Google and Apple are on a collision course.
While the companies are not each others’ biggest rivals, they are increasingly competing with each other.
This follows years of enjoying one of the coziest relationships in Silicon Valley — one that will now get more complicated as the companies compete in more areas.
The latest: Google is developing a movie rental service for YouTube. This is a logical extension of the Web’s top video site, as YouTube increases its focus on professional content. But if it happens, it will put YouTube in square competition with Apple’s iTunes store, which has offered movie rentals for years.
Video rentals do not generate a huge amount of revenue for either company, so it’s not a big conflict. But Google is also increasingly competing with Apple in its more important, core platform businesses.
Their most significant rivalry today is mobile phone platforms, where Google’s Android phones compete with Apple’s iPhones. So far, Apple has had more success, both in getting consumers to buy its phones, and in getting software companies to develop apps for its platform.
But Google has a big year ahead: It will eventually be distributed by all four major U.S. wireless carriers, while Apple is exclusive with AT&T (for now, at least). And phone manufacturers like Motorola have plans to make lots of mid-range, high-volume phones with Android. Assuming the efforts are adequate, Google could catch up significantly in the next year.
Google is also developing an operating system for computers, which is, of course, one of Apple’s biggest businesses. (The Mac generated more than one third of Apple’s non-GAAP, adjusted sales last quarter.) Google’s Chrome OS is supposed to ship next year, initially on “netbook” portable computers, a market Apple doesn’t yet participate in. But eventually, Google plans to offer Chrome OS for laptop and desktop computers, which will inevitably put the companies in deeper competition.
As we said, neither company is each other’s biggest rival. Both are probably still most interested in disrupting Microsoft, which is one of the reasons they became so close earlier this decade. Pretty much every area where Google is competing with Apple, it’s competing even stronger with Microsoft. But it’s impossible for Apple to escape the crossfire.
And that’s one big reason that Google chief Eric Schmidt stepped down from Apple’s board of directors last month. “Unfortunately, as Google enters more of Apple’s core businesses, with Android and now Chrome OS, Eric’s effectiveness as an Apple Board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest,” Apple CEO Steve Jobs said in a statement.
Google's Android platform is one of the most threatening to Apple's iPhone.
In part, it's because it's a powerful software package. But in part, because Google has decided to give it away for free to any mobile phone vendor who wants to use it. So in a way, Google is organising many gadget makers -- HTC, Motorola, LG, Sony Ericsson, etc. -- to battle with Apple, not just one.
So far, Android is much smaller than the iPhone. But many new models will start to launch over the next several months.
Google and Apple both want to convince developers to invest in their mobile platforms, which use different languages and are incompatible. (So far, Apple is winning by far.)
But Google is taking the approach of 'openness' -- allowing any app into the store -- while Apple has kept a tighter lid on its platform. This has led to recent direct conflict among the companies, as Apple has kept two Google apps off the iPhone: Its Latitude social networking service, and its Google Voice phone service.
This forced an embarrassing FCC investigation last month -- a fiasco that likely added stress to the companies' relationship.
OS X is one of Apple's most important assets: It's the software basis for the Mac, iPhone, and iPod touch, which are Apple's three most important hardware products.
And now Google is moving to directly compete with OS X via Chrome OS, a lightweight operating system for Web-focused computers.
Initially, Chrome OS will power cheap netbook laptops, which Apple doesn't currently offer. But eventually, it could power laptop and desktop computers -- which compete directly with Apple's Macs.
Google's Chrome and Apple's Safari are both based on the same guts, 'Webkit.' But most people only use one Web browser at a time, and that means that Google will be directly competing with Apple here -- especially once Chrome is out for the Mac.
Why does Apple care which Web browser its customers pick? Beyond keeping some control over its users, Apple also gets some revenue -- from Google, of all places -- when Safari users search with Google. They won't get that revenue when Mac users search with Chrome.
Google needs to figure out how to make money from YouTube, and it looks like maximizing professional content on the site -- and not so much dogs on skateboards -- will be a help.
So Google is now working on a video rental service, which will compete directly with Apple's iTunes.
Potential consequences: Apple may be less willing to integrate YouTube into its products, such as its Apple TV set-top box, iPhone and iPod touch, and iMovie software.
Google Docs, Google's Web-based office apps suite, is mostly designed to disrupt Microsoft's Office cash cow.
But Apple has one of those Office rivals, too: iWork, its suite of word processing, spreadsheet, and presentation software.
This business isn't crucial to Apple. But its software products are some of its most profitable-per-dollar revenue sources. So it's certainly in no hurry to see its customers run away for free Google Docs.
For $100 a year, Apple's MobileMe offers email, photo and Web hosting space, calendar syncing, and more. But Google's Gmail, Google Calendar, Picasa, and other free products offer most of the same features for free.
And if Google is lucky, someone who heavily relies on Google services might consider buying a Google Android phone -- which has better built-in support for Google's mail and calendar services -- than an iPhone.
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