Chapter 7 Telecommunications, the Internet, and Wireless Technology 287
Google, Apple, and Microsoft Struggle for Your Internet Experience
CASE STUDY
In what looks like a college food fight, the three Internet titans—Google, Microsoft, and Apple—are in an epic struggle to dominate your Internet experi- ence. What’s at stake is where you search, buy, find your music and videos, and what device you will use to do all these things. The prize is a projected 2015 $400 billion e-commerce marketplace where the major access device will be a mobile smartphone or tablet computer. Each firm generates extraordinary amounts of cash based on different business models. Each firm brings billions of dollars of spare cash to the fight.
In this triangular fight, at one point or another, each firm has befriended one of the other firms to combat the other firm. Two of the firms—Google and Apple—are determined to prevent Microsoft from expanding its dominance beyond the PC desktop. So Google and Apple are friends. But when it comes to mobile phones and apps, Goggle and Apple are enemies: each want to dominate the mobile market. Apple and Microsoft are deter- mined to prevent Google from extending beyond its dominance in search and advertising. So Apple and Microsoft are friends. But when it comes to the mobile marketplace for devices and apps, Apple and Microsoft are enemies. Google and Microsoft are just plain enemies in a variety of battles. Google is trying to weaken Microsoft’s PC software dominance, and Microsoft is trying to break into the search advertising market with Bing.
Today the Internet, along with hardware devices and software applications, is going through a major expansion. Mobile devices with advanced functionality and ubiquitous Internet access are rapidly gaining on traditional desktop computing as the most popular form of computing, changing the basis for competition throughout the industry. Research firm Gartner predicts that by 2013, mobile phones will surpass PCs as the way most people access the Internet. Today, mobile devices account for 5 percent of all searches performed on the Internet; in 2016, they are expected to account for 23.5% of searches.
These mobile Internet devices are made possible by a growing cloud of computing capacity available to anyone with a smartphone and Internet connec- tivity. Who needs a desktop PC anymore when you can listen to music and watch videos 24/7? It’s no surprise, then, that today’s tech titans are so aggressively battling for control of this brave new mobile world.
Apple, Google, and Microsoft already compete in an assortment of fields. Google has a huge edge in advertising, thanks to its dominance in Internet search. Microsoft’s offering, Bing, has grown to about 10 percent of the search market, and the rest essentially belongs to Google. Apple is the leader in mobile software applications, thanks to the popularity of the App Store for its iPhones. Google and Microsoft have less popular app offerings on the Web.
Microsoft is still the leader in PC operating systems and desktop productivity software, but has failed miserably with smartphone hardware and software, mobile computing, cloud-based software apps, its Internet portal, and even its game machines and software. All contribute less than 5 percent to Microsoft’s revenue (the rest comes from Windows, Office, and network software). While Windows is still the operating system on 95 percent of the world’s 2 billion PCs, Google’s Android OS and Apple’s iOS are the dominant play- ers in the mobile computing market. The compa- nies also compete in music, Internet browsers, online video, and social networking.
For both Apple and Google, the most critical battleground is mobile computing. Apple has several advantages that will serve it well in the battle for mobile supremacy. It’s no coincidence that since the Internet exploded in size and popularity, so too did the company’s revenue, which totaled well over $40 billion in 2009. The iMac, iPod, and iPhone have all contributed to the company’s enormous success in the Internet era, and the company hopes that the iPad will follow the trend of profitability set by these products. Apple has a loyal user base that has steadily grown and is very likely to buy future product offerings. Apple is hopeful that the iPad will be as successful as the iPhone, which already accounts for over 30 percentof Apple’s revenue. So far, the iPad appears to be living up to this expectation.
Part of the reason for the popularity of the Apple iPhone, and for the optimism surrounding Internet-equipped smartphones in general, has been the success of the App Store. A vibrant selection of applications (apps) distinguishes Apple’s offerings from its competitors’, and gives the company a measurable head start in this marketplace. Apple already offers over 250,000 apps for its devices, and Apple takes a 30% cut of all app sales. Apps greatly enrich the experience of using a mobile device, and without them, the predictions for the future of mobile Internet would not be nearly as bright. Whoever creates the most appealing set of devices and applications will derive a significant competi- tive advantage over rival companies. Right now,that company is Apple.
But the development of smartphones and mobile Internet is still in its infancy. Google has acted swiftly to enter the battle for mobile supremacy while it can still ‘win’, irreparably damaging its relationship with Apple, its former ally, in the process. As more people switch to mobile computing as their primary method for accessing the Internet, Google is aggressively following the eyeballs. Google is as strong as the size of its advertising network. With the impending shift towards mobile computing looming, it’s no cer- tainty that it will be able to maintain its dominant position in search. That’s why the dominant online search company began developing a mobile operating system and its Nexus One entry into the smartphone marketplace. Google hopes to control its own destiny in an increasingly mobile world.
Google’s efforts to take on Apple began when it acquired Android, Inc., the developer of the mobile operating system of the same name. Google’s original goal was to counter Microsoft’s attempts to enter the mobile device market, but Microsoft was largely unsuccessful. Instead, Apple and Research In Motion, makers of the popular BlackBerry series of smartphones, filled the void. Google continued to develop Android, adding features that Apple’s offerings lacked, such as the ability to run multiple apps at once. After an initial series of blocky, unappealing prototypes, there are now Android-equipped phones that are function- ally and aesthetically competitive with the iPhone. For example, the Motorola Droid was heavily advertised, using the slogan “Everything iDon’t…Droid Does.”
Google has been particularly aggressive with its entry into the mobile computing market because it is concerned about Apple’s preference for ‘closed’, proprietary standards on its phones. It would like smartphones to have open nonproprietary platforms where users can freely roam the Web and pull in apps that work on many different devices.
Apple believes devices such as smartphones and tablets should have proprietary standards and be tightly controlled, with customers using applica- tions on these devices that have been downloaded from the its App Store. Thus Apple retains the final say over whether or not its mobile users can access various services on the Web, and that includes services provided by Google. Google doesn’t want Apple to be able to block it from providing its services on iPhones, or any other smartphone. A high- profile example of Apple’s desire to fend off Google occurred after Google attempted to place its voice mail management program, Google Voice, onto the iPhone. Apple cited privacy concerns in preventing Google’s effort.
Soon after, Google CEO Eric Schmidt stepped down from his post on Apple’s board of directors. Since Schmidt’s departure from Apple’s board, the two companies have been in an all-out war. They’ve battled over high-profile acquisitions, including mobile advertising firm AdMob, which was highly sought after by both companies. AdMob sells banner ads that appear inside mobile applications, and the company is on the cutting edge of developing new methods of mobile advertising. Apple was close to a deal with the start-up when Google swooped in and bought AdMob for $750 million in stock. Google doesn’t expect to earn anything close to that in returns from the deal, but it was willing to pay a premium to disrupt Apple’s mobile advertising effort.
Undeterred, Apple bought top competitor Quattro Wireless for $275 million in January 2010. It then shuttered the service in September of that year in favor of its own iAd advertising platform. IAd allows developers of the programs in Apple’s App Store for the iPhone, iPad, and iPod Touch to embed ads in their software. Apple will sell the ads and give the app developers 60 percent of the ad revenue.
Apple has been more than willing to use similarly combative tactics to slow its competition down. Apple sued HTC, the Taiwanese mobile phone manufacturer of Android-equipped phones, citing patent infringement. Apple CEO Steve Jobs has consistently bashed Google in the press, characterizing the company as a bully and questioning its ethics. Many analysts speculate that Apple may take a shot at Google by teaming up with a partne
Chapter 7 Telecommunications, the Internet, and Wireless Technology 287
Google, Apple, and Microsoft Struggle for Your Internet Experience
CASE STUDY
In what looks like a college food fight, the three Internet titans—Google, Microsoft, and Apple—are in an epic struggle to dominate your Internet experi- ence. What’s at stake is where you search, buy, find your music and videos, and what device you will use to do all these things. The prize is a projected 2015 $400 billion e-commerce marketplace where the major access device will be a mobile smartphone or tablet computer. Each firm generates extraordinary amounts of cash based on different business models. Each firm brings billions of dollars of spare cash to the fight.
In this triangular fight, at one point or another, each firm has befriended one of the other firms to combat the other firm. Two of the firms—Google and Apple—are determined to prevent Microsoft from expanding its dominance beyond the PC desktop. So Google and Apple are friends. But when it comes to mobile phones and apps, Goggle and Apple are enemies: each want to dominate the mobile market. Apple and Microsoft are deter- mined to prevent Google from extending beyond its dominance in search and advertising. So Apple and Microsoft are friends. But when it comes to the mobile marketplace for devices and apps, Apple and Microsoft are enemies. Google and Microsoft are just plain enemies in a variety of battles. Google is trying to weaken Microsoft’s PC software dominance, and Microsoft is trying to break into the search advertising market with Bing.
Today the Internet, along with hardware devices and software applications, is going through a major expansion. Mobile devices with advanced functionality and ubiquitous Internet access are rapidly gaining on traditional desktop computing as the most popular form of computing, changing the basis for competition throughout the industry. Research firm Gartner predicts that by 2013, mobile phones will surpass PCs as the way most people access the Internet. Today, mobile devices account for 5 percent of all searches performed on the Internet; in 2016, they are expected to account for 23.5% of searches.
These mobile Internet devices are made possible by a growing cloud of computing capacity available to anyone with a smartphone and Internet connec- tivity. Who needs a desktop PC anymore when you can listen to music and watch videos 24/7? It’s no surprise, then, that today’s tech titans are so aggressively battling for control of this brave new mobile world.
Apple, Google, and Microsoft already compete in an assortment of fields. Google has a huge edge in advertising, thanks to its dominance in Internet search. Microsoft’s offering, Bing, has grown to about 10 percent of the search market, and the rest essentially belongs to Google. Apple is the leader in mobile software applications, thanks to the popularity of the App Store for its iPhones. Google and Microsoft have less popular app offerings on the Web.
Microsoft is still the leader in PC operating systems and desktop productivity software, but has failed miserably with smartphone hardware and software, mobile computing, cloud-based software apps, its Internet portal, and even its game machines and software. All contribute less than 5 percent to Microsoft’s revenue (the rest comes from Windows, Office, and network software). While Windows is still the operating system on 95 percent of the world’s 2 billion PCs, Google’s Android OS and Apple’s iOS are the dominant play- ers in the mobile computing market. The compa- nies also compete in music, Internet browsers, online video, and social networking.
For both Apple and Google, the most critical battleground is mobile computing. Apple has several advantages that will serve it well in the battle for mobile supremacy. It’s no coincidence that since the Internet exploded in size and popularity, so too did the company’s revenue, which totaled well over $40 billion in 2009. The iMac, iPod, and iPhone have all contributed to the company’s enormous success in the Internet era, and the company hopes that the iPad will follow the trend of profitability set by these products. Apple has a loyal user base that has steadily grown and is very likely to buy future product offerings. Apple is hopeful that the iPad will be as successful as the iPhone, which already accounts for over 30 percentof Apple’s revenue. So far, the iPad appears to be living up to this expectation.
Part of the reason for the popularity of the Apple iPhone, and for the optimism surrounding Internet-equipped smartphones in general, has been the success of the App Store. A vibrant selection of applications (apps) distinguishes Apple’s offerings from its competitors’, and gives the company a measurable head start in this marketplace. Apple already offers over 250,000 apps for its devices, and Apple takes a 30% cut of all app sales. Apps greatly enrich the experience of using a mobile device, and without them, the predictions for the future of mobile Internet would not be nearly as bright. Whoever creates the most appealing set of devices and applications will derive a significant competi- tive advantage over rival companies. Right now,that company is Apple.
But the development of smartphones and mobile Internet is still in its infancy. Google has acted swiftly to enter the battle for mobile supremacy while it can still ‘win’, irreparably damaging its relationship with Apple, its former ally, in the process. As more people switch to mobile computing as their primary method for accessing the Internet, Google is aggressively following the eyeballs. Google is as strong as the size of its advertising network. With the impending shift towards mobile computing looming, it’s no cer- tainty that it will be able to maintain its dominant position in search. That’s why the dominant online search company began developing a mobile operating system and its Nexus One entry into the smartphone marketplace. Google hopes to control its own destiny in an increasingly mobile world.
Google’s efforts to take on Apple began when it acquired Android, Inc., the developer of the mobile operating system of the same name. Google’s original goal was to counter Microsoft’s attempts to enter the mobile device market, but Microsoft was largely unsuccessful. Instead, Apple and Research In Motion, makers of the popular BlackBerry series of smartphones, filled the void. Google continued to develop Android, adding features that Apple’s offerings lacked, such as the ability to run multiple apps at once. After an initial series of blocky, unappealing prototypes, there are now Android-equipped phones that are function- ally and aesthetically competitive with the iPhone. For example, the Motorola Droid was heavily advertised, using the slogan “Everything iDon’t…Droid Does.”
Google has been particularly aggressive with its entry into the mobile computing market because it is concerned about Apple’s preference for ‘closed’, proprietary standards on its phones. It would like smartphones to have open nonproprietary platforms where users can freely roam the Web and pull in apps that work on many different devices.
Apple believes devices such as smartphones and tablets should have proprietary standards and be tightly controlled, with customers using applica- tions on these devices that have been downloaded from the its App Store. Thus Apple retains the final say over whether or not its mobile users can access various services on the Web, and that includes services provided by Google. Google doesn’t want Apple to be able to block it from providing its services on iPhones, or any other smartphone. A high- profile example of Apple’s desire to fend off Google occurred after Google attempted to place its voice mail management program, Google Voice, onto the iPhone. Apple cited privacy concerns in preventing Google’s effort.
Soon after, Google CEO Eric Schmidt stepped down from his post on Apple’s board of directors. Since Schmidt’s departure from Apple’s board, the two companies have been in an all-out war. They’ve battled over high-profile acquisitions, including mobile advertising firm AdMob, which was highly sought after by both companies. AdMob sells banner ads that appear inside mobile applications, and the company is on the cutting edge of developing new methods of mobile advertising. Apple was close to a deal with the start-up when Google swooped in and bought AdMob for $750 million in stock. Google doesn’t expect to earn anything close to that in returns from the deal, but it was willing to pay a premium to disrupt Apple’s mobile advertising effort.
Undeterred, Apple bought top competitor Quattro Wireless for $275 million in January 2010. It then shuttered the service in September of that year in favor of its own iAd advertising platform. IAd allows developers of the programs in Apple’s App Store for the iPhone, iPad, and iPod Touch to embed ads in their software. Apple will sell the ads and give the app developers 60 percent of the ad revenue.
Apple has been more than willing to use similarly combative tactics to slow its competition down. Apple sued HTC, the Taiwanese mobile phone manufacturer of Android-equipped phones, citing patent infringement. Apple CEO Steve Jobs has consistently bashed Google in the press, characterizing the company as a bully and questioning its ethics. Many analysts speculate that Apple may take a shot at Google by teaming up with a partne
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