The War Between Google and Apple

The New York Times has an interesting piece on the falling out between Google and Apple. The rancor has reached the point where, according to once unnamed source, "It’s World War III." What brought the two companies to this point, such that we may even see Microsoft's Bing replacing Google on the iPhone, if things work out as rumored?

After all, when the first-generation iPhone was launched, Google CEO Eric Schmidt was on-stage with Apple CEO Steve Jobs. Schmidt joked that the collaboration between the two, necessary to get Google's services on the iPhone, was so close that companies should be merged and called “AppleGoo.” He added, “Steve, my congratulations to you. This product is going to be hot.”

Of course, the iPhone was, and is, hot. Then came Google's Android platform, which Jobs feels was a stab in the back.

During an all-hands meeting shortly after the iPad was introduced in January, Jobs went on a rant about Google: “We did not enter the search business. They entered the phone business. Make no mistake: Google wants to kill the iPhone. We won’t let them.” He also added, “Don’t be evil is a load of crap” (originally reported as Jobs saying it was "bullsh*t").

It is doubtful the Android platform will "kill" the iPhone. However, many analysts believe that Android will eventually overtake the iPhone. The reasons should be common sense to anyone watching the industry:

• The iPhone, because of its App Store and rather draconian policies over what can and cannot be installed on the device, is a closed system. Android is not. The singular example of Google Voice is obvious.

• The iPhone comes (at least so far) in one form factor per year. Android phones are shipping in many varieties, with more to come.  To consumers who like differentiation, this may eventually be an issue.  

• While the iPhone's App Store far outstrips Android in terms of the sheer number of apps, exactly how many of those are truly useful? The better-known apps will show up on Android, if they haven't already. Of course, there are apps that may never show up on Android, such as, say, an app for your favorite bank. Many of those are simply an easy way to get into the web site of the company involved, and can still be done via Android's browser, which is just as capable as the iPhone's, at least for now.

Therein lies the rub, of course: "at least for now." While Apple has not sued Google over the Android platform, it has sued one of Google's hardware partners, HTC. Google, quite naturally, said it will back its partner.  Multi-touch, for example, is at issue in the fight, and that allows pinch-to-zoom functionality, something highly valued by consumers. Loss of such features to iPhone exclusivity will surely hurt Android adoption.

It's not just Google that's "picking on" Apple. Its Android partners are as well. Verizon, which reportedly passed on the iPhone, has made no bones about AT&T's coverage issues, which many iPhone users are aware of. They also were quick to point out that things the iPhone can't do, the Droid can.

It's not just about smartphones, either. The NYT points out that Apple made an offer of $600 million for AdMob, the mobile ad company, but after requiring a 45-day routine clause that prevented the start-up from shopping itself to others, Apple inexplicably let the 45 days pass. Once the period expired, Google immediately pounced.

Within three days of the no-shop provision's expiration, Google announced it had agreed to buy AdMob, for $750 million, a 25 percent premium over Apple's offer. In addition, Google made sure to point out that it, unlike Apple, was an old pro in advertising, and thus better suited to AdMob. Finally, the company also promised that AdMob employees would be able to cash out stock options sooner than Apple’s deal would have allowed.

An unnamed source told the NYT:

“There is no way AdMob would have gotten $750 million if he (Eric Schmidt) wasn’t worried that it would end up in the hands of Steve. Are they going to get $750 million in cash flow back? No way.”

Apple settled for seconds, signing a deal with Quattro Wireless, an AdMob rival, for close to $300 million in January. Of course, AdMob was the prize fruit in all this pursuit. This, and the contentiousness over Android and HTC, signal that Apple and Google's World War III is nowhere near an end.