A Mountain View over Cupertino and Redmond

Remember the time when Google was a search engine and did just that? Remember the time when Apple did just computers? The two companies were “friends” for quite some time, united against a common enemy (the evil Microsoft Corporation). How much can things have changed?

Google and Apple are competing in increasingly overlapping markets, and the more they compete, the less likely they are to be friends. It turns out that the two companies are much more alike now than they were a few years ago. While Google’s original and core service (Internet search) is not in direct competition with Apple, Google will join the personal computer market soon with their Chrome OS.

But Apple and Google have been competing for quite some time in the smartphone market, where Google’s Android operating system ran on several phones, weakly competing against the almighty iPhone. Weak competition, but competition nonetheless, and clearly a force to be reckoned with. It exploded a first time when Apple refused an iPhone app from Google called Google voice. After loud chest-drumming from both sides, Eric Schmidt (Google’s chief executive) was forced to resign from Apple’s board.

Competition between the two companies became clearer recently as Google launched the Nexus One, their own home-branded phone. It may not be the iPhone killer (if one ever appears) but it is probably the first phone to actually compete with the iPhone that you can trust on the long-run.

There are talks about Apple dropping Google as Safari’s default search engine and going for Bing, Microsoft’s solution. According to me, that’s where it gets interesting. In the last years, with the advent of Google and the resurrection of Apple, Microsoft had decided to fight on all fronts and to compete openly against both companies on all domains. Both Google and Apple were tied together by the fight against that common enemy. As one of the two looks at it’s old friend, it realizes that it is becoming too powerful… and searches an alliance with its old arch-enemy! Could Google be as dangerous as Microsoft for Apple?

Nick Bilton from the New York Times provided us with an interesting table showing where each of these three companies (as well as Yahoo!) stand.

Let’s forget Yahoo!, it’s only a small player and it’s not going to be near where the real big business is anytime soon¹. For most people, it will not be surprizing to see that Microsoft is everywhere. The only market they haven’t joined is “mobile hardware”, and that’s just becuse they don’t want to offend their partners. What is more surprising is that Google has become a direct competitor to both Redmond and Cupertino in almost all markets, and though it may not be up for size in some domains, it beats them in others. However, the three firms are still radically different:

Apple sells solid. It is a hardware and software company that likes to control everything so as to deliver quality products that are consistent and interoperable. The power of the Mac and the iPhone are brought by Steve Jobs and Co’s grips on the design and production processes. Apple sells simple, trendy, quality products.

Microsoft originated in a completely virtual world. They appeared as a software company and have grown out of it only partially. The Windows franchise is still their flagship product. Steve Balmer likes to be everywhere and do everything he can to crush every possible competitor, but the main difference between his strategy and Apple’s is his relationship with partners.

Google, on the other hand, is an Internet company. They have lived, grown and thrived in the SaaS² business first providing search (which is still what they are most known for) and gradually creating new services that have transformed the way we do things (like Gmail). They have flourished by giving out free “Software as a Service”, and with a new business model has appeared new ways of thinking. However, the SaaS and freebie models are still newcomers, and apparently too small and fragile for Mountain View. And that’s how it became the third bully on the block. It was David and Goliath a few years back, now it resembles the Titans against the Olympians.

Three way competition is more than interesting as we will see the cooperation-competition relations evolve. Google can’t survive without Windows and Mac OS as Chrome OS will not be getting interesting marketshare anytime soon. Google is still primarily a search engine and advertiser because that’s where its revenue comes from. Microsoft and Apple–as companies that like to keep things under control–cannot like the way Google is evolving, but neither can they like each other.

We would like to forget that in these situations, it’s still pragmatism that wins. Companies are playing the money of their investors, and all these ones want is cash. But as Google invests more into their traditional territories the game will get ever more complex. Is there enough space for three big players to survive?

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¹ Not that Yahoo! is small, but they’re not the ones making the rules any longer.
² SaaS stands for Software as a Service

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