Friday, September 22, 2006

Apple/Google Partnership

We've seen this one before, right? Two up and coming companies (or in this case one that is regaining some of its luster from the 1980's) teaming up to take on the the titan, Microsoft. More than a decade ago, Sun and Oracle, led by Microsoft-loathing Scott McNealy and Larry Ellison, respectively, teamed up to take on the behemoth. Today, both are shadows of their former selves, yet Microsoft marches on, barely scathed from the onslaught.

And now Apple and Google's flirting have them headed in a direction to attempt to finish what McNealy and Ellison could not. Eric Schmidt joined Google's board about a month ago, and the companies recently entered talks - the pieces are in motion. The topic has been a hot one in the Valley - Om, Robert Young (who writes for GigaOm), and Michael Arrington (of Techcrunch fame for you east coasters who don't know...), to name a few, have all blogged about it recently.

Their general consensus has been positive - Om warned competition about the companies' synergy in the media distribution market, Young pointed out that Google's internet-platform focus fits nicely with Apple's hardware/software core competency, and Arrington mentioned Google Video on Apple's upcoming iTV as an intriguing possibility.

My take on it isn't so rosy, and it's not just because I love flying in the face of conventional wisdom (well ok, maybe it is a little bit...).

To start off, synergy in media distribution (i.e. watching a movie on Google Video and then buying it through iTunes, etc.) breaks down when the market is thoroughly examined. The hallmark of the online media industry is razor thin margins. Thus, though partnering could reach a wider audience, in the end, vertical integration gives the most potential for profits. For example, if SoapBox and Zune both take off, the two could be linked to increase video sales for Microsoft. It's not a surefire strategy, but it hints that perhaps Apple would be better off not having to share profits with Google and attempting to vertically integrate rather than partnering. Still, Om astutely points out that there are certain overlaps between Google's search capabilities and iTunes that make a potential partnership valuable (linking song searches to buying songs, for example). So maybe A/G can add some real value this way.

But the real groundbreaking potential of the partnership lies in what Young delved into - aiming a dagger at Microsoft's heart, Windows - the Holy Grail that McNealy and Ellison chased for years. Making a pretty penny of media would be great, but taking down the juggernaut has to be the ultimate goal. But how? Young argues Apple's hardware/software approach juxtaposes nicely with Google's internet platform applications.

And to an extent, he's right. As he states, the next step in computing is the bridge. The future is headed towards an online OS and the "dummy terminal" dream that has launched and failed so many times. Some day, our computers will be simple ports from which we can access all of our data, instantly, via the web. But because technology has not yet brought us to that point, today we must aim for a hybrid of local and online apps, a set of goals that seemingly aligns nicely with Apple's and Google's core competencies.

So A/G could potentially join forces to bring us that bridge. Apple provides the hardware and a sweet OS, while Google keeps churning out web-based applications. A close partnership could lead to well-knit integration that adds seriously value in terms of UI.

Of course (and here is where I take the position that makes you scratch your head and wonder if I'm crazy), I just don't think they will win. Hear me out. Yes, they can build some pretty cool stuff and yes, they have a bunch of very smart people working away at it. But here's the dirty little secret that's slowly getting out: Gates is one step ahead. Boss man Bill is at it again - he's realized his weakness, as great leaders and minds often do, and rectified it via the creation of Live, Microsoft's next gen series of web applications.

And to be blunt, Live is awesome. Sick. Dope. Ridic. Even the Microsoft haters admit it. Microsoft was vulnerable, sure, but the key word in that statement is was. The core of the A/G partnership would be the integration of desktop features with web applications (the so-called "webtop"). For example, there could be an icons on the desktop that open Google applications (spreadsheet, maps, etc.) and other tie-ins between offline and online programs.

But Microsoft beat them to it. If they've got half a brain (admittedly questionable as of late), the boys from Redmond (thats Microsoft you east coasters) will integrate Vista (their new OS) with their Live applications.

At that point, A/G's attempt begins to smell a lot like the one from a decade ago (or two decades ago with Mac vs. Windows) - too little, too late. I can't believe I'm saying this, but I think Microsoft has them outfoxed. Furthermore, Microsoft has a clear advantage in terms of integration between the OS/desktop and web apps because it owns both, whereas Apple and Google are two separate companies who will have to collaborate. To top it off, a serious partnership would be somewhat contingent on Apple regaining market share, and for all the hype they've been getting recently, they still own an extremely small segment of the computer industry.

My conclusion - the A/G partnership is a nice thought, but they will suffer the same fate as Sun and Oracle. Many have tried to dethrone Gates and Co., but none of have succeeded. Media distribution could be a cool card trick, but attempts at winning the OS/platform war will fail.

Then again, Jobs should be used to it.


  1. Gates and Co. have dethroned themselves with their recent stream of failures over the years. Among the many differences in the computing world between the failure of Sun and Oracle (and differences there are many) is that Microsoft was a lean, focused, frightening giant, not the listless headless money-hemorrhaging monster it is today.

    Microsoft is losing this time.

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