Google, Apple: friends, rivals or frenemies?
With Arthur Levinson resigning from Google's board in the wake of an FTC antitrust investigation, there has been no shortage of drama between Apple and Google.
The resignation of Mr. Levinson, who is still on Apple?s board, follows the resignation of Google?s CEO Eric Schmidt from Apple?s board in August. While the FTC had been investigating possible conflicts of interest stemming from the two men sitting on both companies? board of directors, Android?s increasing momentum could mean that the two juggernauts may be going head-to-head more often going forward.
?Apple and Google have traditionally operated at different and complementary parts of the value chain, but as Google has stepped up is competition with Microsoft by creating and promoting mobile and desktop software via the Android and Chrome operating systems and Chrome browser, it is now also competing with Apple's efforts in the iPhone and Mac markets and Safari browser,? said Ross Rubin, director of industry analysis, consumer technology, at the NPD Group, New York.
?It would be difficult to fulfill a board member's fiduciary duty to both companies,? he said.
The two companies have butted heads a lot recently.
Google wrote a letter to the Federal Communications Commission claiming that Apple had indeed rejected its Google Voice application for iPhone, contradicting Apple?s claim that it was still reviewing the application (see story).
The competition will likely ramp up in the coming months as Apple battles with smartphones based on Google?s Android operating system for market share.
?The iPhone continues to sell strongly, but Apple continues to pursue a primary design and an exclusive carrier in the U.S., which is limiting its market share potential,? Mr. Rubin said.
?Android, in contrast, is a younger operating system that has done well at T-Mobile and is just starting out at Sprint, but has yet to crack the two largest carriers, although it is clearly coming to Verizon,? he said.
?In addition, we are seeing Android handsets start to roll out from higher-volume manufacturers such as Motorola, Samsung and LG, which should help its market share.?
FTC satisfied for now
The FTC had been threatening to file a lawsuit to force the two companies to shake up their board.
Former Vice President Al Gore and Bill Campbell, chairman of Intuit, are both Apple directors who are still advisers to Google. However, the commission said that it was no longer pursuing its inquiry into the two companies? connections, according to the New York Times.
The FTC released a statement saying that Google, Apple and Mr. Levinson should be commended for recognizing that overlapping board members between competing companies raise serious antitrust issues, and for their willingness to resolve our concerns without the need for litigation.
?The real issue is, are there cases where the person has to recuse themselves because they have an interest in both companies?? said Carl Howe, director of consumer research at Yankee Group, Boston, MA. ?Clearly that hasn?t been the case up to this point, or the recusals have been infrequent enough that it hasn?t been an issue.
?With Android coming along and becoming more of a force in the smartphone market, some of the directors were thinking, ?Why am I attending if I have to recuse myself and can?t actually be at the meeting??
?I think you have to stretch this pretty far to say antitrust issues, which requires collusion to reduce competition in the industry, and neither has enough market share to support that?a conflict of interest maybe, but an antitrust violation is a stretch.?
Looking forward, Google and Apple will most likely compete in areas beyond just smartphone operating systems and Web browsers. Both companies have photo-editing software, but the real battles will be for distribution rights for placement of content in Apple?s iTunes Store and Google?s YouTube.
However, there are areas where Google and Apple do not overlap.
?It?s easy to focus on the competitive aspect, but by and large the two companies don?t compete much, because they have very different businesses for the most part,? Mr. Howe said. ?They?re competitors in the phone business, they?re seeing each other more often, but actually they have very different value propositions.
?In the services business they are mostly complementary,? he said. ?For example, I don?t see Apple throwing Google Maps anytime soon, although they did just buy a mapping company.
?In terms of hardware they are not competitive.?
Comparing Apple to Android
The Verizon-Google deal promises to bring more Android devices to market and could mean an end to the iPhone craze (see story).
While that may be a bit far-fetched, with the iPhone still holding a commanding lead in market share compared to Google?s Android-based handsets, Apple has taken notice. Some analysts speculate that Apple may even be rethinking its single-carrier approach.
?In terms of mobile phone software products, they offer competing solutions, so clearly there is some conflict there and they?re working that out,? Mr. Howe said. ?One could argue that both Google and Apple offer email services, and they do, but in that area they?re basically competing for a pretty small business.?
One area where the two companies are not competing is advertising.
Also, the two companies? smartphone strategies are vastly different.
Android is a very small part of Google?s business, while iPhone is a very large part of Apple?s. Clearly the iPhone?s market share is going up, while the Verizon-Android partnership is, as of yet, unproven.
?It revolves around products to be delivered later, so we don?t know,? Mr. Howe said. ?It?s a little early to speculate that Google will be a threat to Apple, and it will take a few years for them to become a threat.
?Even though there will probably be 10 Android devices on the market by the holiday season, people only buy expensive new smartphones so often.?
With the FTC?s concerns addressed, Apple and Google will go about their business.
However, the issues of cooperation and competition between the two companies will not die down anytime soon.
?I think of it as a state of ?coopertition,? elements that are competitive and elements that are coorperative," said Charles Golvin, Santa Cruz, CA-based analyst for Forrester Research. ?There is a whole bunch of Google technology inside of the iPhone such as Google Maps and YouTube."
Google?s search engine is on the iPhone, technology that Google is providing that is deeply integrated into the iPhone to so users can get the best experiences of the Web.
The companies come at the market differently, and while it is easy to consider the Android platform a competitor to the iPhone, Google?s endeavor in mobile, just like on the Web, is to be everywhere.
For Google, Android is a reach play and any revenue the company may make down the road is gravy.
?It?s not like Android is the be-all-and-end-all of Google?s mobile approach,? Mr. Golvin said. ?They make apps for BlackBerry and Symbian, and they want their services to be the best they can be on as many mobile phones as possible.
?It doesn?t matter to them if customers are using a Google product on an iPhone, BlackBerry, Android, Symbian or even Windows Mobile,? he said.
?Apple is all about making the iPhone as successful as possible, while Google is interested in extending their reach as far as they possibly can.?