The Mobile Wars: Apple vs. Google – Alap Bharadwaj

At Viedea we keep a tab on the day to day action of the ever changing ‘mobile’ space. This domain receives a lot of coverage from the media and lately the news has become even hotter because of the scintillating race for dominance that is emerging. The battle for mobile supremacy has well and truly commenced and the main event clearly belongs to former collaborators Apple and Google. With a certain contender from Redmond, WA undoubtedly out of the race, this will be one of the few times that two of the “good guys” will be ‘duking’ it out. The question remains, however, as to who will set the tone that others will follow and I believe I have the answer.

Google and Apple will draw swords in four main arenas of mobile warfare – Hardware, Software, Advertising and Search, and a close inspection of each reveals that the race isn’t as close as it seems.

The Hardware portion is a no brainer – The iPhone has been a game changer and has rapidly eaten away at Nokia and RIM’s market share, while Google’s Nexus One has been a colossal disappointment with major carriers Sprint and Verizon refusing to continue to offer it and Google itself admitting that its sales strategy (selling through its own store) was flawed.

Moving on, the software battle might look deceivingly close but the statistics do not lie. Apple’s iTunes App Store boasts more than 200,000 applications compared to Android’s 50,000 with comparable market share. Moreover while Google’s ‘open’ operating system might seem to have a leg up on Apple’s closely held iPhone OS, Google’s Open Handset Alliance (a group of carriers, software developers and handset makers that supported the Android Open Source Project) is showing significant signs of strain and struggling to maintain partner interest.

Carrying on to the hotly contested world of Mobile Advertising where both Apple & Google have employed the inorganic route to bolster their capabilities. In my opinion Google significantly overpaid for ‘AdMob’ buying them at almost 25x (Deal Value: US$ 750 MM) the 2009 revenues compared with just 12x (Deal Value: US$ 250 MM) that Apple paid for Quattro. While ‘Admob’ does boast significantly larger click volume, the firm only outdoes Quattro by approximately US$ 10 MM in revenues, which is not very encouraging for Google. Moreover Apple’s iAd plans which include “exclusive integration with the App Store” and ensuring iPhone, iPad and iPod advertising remains exclusively in house present a daunting challenge for Google.

Finally we look at Search, the cornerstone around which Google has built its sprawling internet Empire and something that poses a seemingly insurmountable challenge for its Californian neighbor. Apple has dealt with this trial in an ingenious manner – by changing the way people access information on their mobile devices – through apps. According to Nielsen the average number of apps on any smartphone hovers around 22 (with the iPhone at 37!), clearly indicating that search is being replaced by apps as an information access starting point. A superb blog post points out that “Apple has trained us to look for apps and use apps, not web sites”, thereby rendering the browser and in effect Google search to a large extent ineffective! Apple has made significant strides to change the mobile user experience in order to negate Google’s influence via search.

Ultimately Google’s mobile strategy might pan out, but only if it can manage to attract a significant customer base to its software and services, which is no easy task. Meanwhile it’s hard to look past Apple as the clear leader of the new school when it comes to the world of Mobile. The others better get their act together soon or they will be relegated to being mere observers in the smart phone race, struggling to stay relevant only by playing in the highly fragmented and low margin world of feature phones.

Advertisements

About Deepak
Venture Capital and M&A advisor, Entrepreneur, Startup enthusiast..

2 Responses to The Mobile Wars: Apple vs. Google – Alap Bharadwaj

  1. Asif Ali says:

    Nice blog Alap

  2. Vijay says:

    Alap,

    Good perpective. There is a space emerging between smart phones and netbooks. Niether of these two players have looked at that space yet. So more competition is likley to emerge as new players come in with newer offerings that are more attractive and provide superior vale for money. That will heat up the competition further.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: