Is Apple Going After Google?

On The Charlie Rose Show, Tim Cook was uncharacteristically harsh on Google, or so it seemed to my eyes.

Some quotes;

Our business is not based on having information about you. You’re not our product.

I think everyone has to ask, how do companies make their money? Follow the money. And if they are making money mainly by collecting gobs of personal data, I think you have a right to be worried, and you should really understand what’s happening with that data, and the companies I think should be very transparent about this.

I’m offended by lots of it.

Tim Cook also mentioned prior to this quite strongly that Apple’s competition is not Samsung but Google. (32min 20sec on this video)

I find this very interesting. Steve Jobs tended to divert attention when asked about his feelings towards Google, although we know for a fact that he was mad at them copying the iPhone with Android. As far as I know, Tim Cook’s words are the most critical I have heard from an Apple executive.

With the launch of iOS8 and iPhone 6, many analysts have observed that the advantages that Android (and Samsung) had over Apple are mostly diminished. Hence at least in the United States, it is very likely that iPhone will take market share away from Android. Apple has also improved its Maps application, and it seems that iOS users are mainly using it over Google Maps. It is also common understanding that Google is paying Apple to keep Google as the default search engine on mobile safari. It looks like Google is quite reliant on Apple as a partner, but that Apple is increasingly gaining a stronger bargaining position.

On the other hand, Apple’s attempts to keep Android at bay through patent litigation has proved to be for the most part unsuccessfull. In some cases the courts have found that Samsung has infringed on Apple patents, and as a result, some features have been removed. This hasn’t however prevented Android from gaining in popularity and market share around the world.

My hunch is that Apple has changed its strategy from simply trying to block Android through litigation, to a strategy where Apple will try to damage Google’s core business and revenue source, that is collecting user data and using it for advertising.

The motivation of such a strategy is quite simple. Outside of its core business of search and advertising, Google consistently tries to undermine a successful business by giving away a similar product for free. This is what they did to Microsoft Office with Google Docs and to the iPhone with Android. They are also aiming to do the same with Chrome OS. As Apple introduces the Apple Watch, Google will inevitably modify Android Wear and give that away for free, which may cause headaches for Apple. Google can do this because it makes so much money from advertising. They use this money to fund unprofitable businesses with the goal of commoditizing that market.

Apple has found that they cannot directly block the free products that Google creates. The patent litigation process takes too much time for it to be effective in the fast changing tech landscape. Instead, Apple might be thinking that preventing Google from earning so much money from search is the better approach.

If this is the case, we may see much more public relations efforts from Apple (and even maybe in concert with Microsoft) to educate the public that Google is collecting and using customer information for advertising purposes, and that we should be concerned. We can also expect Apple to move more aggressively with Spotlight in iOS so as to all but eliminate the need to search on the Internet. It looks like this is going to be done quite forcefully.

It will be fascinating to watch.

Update

On Sept. 18th, soon after the Charlie Rose Show aired, Apple posted a letter from Tim Cook on its web site. It reiterated what Tim Cook said on the show about piracy and about the practices of Google (without mentioning the name). It’s actually not a single letter, but a new privacy section of their website with a few more pages detailing how Apple handles privacy. It is now evident that Tim Cook’s comments on the show were not spontaneous, but was an initiative that Apple had planned for a while.

“A message from Tim Cook about Apple’s commitment to your privacy.”

A few years ago, users of Internet services began to realize that when an online service is free, you’re not the customer. You’re the product. But at Apple, we believe a great customer experience shouldn’t come at the expense of your privacy.

I expect we will be seeing much more comments like this coming out of Tim Cook and Cupertino this year. It will be very interesting if they can take it to the point where Google starts feeling like retaliating.

  • Sue Duris

    Nice article.

    “Our business is not based on having information about you. You’re not our product.” You’re not our product? Should have stopped with the first sentence.

    Harsh = emotion to me and TC should be defensive about the most important area Apple has ceded to Google, education. Apple can talk all they want about providing hardware to the schools, but software is the driver. Even Steve Jobs recognized that when NeXT pivoted from hardware to software and the reason Apple acquired them. It is Google, through their GAFE ecosystem, who is winning in education. Unlikely Apple is losing revenues, but people will buy the iPad and connect to GAFE. Apple dropped the ball. I hope they can fix it.

    Another area that can help Apple is with Apple Pay, they can really integrate it with iBeacon. Would be a very strong mobile play. Would like to see more mobile apps competition between AAPL and GOOG.

    • Yes, I agree that Tim Cook sounded emotional, and in general, making serious decisions biased by emotions is not a good thing. However up till now, I do not think Apple has done that.

      As for education, yes I have read that Google is making inroads. They have also agreed to stop reading the content of students’ emails for advertising purposes, but before that, they were doing that. I don’t know how they are making money on this now that they can’t spy on students. They suspect they are bleeding money.

      It’s not as if Apple is abandoning efforts in education. They have iTuneU, iBooks Author, etc. They tend not to do things like GAFE itself, but rather provide the tools that educational institutions can use to build stuff like GAFE. I think they just have a different approach, for better or worse.

      I agree Apple Pay integration with iBeacon would be quite interesting. The thing is, the decision to deploy iBeacon is up to the merchants. Hence the leverage point is whether or not merchant would benefit from Apple Pay. In the case of Google Wallet, merchants had to hand over transaction data to Google, which Google would then use for targeted advertising. That sounds treacherous. Imagine a competitor store doing targeted advertising via Google on your customers. Merchants wouldn’t like that and I would consider it unlikely that merchants would embrace Google Wallet. Apple Pay is very different and merchants may be committed to its widespread usage. So yes, they might have a good incentive to deploy iBeacons in their store and integrate it with Apple Pay.

      • Sue Duris

        I didn’t mean to imply that Apple is doing nothing, but that said, (1) they became complacent and let GOOG catch up and (2) the items you mention, iBooks and iTune author is content but is it targeted content, like GAFE? That’s where GAFE differs. They are getting very targeted and large percentages of educators prefer GAFE. I think GOOG is waiting to see which way the wind blows on Apple Pay and if successful, watch GOOG pivoting in Apple Pay’s direction. No product is absolute, always changing on environment. Have to, in order to create/sustain growth. Great dialog. And thanks for sharing this article. Good content.

        • I think each business has its own strengths and weaknesses, its own business models and its own visions. I think these are more important than technical capability alone.

          Apple is not good at building communities or providing complete business solutions or targeting a specific vertical market. That’s why they teamed up with IBM for example. I think GAFE is one of those things that Apple chose not to do because it relates to a weakness, not a strength. Apple’s strength is in providing the intuitive tools that anybody can use.

          Apple Pay is interesting because that business model directly conflicts with Google’s appetite for user data. Apple says that it doesn’t want transaction data. Google drools for it. There is a business model conflict here. And I think merchants prefer Apple’s approach.

          Will Google change its business model for Google Wallet? That would be very interesting.

          • Sue Duris

            Valid points. And support for why nothing is absolute.