NEW YORK (AdAge.com) -- What's the one common denominator that could prompt rivals Apple and Microsoft to strike a deal? An increasingly shared enemy: Google.
It's not so much that Cupertino, Calif.-based Apple has suddenly decided to be best friends with its foe up in Redmond, Wash.; rather, Apple is increasingly eyeing Google as a competitor and, as a result, is expected to push Google search off the beloved iPhone in favor of an exclusive deal with Microsoft's Bing.
The imminent partnership with Bing is an indication of just how strongly Apple views Google as its competition.
It all started in 2007, when Google announced it was developing the mobile-phone operating system Android, months after the game-changing iPhone, which is powered by Apple's own operating system, hit shelves. That announcement made clear Google intended to chip away at Apple's growth business: mobile.
More recently, on Jan. 5, each Silicon Valley giant took another deliberate step into the other's territory: Google launched the Nexus One, its first mobile handset and a threat to the iPhone, and Apple announced it was getting into the advertising business by acquiring mobile-ad network Quattro Wireless. Though the deal was rumored to have closed in 2009 after Google outbid the computer maker on its first-choice ad network, AdMob, there was talk that Apple waited to announce the deal in order to steal some thunder from Google's Nexus One. Apple had reportedly been vying for AdMob, a leader in mobile advertising, but at the 11th hour, Google turned up with a whopping $750 million in stock -- almost double Apple's alleged price -- and locked up the acquisition in November.
The relationship between the two companies hasn't always been contentious. In 2006, Google Chairman-CEO Eric Schmidt was invited to sit on Apple's board. By 2009, Apple rejected Google Voice apps for the iPhone, and, in August, Mr. Schmidt left Apple's board.
Ad Age dissected where exactly the two giants of Silicon Valley compete.
First-month sales: 600,000**
Tagline: "There's an app for that"
Price: iPhone 3GS $199-$299; iPhone 3G $99
Sold: Online and in Apple and AT&T retail locations
The effect: The iPhone, with 42 million units sold worldwide since its launch, has undoubtedly accelerated smartphone adoption in the U.S. What's more, it's created an entirely new content economy with apps. Incidentally, the iPhone is great for Google -- with more consumers on the web using their phones, that's more eyeballs for Google's search ads. Right now, Google search and maps are default on iPhones. For Apple, the iPhone is a direct extension of the company's existing product business of computers, laptops and iPods.
Distribution: The iPhone OS runs on iPhones and iPod Touchs worldwide and will soon be on Apple's new iPad. The iPhone OS is only second in U.S. smartphone market share to Research in Motion, which makes BlackBerry.
Number of apps: More than 140,000
Number of app downloads: More than 3 billion
Developers: More than 120,000
Gross revenue for 2009: $20 million*
Market share: 7%*
Leadership: Quattro CEO Andy Miller is now VP-mobile advertising for Apple, reporting directly to Steve Jobs.
Market position: Quattro specializes in rich media and brand mobile ads. Generally, Quattro ads demand a higher cost-per-click on more sophisticated publishers, like on a media company's app.
Quattro marks Apple's first foray into advertising. Why would it want to get into the service business? To keep the developers that create the apps that sell iPhones happy. "Apple can now provide 360-degree services for its developers," said Nihal Mehta, CEO of local-search and networking app Buzzd. "Developers have an easy way to serve ads and monetize their apps without having to maintain relationships with ad networks."
Distribution: Safari comes pre-installed on all Apple devices, from Macs to iPhones. It can also be downloaded for Windows machines. Before Apple launched Safari in 2003, Microsoft's Internet Explorer and Netscape were the pre-loaded web browsers on Apple machines. Safari curbed Apple's dependence on Microsoft for web browsing.
First-month sales: 80,000**
Launch tagline: "Web meets phone"
Price: $179.99 with T-Mobile 2-year contract; $529.99 for unlocked phone
Sold: Only online
Sales of Google's first-ever handset have been slow, and might be a symptom of Nexus's online-only marketing and distribution strategy. Verizon's Droid, the first Google-branded handset, sold 535,000 handsets in its first month.**
The effect: With Nexus One, Google is trying to diversify its business beyond search, a paradigm of the wired web that may be rendered obsolete if apps become the primary discovery tool on phones. Google CEO Eric Schmidt has said the mobile web is his company's best opportunity for growth. A Google handset is seen as a way to up appeal and adoption of Android, as well as a way to destabilize Apple's leadership in mobile.
Distribution: Android has the smallest U.S. smartphone penetration, but the strongest growth in the last quarter of 2009; it's now on more than 12 devices in 26 countries with 32 carriers in 19 different languages. It's free and open-source, which means anyone can take Android and add code or download it to create a mobile device without restrictions. Android is Google's strategy for getting a toehold on lots of phones in lots of places.
Number of apps: more than 20,000
Number of downloads: Not disclosed
Number of developers: "Thousands," according to a Google spokeswoman.
Gross revenue for 2009: $31 million*
Market share: 11%*
Leadership: AdMob CEO Omar Hamoui founded the company while in the MBA program at The Wharton School at the University of Pennsylvania.
Market position: AbMob is one of the biggest players in mobile advertising; it has more inventory and a self-service, high-volume model that would dovetail nicely with Google's AdSense. "AdMob was born to be acquired by Google," said one mobile-ad executive. Initially, AdMob built its business on cost-per-click campaigns, but has since expanded to premium CPM for brand ads.
The Federal Trade Commission is still reviewing the acquisition. The deal, with its exorbitant price tag -- triple what industry bankers and execs had projected -- makes Google the mobile-ad leader with 21% mobile search market share.*
Google launched Chrome in late 2008 to make browsing faster, the idea being that it would help internet users search more and, presumably, click Google ads more. Google is in conversations with various PC manufacturers to get Chrome pre-installed on machines; some Sony computers already ship with Chrome.
**Sales data projected by app analytics firm Flurry.
***Market Share data is according to ComScore.
****According to Net Applications, January 2010.