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“With each battle, they pick up a different enemy,” he said. “They’ve made enemies of everyone from Apple to Microsoft to Rupert Murdoch. In theory, even with Microsoft, they would have been better off to partner than to battle them..”
The companies Google’s taking on aren’t exactly light weights. AT&T, Microsoft, Murdoch’s News Corp., and Apple all rank ahead of Google on Fortune’s 2009 Fortune 1000 list of America’s biggest companies. AT&T alone last year had close to six times the revenue and five times the profit of Google. Microsoft had close to three times the revenue and four times the profit of Google. Apple and Google are more evenly matched; Apple had about $11 billion more in revenue and $6 million more in profit than Google. Apple, with a market capitalization of $176.5 billion and Microsoft, with a market capitalization of $250.3 billion, both have higher market capitalizations than Google.
“Fights can be very expensive,” Enderle says. “It’s clearly something that youth doesn’t learn until later in its career and this is a young company run by relatively young people.”
But those young people may be onto something that’s worth the fights.
“First of all,” says Tim Bajarin, president of Campbell, California-based Creative Strategies, “Google doesn’t do anything that is not a key part of their strategic vision.”
The applications like word processing, the Chrome web browser, Android, and Google Voice, are all about creating an environment where consumers are comfortable, and in turn are served with the search advertising that is at the heart of Google’s business model.
“When you look at things like Android, you look at things like Google Voice, it’s all about their services being at the center of the cloud,” Bajarin says. “All of this, the front end, the back end and the browser are ways to tie back to content around the search ad link.”
And Google has already landed its first big Android fish. Motorola’s Droid phone—which will run on the Google Android 2 operating system--will be sold by Verizon Wireless and supported with that company’s biggest-ever marketing campaign, one aimed squarely at taking on the Apple iPhone. Google and Motorola said Wednesday the phone would also be the first to operate using navigation software from Google. That’s a direct challenge to GPS makers like Garmin and TomTom. And while the Motorola phone will be the first with the navigation software when it rolls out Nov. 6, other phones using the Google platform will also get the software later.
That wasn’t the only move made by Google this week. The company introduced its application to search for music on the web. It’s an indirect shot at Apple, since it won’t compete directly with iTunes, but will direct users to iTunes’ competitors on the web.
But it’s the phones and other mobile devices that are a key to Google’s future growth, and the space where competition with Apple, especially, could get very fierce.
A group of Morgan Stanley analysts led by tech guru Mary Meeker write in their latest report on Google: “With Google’s free and highly-customizable policy for Android, we could see multitudes of Android-based devices (smart phones, feature phones, media players, netbooks) and we would not be surprised to see Android’s usage share (and Google’s monetization opportunities from associated services) continue to rise further.” Meeker expects shipments of mobile devices to outpace personal computer shipments by 2012.
Bajarin said it could turn out to be a very interesting battle between the iPhone and Android. That’s because both Google and Apple understand they are delivering an entire experience. But Apple has a different model.
Apple has made micropayments for applications on the iPhone and iTunes a big part of their revenue, while advertising is not as key. And it has a big lead on Google going in. “People are betting with their wallets,” on the iPhone.
Google has its work cut out for it. Then again, it’s hard to bet against a company that in 11 short years has come to dominate the web.
Kent Bernhard Jr. is News Editor of Portfolio.com
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