Mobile access: It's the new battleground

September 6th, 2009 at 9:50 am |

Imagine text messaging on your iPhone and instead of using Apple’s familiar, intuitive interface, up pops an alternate interface designed by Google. That’s what worried Apple into refusing to approve Google Voice — an application that provides integrated telephony and voice mail management — for distribution through its online App Store.

In response to a Federal Communications Commission inquiry into the rejection, Apple said that Google Voice wasn’t approved “because, as submitted for review, it appears to alter the iPhone’s distinctive user experience by replacing the iPhone’s core mobile telephone functionality and Apple user interface with its own user interface for telephone calls, text messaging and voice mail.”

Google’s letter to the FCC said that Google Voice is “an enhanced voice and data messaging application” that “does not provide the underlying communications pathway.”

The skirmish with Apple is just one in a series of battles Google is likely to undertake, Wharton faculty and other experts say. With its dominant position in Internet search, the introduction of its free productivity software and Android mobile platform for smartphones, and its plans to develop its own operating system, the company is beginning to look a lot like Microsoft in the mid-1990s: A company with big ambitions and an ever-growing list of competitors.

“There are many parallels between Google and a young Microsoft when it was a hip teenager,” says Andrea Matwyshyn, professor of legal studies and business ethics at Wharton. “The risk to Google is not learning from Microsoft’s mistakes.”

Those mistakes include going after Netscape by bundling Windows with the Internet Explorer browser, leading to a high-profile lawsuit brought by the U.S. Department of Justice in 1998. Under a 2002 antitrust settlement, Microsoft agreed to share its application programming interfaces — specifications that govern how programmers can interact with software — with third parties and have a panel monitor its business practices.

Eric Clemons, an operations and information management professor at Wharton, believes there are several similarities between Google and Microsoft before its run-in with regulators. “The fact is, Google almost doesn’t have any competitors,” says Clemons. “Google could kill anything it wants to.”

For instance, Google is offering its Android mobile operating system as freely available open source software. Its Chrome operating system will also be free. And aside from corporate accounts, Google’s office productivity software is free with embedded advertising.

Google’s expansion into productivity software has led to a high-profile clash of the titans between the search giant and Microsoft. Most recently, in response to Google’s dominance, Microsoft forged a deal with Yahoo and launched a new search engine, Bing.

The competition with Apple has only begun to heat up, but it’s clear that Google is a growing threat for that company, too. Google CEO Eric Schmidt served on Apple’s board of directors, but resigned as Google has come into increasing competition with the iPhone maker.

Google’s Android operating system is being used to power new phones from Motorola and HTC, a handset maker based in Taiwan. Its planned Chrome operating system will bring it into closer competition with Apple’s Mac OS.

The relationship between Google and Apple is becoming more complex. For example, Google powers the mapping feature on Apple’s iPhone. However, Apple requested in July that Google’s Latitude application, which allows consumers to broadcast their whereabouts using the global positioning system technology in the iPhone, be a browser-based tool instead of a native, or more integrated, application.

Why? According to the Official Google Mobile Blog, Apple was concerned that Latitude could be confused with the iPhone’s own mapping tools.

David Hsu, a management professor at Wharton, says Google has to focus on the mobile market to maintain its search presence. “This is not a category [they're] going to ignore.”

The stakes are high. Research firm comScore estimates that more than 63 million people accessed online news and information from their mobile devices at least once in January 2009, up 71 percent from January of last year. During the same period, the number of consumers who used their mobile device to access online content daily doubled to more than 22 million.

“[Apple and Google] are certainly competing,” says Kendall Whitehouse, director of new media at Wharton. “Everyone senses a shakeout in mobile platforms.” Whitehouse said he didn’t think Android could completely upend Apple’s iPhone, which had 13 of the smartphone market in the second quarter of this year, according to research firm Gartner. However, he points out that Google could certainly steal market share from Apple in the mobile market.

“The reason the battlefront has moved to mobile is that most businesses see this as the future of advertising, person-to-person [social networking] and even consumption,” says Eric Bradlow, a marketing professor at Wharton. “In many people’s view, what is most important is having access to consumers often and in contexts in which they are receptive to advertising and likely to purchase. Mobile access is that venue.”

While Google increasingly competes with established technology giants like Apple and Microsoft, experts at Wharton note that the search company comes to everything with advertising as its core business model. At the end of July, Google controlled 67.5 percent of the worldwide search market, according to comScore.

“Google is more focused on making sure it isn’t locked out of any one market,” says Hsu. “Clearly, mobile is a battleground for all of the big players, but Google comes at it differently. It doesn’t want to make hardware; it wants the information and advertising. Google is very much in business against any company that may interrupt its core search advertising model.”

Google’s moves into new markets are about reaching more consumers to use its search tools, learning more about their preferences, transferring information like cell phone contacts to its servers, and ultimately targeting ads more precisely.

“Google is interested in maximizing reach and eyeballs. Everything reverts to advertising,” notes Forrester analyst Charlie Golvin, who says that he expects Apple and Google to alternate between cooperating and competing as developments warrant. “Google wants its services on every phone.”

In many respects, Google’s mobile march is just beginning. Over the next year, Google’s Android will begin appearing on multiple devices. To date, T-Mobile’s G1 phone has been the torch bearer for Android with more than one million units sold in the U.S. T-Mobile recently launched the second incarnation of its flagship Android device, the MyTouch 3G. Meanwhile, Motorola plans on using Android to power many of its devices and fuel a turnaround.

That mobile land grab, built on Google’s dominance in advertising, is what Clemons sees as perilous antitrust territory:

“The fact is that Google doesn’t really have any competition because it doesn’t need to make money on new markets. Apple has Google as a competitor, but Google isn’t threatened by Apple because it doesn’t have search. Everything is funded by search.”

Google is using its profitable search business — with a net income of $2.9 billion for the six months ending June 30 — to position itself for the future, Clemons says, noting that the company isn’t looking for a new roll-out to diversify its revenue base as much as a series of businesses that add up to information dominance. “Google is setting up three to four killer ‘applets.’ ” He points out that the search giant could own the marketplace for a bevy of daily transactions. “Google will be the distribution point for everything.”

Matwyshyn suggests that when companies like Google and Apple jockey for position in the market, consumers can benefit.

“As these two go head-to-head, consumers could be the winners because there will be more options and better products. It could be a good thing that the two ‘cool kids’ in the tech space are fighting.”

Hsu agrees, but acknowledges a conundrum. Google collects a lot of information and it’s not hard to foresee a time when Google will know from your e-mail, text messages and search behavior that you are looking for a Thai restaurant south of Market Street in San Francisco. At that moment, Google can give you a 10 percent coupon to just such a restaurant. “Google has the potential to deliver on that promise,” says Hsu.

According to Forrester’s Golvin, that mobile vision can give Google a more intimate connection to the consumer. “Things of that ilk are very valuable to someone who is mobile.”

And although real-time mobile ad relevance could be viewed as a sign that one company has too much power, experts like Clemons and Matwyshyn note that, so far, the convenience Google provides is outweighing any apparent privacy worries. In addition, Google has made it clear that consumers have to opt in to use applications like Google Latitude, which track a person’s movements via their phone.

Matwyshyn says that many consumers will take the improved services in exchange for data. Why?

“Children carry security blankets and adults carry their smartphones.”

(Source: The News Journal)

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