All Sorts of Things

Random posts on all sorts of things designed to inform and provoke.

Technology: Google continues its Advance on Apple’s valuable Mobile Customers

imagesSales of Apple’s iPhone5 do not seem to have matched the company’s expectations forcing it to significantly reduce orders of components from its suppliers and hurting its stock price and market image. On an even worse note, the research firm IFI recently reported that Google received more patents than Apple for the first time in 2012, as the search giant’s patent count increased by 170 percent compared to 68 percent for the Cupertino-based corporation. This latter development does not bode well for a company that revitalized the mobile marketplace with the iPod, iPhone, and iPad products because it means that its competitor is generating more ideas and in the mobile business ideas are worth everything.

Some analysts have noted that Apple’s advantage does not lie in the number of patents but in the company’s extraordinary ability to monetize the apps. While conceding this point, my counter-argument is that a company in the mobile apps business does not make the majority of its revenue from the apps but from the information that they generate. In that sense, Apple remains at a distinct disadvantage since it does not develop apps for multiple operating systems (OS) thereby limiting the company’s potential while Google is able to resource every individual that uses its apps regardless of their mobile platform.

The most recent example of this assessment comes from Apple’s fiasco with its mapping application: Replacing Google’s popular mapping software with one developed in-house and filled with glitches gave the iPhone maker a huge black eye, forcing the company’s CEO to publicly apologize. In the meantime, Google developed a new mapping app for the iPhone, which, when released in December, became the most downloaded program for the iPhone for that month.

Apple should be concerned about Google’s iPhone development unit that has developed a YouTube app, an iPhone version of the Chrome browser and Gmail service. These applications allow the owner of the Android OS to generate revenue from the ads that appear in those apps and, more importantly, collect valuable user data thereby allowing it to better target new and existing consumers with customized user experiences. They also allow the company to develop a connection with Apple’s customers who have high disposable incomes and convert them into its valuable and loyal patrons.

Apple’s response is to expand its market as evidenced by CEO Cook’s recent visits to China and courting of China Mobile, Ltd. This is a shrewd move as China is a growing market, there is some animosity between Beijing and Google, and Apple’s growth there has been limited. If Cook is able to sign an agreement with China Mobile, its consumer base may increase by hundreds of millions – the phone company has 700 million customers – allow it to make significant inroads into a heretofore relatively untapped market. The key, obviously, will be compliance with the conditions imposed not just by China Mobile but by the Chinese government and that may dent the Apple’s global image.

There is no doubt that Apple is a design-based company and no one can argue with the high quality of its products. However, it is also true that companies that are focused on a niche market have, by definition, a glass ceiling. While it has been unable – or unwilling – to break that ceiling, Apple has smartly expanded the width of the room. The question facing the company now is whether it has reached the limit of that expansion and if it will be forced to finally shatter the glass in which case those shards may end up hurting its image with its loyal followers.

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2 comments on “Technology: Google continues its Advance on Apple’s valuable Mobile Customers

  1. stanito
    January 18, 2013

    I had a chance a month ago to buy either Iphone 5 or Samsung GSIII, I went for the Samsung honestly. Iphone 5 is nothing extraordinary.
    Apart for the legal battle between Apple and Samsung, I do believe Samsung exploited the apps and features much better than Apple.

    • AHB
      January 18, 2013

      As a first-time smart phone user, I went with Apple because of the quality control of their app store. Having said that, and now as someone who knows the ins and outs of the different systems, I have to admit that my next upgrade won’t be an iPhone.

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This entry was posted on January 14, 2013 by in Global Economy and tagged , , , , , , .
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