. Hypocrites
I was going to say “You Cannot just design…”
in Aug 2009, Aaron? Sure. That’s when he quit and says, let’s show them, we’ll make a phone and voila 5 months later, there’s a phone.
I don’t think so. In phones and portables, SW + HW integration is tight. Hell, standard software + varied HW integration barely works right on PCs. You can’t just slap on Android 2.1 on a device you haven’t worked with and release it in 5 months. No way. There’s a reason quality smartphones have emerged so few and far between even since 2007. It takes effort, and a lot of tight integration between OS + HW.
Ergo, Schmidt knew they were doing a phone. He was just being a jackass about it by lying.
Or, they just slapped their brand on a phone that HTC has been rumored to be working on for a year now, which happens to have exactly the same specs, exactly the same form factor, and look pretty much the same. It doesn’t even take a couple months to say “sure, we’ll buy that design and sell it.” You do know that selling their phones as re-branded devices is HTC’s core business, right?
Excellent point. I wonder the same. May be Apple should sue him.
“while proclaiming loudly, in his evil ‘do no evil’ voice that Google had no plans for a phone.”
citing please?
I am sorry to rain on your Google Hate parade, but as far as I can tell, the Nexus One is nothing but the HTC Bravo/Passion, with a different branding. It really doesn’t take a whole lot of time, energy, or CEO involvement for a company to say “Hey, HTC, why don’t you silkscreen our name on your product, and we will setup a web store!”
Last I checked, Google has a couple of web developers on staff, and even a couple marketing people. I don’t really think the CEO had to get involved and spy on the Apple board for years to come up with the idea of the Google name on a phone from a company who’s biggest business is making re-branded phones for other companies.
GOOG may be able to marginalize APPL but it is a long long way from even hurting MSFT – don’t kid yourself…them boys in Redmond are probably the most dirt bag fighters after Intel.
They both can’t win — no chance. Will be very interesting to see what happens. This is going to get VERY bloody!
I don’t think other partners would have issues with google making its own phones. Before android, there was symbian mostly owned by nokia and it didn’t stop sony and other from making symbian phones, nobody was freaking out because nokia was doing symbian phones too. And Android is much more open than symbian.
Google has to become both a Device Maker and ISP, just in case Facebook ends up becoming The Internet
Excellent Post! Loved it.
Just remember when Microsoft boy basically stole apple concepts, Steve turned Apple around. Don’t count the red fruit company out.
Fun. In 2010, you have to give the advantage to the company that has the best integration with leading edge web services, which would seem to be Google at this point (although the Lala and Proximity acquisitions could yield interesting fruits soon). Just as Google’s adopted some Apple ways (creating the “whole widget”) Apple is going to have to adopt a few more of Google’s methods to stay in this fight in the long term. Annual updates on their web services (i.e. mobile.me features) are totally inadequate compared to Google’s rolling updates on all of their services. Frankly, they need to make more software products and risk letting them fail like Google does if they want to create more hits in the world of web services. Their perfectionist streak is working against them in this agile, rapidly moving marketspace.
Mobile wars will dominate the decade
I don’t see Apple winning in the ad space specifically because they have a history of closed environments.
Developers aren’t going to be moving to Andriod, they are going to be making apps for all devices.
Therefore, the ad network which targets developers on all devices will be the one who likely will gain market share.
Apple likely won’t be able to do that due to their history, and being considered the maker of the iPhone. Google is known as an advertiser first, that is a huge benefit. Plus they have andriod, and are into the whole open web thing. When GWT automatically exports your code to multiple handsets and app stores, I think we’ll see who the winner is.
But the app store for iPhone is a pretty big ‘closed environment’.
Does Sprint have any android phones yet? I Assume ATT doesnt. Once 3 of the 4 carriers gets some android phones, i think the dangers of google getting hurt in this knife fight are over. I guess it’s a 3 way knife fight. Google vs all other mobile manufacturers and the carriers. If the carriers all succumb to google, which they will if 3 out of 4 of them do, then the manufacturers are just screwed. They could not install android, so the carriers will all just go to HTC or whoever is willing to make it. Nothing will compare to Android. So, in short, Eric, I absolutely love the conclusions you’re coming to here about everyone being out of their element, but I think it’s practically impossible for Google to lose at this point. Simply because they have Verizon and T-Mobile already…and they actually have Sprint already. I just haven’t done my homework. Sprint has the HTC Hero and even AT&T has an Android HTC phone. In other words, anyone manufacturers that don’t go android are digging their own grave at this point. It’s worth discussing this possibility for sure. But the likelihood of the manufacturers or carriers ditching android is very low. They would have had to have done this already and saw this coming better. But now, it’s already here.
Hey guys I lost my microsoft.
Have anybody seen it?
Well – do you really need it?
Apple getting into advertising might make sense if they plan to cut deals directly with publishers for their future tablets and custom hardware, can completely take the Big G outta the picture.
In the end this rivalry is good for us the end-consumer as each company innovates and pushes each other to bring out hopefully better and cheaper technology.
I think you are right on target. It’s about serving adds on Apple tablet, or which ever devise on which Apple sells news paper/magazine subscriptions.
News papers/magazines can then continue their adds in digital versions, thus offering reduced subscription fee, and share revenues with Apple.
Brilliant!
Ohh I do love dreaming, too bad this world is based in reality and you all have no idea the costs to write a newspaper and get anyone to publish it digitally, paper is marginally cheaper
I know this strays a bit off topic from the article above, but this is what I see: Apple purchased Quattro to help set up the infrastructure to collect ad revenue when they start doing a TV show subscription model for iTunes and Apple TV. That would put them in competition with Hulu/Boxee/Youtube directly.
“That strategy could backfire if other mobile phone manufacturers decide Android is just not worth supporting”
What? Seriously? Just because Google decides to push one phone will not suddenly turn away Moto, Dell, HTC, and others. Let’s not forget Moto is most invested in Android considering they put all their eggs in one basket and Google is aware of that. If anything, watch for Google to open up its online mobile store to other manufacturers and become the sole place to purchase Android phones. I can only see this boosting profits for Android phones and selling more units.
I agree – this seems almost like wishful thinking or something. Android has a ton of momentum at the moment. The “not worth supporting” seems pulled out thin air. Too make it seem like google is taking a much bigger risk than they actually are.
Plus their other hardware partners were at the event and their phones will be sold on google’s site.
I’m not sure everyone in this conversation realizes what’s at stake of OEMs with Android.
1) They can create products with an open OS (Open Handset Alliance) with no direct oversight from Google. Cost: 0$
2) They can bundle Google services (Search, Maps, GMail, etc.) and capture revenue share. Profit: $3-5 per unit over the life of a handset
They changed the game on Microsoft. Instead of paying MSFT $10, and OEM can *make* $5 extra margin. That’s a HUGE $15 swing factor on a product that costs them $200-300 to build.
Bottom line: Google can compete by offering their own handset and no OEM will care. As soon as Google starts using early access to OS updates, proprietary features, or reducing their *hardware* margin to zero, there will be unrest.
How about an Apple-Yahoo alliance? Apple would get Yahoo applications for their mobile (Maps, Mail, Search, etc) instead of Google’s. Yahoo would have mobile relevancy and at least a chance at life.
It’s too bad Yahoo is so far gone that their apps are not desirable.
While “knives” makes a great story, let’s keep in mind that the vast majority of advertising is not online yet, and the vast majority of people do not have smartphones yet. There is plenty of room for Apple and Google (and others) to grow these markets for years to come.
Er dude, I beg to differ on that first point;
http://www.guardian.co.uk/media/2009/sep/30/internet-biggest-uk-advertising-sector
Basically online is already the biggest advertising sector in the UK.
I think what was meant was that the vast majority of advertising is not on “mobile” yet.
Tablet computers will change that, and that’s going to be the battle ground for mobile adds.
Interesting story!