(500) Days Of Apple And Google

500daysposterIf you haven’t seen the movie (500) Days of Summer, you should, it’s a great movie. But I’m not giving anything away (that the trailer doesn’t) by saying it’s the story of a relationship that ends for seemingly no good reason. And following the release of the documents sent to the FCC, it would seem that we’re in the midst of watching the same thing happen between two tech titans that previously had a close relationship, Apple and Google.

The statements by the two to the FCC are full of information — except for the information that Gdacted, I mean, Google, declined to release to the public. We’ve already written about some of what Google likely has in its missing portions, but the most interesting aspect of it may be why they chose not to release those portions. The answer may well be because those portions go against some of what Apple is saying, and that would put both companies in a tough position. And it would put further strain on their relationship.

This is a story of software company meets hardware company

A few years ago, much of the tech world looked at Apple and Google as the two companies that could possibly take on the Microsoft juggernaut. Apple would take on Microsoft’s heart, Windows, with its OS X. And Google would kick out its legs by taking on Office with Google Docs. The two were perhaps best suited for such a fight because each had other revenue streams to sustain a war against Microsoft (Apple with Mac hardware sales and the iPod, Google with search and more importantly, search advertising).

And the two grew closer together. In 2006, Google CEO Eric Schmidt joined Apple’s board. “Like Apple, Google is very focused on innovation and we think Eric’s insights and experience will be very valuable in helping to guide Apple in the years ahead,” Steve Jobs said at the time. “Apple is one of the companies in the world that I most admire,” wrote Schmidt in a statement. Alongside Schmidt on Apple’s board was Genentech CEO Arthur Levinson, who was also on Google’s board, and former Vice President Al Gore, who also was acting as a senior advisor to Google.

Apple started launching products that were closely tied to Google. iMovie could export directly to YouTube. iWeb offered easy embeds of Google Maps and AdSense ads. Apple TV got a special YouTube channel. And of course, the iPhone featured Google search as the default, made it easy to access you Gmail emails in mail, came with a YouTube application, and had a Maps application that used Google Maps and in fact, was built with the help of Google. It’s also interesting to note that the all of the YouTube integration required (and still requires) Google to encode videos in the h.264 format because the iPhone doesn’t support Adobe Flash (which is how YouTube videos play on the web).

Then there were the less obvious connections. Multiple reports now point to Apple asking Google not to include multi-touch support in the first Android-based phones, and Google complying, much to the dismay of many customers. And then there’s the unwritten agreement that the two sides apparently had stating that neither would hire one another’s workers.

Yes, when you used to think of the relationship between Apple and Google, the term “buddy-buddy” came to mind.

500-days1So what happened?

In (500) Days of Summer, when the main character, Tom, asks his girlfriend, Summer, what went wrong with her previous relationships, she responds, “What always happens. Life.” The same may well be true for Apple and Google, though seeing as they are giant companies, it may be more appropriate to replace “life” with “growth.”

While Apple and Google both benefitted from their close ties, both still existed as separate companies with their own agendas. While Apple was primarily a hardware maker, and Google an online software company, the two had few conflicts. But mobile changed all of that.

The iPhone launched in 2007, and the first Android phone the following year. Still, the two companies got along just fine. Sure, Schmidt found himself having to exit Apple board meetings when the iPhone was brought up, but both sides clearly saw it as a small price to pay for Schmidt still being on the board. But then the iPhone exploded in popularity, to the point where it’s now Apple’s second biggest business (behind Macs, ahead of iPods), and it’s certainly not crazy to think that one day it could be the biggest.

While Android phones haven’t exactly taken off compared to the iPhone, the platform is making progress and Google is poised to release another dozen or so Android phones before the end of this year. With all due respect to the BlackBerry (whose apps are generally considered to be sub-par), Android and iPhone are seen as the two mobile platforms right now. Some people are iPhone people, some are Android people. They are competitors. And so by extension, Apple and Google are competitors.

Yes, they have different models for how they want to do things in mobile. But it’s not entirely dissimilar to the Apple and Microsoft battle in the 1980s. Microsoft built an OS that they wanted to get on as many machines as possible, Apple built a hardware and software combination to provide the best controlled experience. These days, in mobile, Google is taking the quantity approach, with Apple sticking to its quality approach.

Meanwhile, outside of the mobile sphere, Google continued its growth despite an economic slowdown and decided the time was right to start branching out. And while it’s not ready yet, the announcement of Chrome OS is another element of its business that will directly collide with one of Apple’s. The impact might not be so big on Apple, but when so many parts of your businesses start to collide, one can imagine that it’s hard to stay so buddy-buddy.

And the Chrome OS bombshell had much larger fallout. It intensified and perhaps even reinvigorated the FTC’s investigation into the relationship of Apple and Google, and specifically their interlocking directorates. And then Apple rejected (or “didn’t approve” depending on who you believe) the Google Voice app, prompting an FCC investigation into the relationship between the two companies as well. A few days later, Schmidt stepped down from Apple’s board.

2009_500_days_of_summer_0011The missing app that gets no love

But let’s not forget that before the whole Google Voice thing, Apple “requested” that another application Google made for the iPhone instead be made into a web app, Latitude. While it’s not entirely clear if Google submitted that app and Apple rejected/didn’t approve it, it really doesn’t matter. It is another example of Apple shooting down a Google app, turning one incident into a pattern. And that pattern points to something. (As does the fact that Google mentioned Apple’s “request” very publicly in a blog post.)

As we have heard from multiple Google sources, it would seem that Apple is getting paranoid about Google taking over the iPhone. Maps, YouTube and Search were apparently fine, but with new apps like Latitude and Voice, it was certainly starting to look possible that eventually Google apps would take up the entire first screen of apps on the device.

And while most companies may not mind that, and would let the customers decide, Apple is not most companies. Their stated reason for both the Latitude and Voice removals say more or less than those apps would cause confusion with consumers because they are similar to core iPhone functions (Latitude is like Maps and Voice is like the phone). And no matter how buddy-buddy Apple and Google were, no company likes the idea of another company controlling so much of its product.

Naturally, if someone else controls your product, your product may be in trouble if they pull support. Or, and I’m just speculating here, maybe Apple felt that Google was using the iPhone as a gateway drug of sorts to give users a taste of what their apps can do, get them hooked, and then getting them wanting more with more functional versions of the apps on the Android platform.

Just look at some of the examples, Gmail works on the iPhone, but it doesn’t have push support for some unknown reason. On Android, it has push support and better label support and star support, etc. Maps work on the iPhone but doesn’t feature Latitude, on Android, it does. Further, Latitude would have worked on the iPhone (and does through the web browser), but it’s a lame version. Android, which allows apps to run in the background, has the better version. Same with Google Voice, even if it was on the iPhone, it would not run in the background.

500-days-of-summer-bench-tomThe bottom line

The real bottom line for all of this is money. On the surface, it doesn’t seem to make a lot of sense why Apple would want to reject the Google Voice app. It actually would have made more sense if Apple worked with Google to integrate Google Voice into the iPhone, giving them more leverage over the carriers that Apple still very much relies on for its device.

While Google Voice still requires the carriers for its functionality, eventually, it’s not hard to see it having a VoIP component that bypasses the carriers. As we learned from all of the open spectrum stuff, Google clearly envisions a future where there isn’t just a handful of carriers that control all wireless access in the U.S. Instead, it wants a more open system with many different providers. And there won’t be confusing and ridiculously priced voice and data plans in their system, there will just be fairly-priced data plans.

Of course, all of that sounds great to us, but Google has an agenda too. They want all of this because they believe that easier access to the web means more people using Google, which helps their bottom line.

So why wouldn’t Apple want to help Google in shaking up the system? Because doing so would hurt its own bottom line. Where do you think Apple is making all of its money off of the iPhone? It’s making it on the subsidy that AT&T pays them every time someone buys an iPhone.

The first version of the iPhone didn’t have a subsidy, and at $600, not surprisingly, not as many people bought it. So Apple switched things up and agreed to waive the money it gets per month from AT&T contracts, in exchange for AT&T subsidizing each phone and paying Apple the difference. If AT&T (or any other carrier that eventually gets the iPhone) doesn’t exist with the outrageous rates they charge, they don’t pay Apple the huge subsidy. And if they can’t charge the ridiculous rates (which they wouldn’t be able to do and survive in Google’s dream scenario), they can’t subsidize the phone down to $200, and pay Apple the difference. If the phone isn’t $200, not as many sell. And so on…

And so now we see a few different ways in which the Apple/Google situation has become complicated. And any combination of these can certainly sour a relationship — even one that looked so promising for so long. It would seem that the story has turned to one about growth, control, and above all, money. Those aren’t exactly the things that love stories are made of.

[images: Fox Searchlight]