Apple: Unfazed as Google Tries to be Microsoft 2.0

Richard is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Whenever Apple’s (NASDAQ: AAPL) future is being discussed, the theme always defaults to the ever popular bear case of how Android is eating Apple’s lunch. Somehow, Apple has everything to fear when it comes to Google (NASDAQ: GOOG). Remarkably, within these same debates, Google is presumed fearless. But if studied closer, investors will see that Google has plenty of reasons to panic.

It Worked for Microsoft, Why Not for Google?

Bulls will tell you that Android is the answer and Google has it all figured out. This is despite the fact that Apple has regained the lead in U.S. smartphone sales; this is according to Kantar Worldpanel Com Tech, a research firm based in London.

The report showed that for the period of August 5 through October 28, Apple’s IOS had a market share of 48.1% while Android had only a 46.7% share. But why let facts like these get in the way of a good Apple-hate fest? I will concede that Android is gaining traction and there is a lot of buzz surrounding its worldwide growth potential. But it’s limited.

Still, I’m willing to give Google credit for having created a full-bodied OS that does what it needs to do and has been embraced by phone manufacturers and consumers. But many continue to ignore Android’s main birth objective – to deliver Google with more ad revenue. Why does this matter?

Google wants to control ads. To realize this objective, it requires that the company first control those who write code for apps, essentially the developers. Why not? After all, it worked for Microsoft (NASDAQ: MSFT). Microsoft had Windows everywhere and available on any form factor by any manufacturer who would license it. This is regardless of how crappy the hardware might have been.

As long as it had an Intel chip, it was presumed good enough. The net effect was whenever software was needed for a Mac, it essentially had to be “special ordered.” Developers had moved on to where the money was. You can’t blame them. This killed Apple. Google is now thinking “it worked once before”- but not so fast.

It Hurt Microsoft, It Will Also Hurt Google

Today, although Apple has had a meaningful lead in device sales and apps developed/download, Google is looking to deploy this same strategy - except it won’t work long term. So far, in fairness, it is working better than I expected. I would venture to say that even Google appears surprised at its own success. But it’s flawed fundamentally since Android’s main advantage also serves as its biggest weakness.

For instance, Google can leverage its significant number of Android OEMs, of which Samsung, its largest manufacturer currently enjoys the top spot in over all handsets sold worldwide. While this is great, as with Windows, there are plenty of holes, or security risks – particularly for Android’s “open platform.”

Google bulls argue that “openness” makes for a better community of developers working together to improve the product. But there’s also the other side that exposes all of the weaknesses - as recently alerted by the FBI where Android was the subject of various malware attacks.

To Google’s credit, the company has since taken measure to secure these threats. But can Google focus on growing Android while at the same time devoting much of its attention to securing these holes? Although it doesn’t appear to hurt at the moment, there will be long term ramifications.

This is the same thing that hurt Microsoft and its hardware partner such as Intel – they worked too much to improve Windows and missed the mobile revolution. Now they’re playing catch-up. If Google is not careful, it will be next.

Bottom Line

As noted, advertising was the main objective in the design of Android it seems security didn’t make the top 10 list. How will this affect app developers? Even without the security concerns, app developers already had more of an incentive to choose Apple over Android. This is because the Android market doesn't make publishers nearly as much money. In this area, Apple is winning.

The reason is although Android appears everywhere, a good majority of Android apps are free, whereas paid apps on iPhones and iPads beat Android by a ratio of almost 10 to 1. So how exactly does the developer benefit? As I’ve asked recently, what’s the point in volume if it is not profitable?

How is Google going to get someone who owns an iPhone to suddenly switch to Android? The other main point in the Google bull arguments (as I’ve noted above) is that Android is growing worldwide. But what exactly has Android built in terms of ecosystem? Whereas every Apple product is linked together in some way to the extent that switching from iOS to any other platform is a life-altering event. 


rsaintvilus is long AAPL and has no positions in the other stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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