Apple Helping to Increase Google's Revenue
Sean is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG) are at war. They have been at war for a few years, now competing in fields such as smartphone operating systems and tablet devices. But there have also been strange collaborations as iPhones used to come pre-installed with Google’s YouTube and the mapping system on iPhones used to run off of Google maps.
These were always limited collaborations in which they worked together out of necessity or convenience, both always reluctant to do too much to aid the other. Nonetheless, Apple has recently unintentionally increased Google’s ability to generate ad revenue from iPhones.
Google has been dominating the smartphone war with its operating system. As of last month Google controlled over 72% of the global smartphone market. Apple was in second, but trailed far behind with 13.9% of the global market. The huge number of phones utilizing the Google operating system and various other Google services have generated $8 billion for Google this year.
On top of that, it was estimated in the spring of 2012 that Google might actually make more money from its services on the Apple iPhone than it does from all the other devices using Android. This was certainly one of the motivating factors for Apple kicking both YouTube and the Google-based map system off the iPhone 5 and releasing their own mapping software, which was immediately met with ridicule as there were rampant errors in it.
Apple’s reasoning behind kicking Google off its iPhone makes complete sense. Why would you want a competitor to be running software on your own phones that brings the competitor hundreds of millions of dollars? Apple wanted to control the mapping aspect of the phone and not give any more opportunity than it had to for Google to generate revenue off of Apple devices.
However, Apple’s plan has backfired. It is likely that what Apple has done will end up creating more revenue for Google than if they had just left the Google mapping system and YouTube on the phone.
Apple’s app store has approved app versions of Google Maps and YouTube that users may download. So even though the services were kicked off before, users are now able to download them back onto their phone.
Since Google is not working directly with Apple it is less restricted in its ability to display ads through its services. Previously Apple had limited Google’s ability to make money through the mapping software and through YouTube, but these new apps have no such restrictions.
Google Maps will now be able to include more ads and cross-promote other Google services. Additionally, the YouTube app will now be able to play advertisements, something that the previous version of YouTube wasn’t able to do.
Apple has, in essence, achieved the exact opposite of what it intended when it booted Google off the iPhone. Not only did it draw public ire for a low-quality mapping service, which hurt its own reputation, but it has now created two new revenue-generating streams for its main competitor. A competitor that was already making hundreds of millions off the iPhone and is now better positioned than before.
Google is now stronger than ever in the smartphone market.
SeanMSullivan has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple 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!