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Why Google Will Never Overtake Apple

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

The exaggeration surrounding Apple’s (NASDAQ: AAPL) iPhone 5 map situation ignited flames from bears arguing that Google (NASDAQ: GOOG) was suddenly the most dominant tech company on the planet. Apple's "misdirection" with its map app coupled with a less than stellar release of IOS 6 presented the “I told you so” moment that Google had been waiting so patiently to declare.

However, aside from an apology made to the market by Apple’s CEO Tim Cook, who admitted that the map project was not up to the company’s usual standards, what exactly did Google win - and (if anything) will it extend into 2013? Wall Street has a short memory, especially when it comes to Apple. So despite Apple’s recent struggles it is not yet certain that the company has lost a step.

Biting Off More Than It Can Chew

Admittedly, entering this year Google has quite a bit of ammo at its disposal. Not the least of which is a popular Android mobile operating system that ended 2012 running 450 million phones, which is more than the total number of PCs sold. Make no mistake - Google has done a remarkable job in such a short period of time.

That the company has been able to overtake both Research In Motion (NASDAQ: BBRY) and Microsoft in the smartphone race is nothing short of remarkable. Even more impressive, is that Google has been able to do this while launching Google+, its social media site that rivals Facebook (NASDAQ: FB).

In the process, the company was able to launch its Chrome browser to compete with Microsoft’s Internet Explorer. This is in addition to having developed its own hardware OS while expanding its Google Apps to offer free alternatives to Microsoft Office. The cloud was the next platform to dominate. 

However, as impressive as all of these accomplishments may be, they point to a couple of things. First, Google now has made too many enemies than it wish to admit. Secondly, there is ample evidence that the search giant just might have bitten off more than it can chew.

For instance, aside from recently investing over $1 billion into wind farms and green power installations, Google now wants to become the world’s best internet service provider (ISP) after recently unveiling its new Fiber ISP residential service in Kansas City. Analysts have called it a “game-changer,” suggesting that the service is 100 times faster than a standard internet connection.

The residential service comes a la cart at $70 per month and for an additional $50 customers can add television service. Essentially, Google is now looking to increase its list of enemies to include large ISP telecommunication providers such as AT&T, Verizon and Time Warner. Will it have the focus required to take Apple head-on in the New Year?

Are There Clear and Present Dangers?

The good news is that the company is no longer burdened by its Motorola acquisition after having sold the home business segment to ARRIS in an auction with a winning bid of $2.35 billion. Impressively, throughout all of these endeavors Google never lost sight of its main bread –and-butter search empire, which is still light years ahead of Yahoo and Bing.

Also, the company still understands that its future is based on its ability to dominate ads. Although this point is often missed by investors, this is also the basis upon which its Android OS was released. Though Google may dabble into these other projects, they all lead to one thing and one thing only – controlling ad revenue. But the tide is beginning to shift – albeit slightly.

There is new evidence that Facebook is beginning to gain more traction – particularly with mobile. In May, a report was released by Wordstream that measured the “click through rate” (or CTR) between the Google and Facebook, during which the report concluded that Facebook had less reach than Google and therefore its ads were less effective.

The report revealed that advertisers were paying more per click on Facebook than they were on Google. However, in the most recent report, it showed a reversal as Facebook’s CTR has increased, which means that advertisers now pay a lower rate per click. On a similar note, it seems that Facebook’s sponsored stories have helped the company gain more overall footing with advertisers as evident by the 32% year-over-year growth in ad revenue.

Facebook still has a long way to go before it overtakes Google, but unless Google loses its fixation on being “everything to everyone,” the company may find itself being threatened from a company such as RIM. That RIM shipped 7 million BlackBerry  by Coupon Companion Plugin">smartphones and roughly 255,000 BlackBerry PlayBook tablets in its most recent quarter means that the race for smartphone supremacy is no longer the forgone conclusion that it once was.

What’s more, RIM’s upcoming release of BB10 may put a damper of Android’s rising popularity. Also with Amazon (NASDAQ: AMZN) expected to unveil a smartphone in 2013, it is not a given that Amazon would choose Android for its OS. I think BB10 along with Windows Phone 8 would be suitable options.  

Amazon would look to differentiate itself and become more of an enterprise player. BB10 and Windows 8 would present Amazon with options that Android does not currently offer - security being one important component.

Bottom Line

Without question, Google has a great business as evident by revenues which grew 45% to $14.1 billion in its third quarter. On the other hand, the company appears to be battling a constant identity crisis. So far it has not impacted its ascent to the top of the tech sector. But with so much scattered ambitions, I question whether Google has the long term focus necessary to overtake Apple as Wall Street’s darling. Right now it doesn’t seem like it.


rsaintvilus is long AAPL and has no positions in the other stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, Facebook, and Google and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Apple, Amazon.com, Facebook, and Google. 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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