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August 9, 2010

Google/Apple War: What does it all mean

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For those who have been living in a cave, Google recently bought AdMob, the small but highly innovative mobile advertising company for the extremely inflated price of $750 Million. That is the gross national product of the country of Kiribati, a small country made up of a bunch of atolls. While AdMob hadn’t quite made anywhere around that amount of revenue, Google wanted to gobble it up before someone else did and to have a quick way to access the growing revenue stream available on Mobile Applicatications. Part of this strategy was to be able to access the significant population of IPHONE users. However, recently Apple came out with new developer rules that will prevent ADMob and Google Adsense from being displayed on iPhone applications… and thus a significant issue with ADMob’s revenue stream. However, perhaps things aren’t as they seem…

Let’s make this really clear, Apple is looking to break into the advertising and eventually search market. Google, as the all encompassing leader of search clearly dominates the market. However, they recently also decided to get into mobile market with the Google Android system, which while itself doesn’t make that much money for the company, the offshoots such as the product development, application development, google interfacing and even their own google nexus phone has been a significant success. In fact, according to most reputable reports, the open-source android phones are taking over as the dominant force in the market, pushing out Apple. Apple, ain’t happy about their market share being taken. They saw themselves as dominating the mobile space for a long time to come. Don’t forget also that Apple had actually wanted to buy ADMob, but the $750M price tag was way too high – they bought a competitor with just as much revenue and potential, it seems for a significantly lower price tag of $250M.

While some people might say this is a stab at Google for getting into “their business”, there is much more here than meets the eye. Apple has no reason to actually allow Google Adsense onto their applications – because they don’t make a single dollar from those ads. Since Apple is making their own system, they need to ensure that the only way to run advertising on the system is through them. It’s pretty damn simple – Google already has an extensive database of advertisers, and they would easily overshadow any attempt by Apple to compete with them even on their own platform. This wouldn’t fare very well for Apple, if in a year a report came out that not only was Google Android overtaking Apple iPhone, but that the predominate type of advertising on the IPHONE was actually Google.

What is strange about this mobile advertising war is the investment versus the actual possible revenue being made. Everyone is talking about mobile advertising on applications and application development as if it is the “end-all” of advertising and will take over advertising left and right. However, people ten years ago pushed application advertising and ad-supported applications as the method that would take over interactive advertising. Now it’s almost impossible to find any program that actually does this and the predominate type of advertising is in the browser.

I honestly think that this is a very possible future for mobile also. As mobile devices get bigger, as the web integrates with mobile more and more, there will be a growing seamless interaction between the two mediums. In fact, if you think about it, a great portion of the “internet” users are really “mobile” – laptops are a “mobile” device of sorts, and they have become smaller and smaller, while phone screens have become bigger and bigger. At some point in the near future they will meet in the middle and we will have laptop/netbooks that are nothing but combinations of mobile phones, laptops that do everything. Most people that I know who have android phones and iPhones spend quite a bit of their time, browsing the web using it as a “little computer” of sorts and see all the banner and other type of ads made specifically for the websites.

So, does this war really matter? Perhaps for the short term, but within a few years, I can’t see it will really matter except to corner a very small part of the marketshare. Mobile as separate entity, with its own features (mobile billing, mobile applications) will become part of the entire interactive, internet, web-process. No one actually believes that ADMob was worth $750M, but sees it as one chess piece in a greater strategy that both these companies have to dominate the web. This has little to do with “Mobile”.


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One Response to “Google/Apple War: What does it all mean

    avatar Diesel jeans says:

    Very much like your article!

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