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While the top five U.S. tech companies -- Apple, Google, Amazon, Microsoft and Facebook -- all have different core businesses, they often collide with each other in different areas. Apple's latest foray into search is a sign of intensifying competition among the tech giants in their core areas.
Since 2010, the social media giant Facebook has been trying to develop a better search engine. With the advantages brought by massive social information resources, it has become the world's second largest search engine after Google, and has obtained substantial search advertising revenue. And Google isn't sitting on its hands. The company struggled to launch a social network to challenge Facebook until it abandoned the idea five years ago.
Now, Apple is getting ready to try out the search service. The smartphone maker is crawling more of the web to build search indexes, putting some of its search results in front of iPhone users and hiring engineers to speed up the long and expensive effort.
The prospect of a return of the internet search wars raises an interesting question: Why hasn’t there been more competition between the biggest tech companies in the core markets that have defined them? And can regulators nudge them into more open rivalry?
The answer to the first question is that the leading consumer tech companies have been able to become some of the world’s most valuable concerns without needing to tread on each other’s toes too much. Another reason is that frontal attacks are expensive and often ends in failure. Microsoft, for example, invested billions of dollars in search and smartphones, but eventually gave them up. Beating an entrenched rival in tech by fighting on its home turf is usually a losing proposition.
Instead, the leading companies have thrived as partners and customers, supporting each other’s core platforms. Amazon has long been one of the biggest buyers of Google’s ads. Facebook and Apple have had an important symbiotic relationship since the early days of smartphones. After years of bitter fighting, Microsoft and Google patched things up a few years ago, always looking for common ground.
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But that has not stopped them from competing in other areas, especially in newer markets. Both Microsoft and Google are focused on productivity applications, and the huge cloud computing business has become a new area of intense competition between the two companies and Amazon.
Apple's interest in search suggests that the tech companies are starting to penetrate each other's core markets more deeply, and their size and ambitions have reached the point of involuntary conflict. All of this is driven by a common need to dominate the next generation of large computing platforms.
Apple and Facebook have also been on the path of conflict. When Facebook announced its plans this week for its cloud gaming service, it was claiming the right to own one of the most popular activities on smartphones. Notably, the company said the new service would not be immediately available on Apple's devices, accusing the latter of "controlling a very valuable resource."
At the same time, one of Amazon's fastest growing businesses is advertising, as it competes with Google for a better starting point every time someone starts looking for a product to buy online.
Regulators can help push things forward more quickly. The us government's antitrust complaint against Google last week points directly to its agreement with Apple to incorporate Google's search engine into the iPhone. It is crucial that Apple accelerate its search efforts to hedge against losing the deal. Where other companies have failed, Apple also has a better chance of succeeding against Google.
Three things in particular make it hard to compete with Google in search, including brands, eyeballs and data. Apple has strengths in all three areas.
Apple already has Siri in this area, and the company's name itself extends to services. As for eyeballs, keeping the default location on their devices as their own search engine would immediately generate a large number of users and avoid what the U.S. Department of Justice says gives the Google an unfair advantage. Starting with the latest version of iOS, Apple will collect data from billions of queries to help it make the results more relevant.
Google has a fourth advantage in search, but that could prove to be an even bigger stumbling block, at least for Apple shareholders: monetization. Generating more advertising revenue per search than any other company, Google has been able to funnel huge amounts of cash, to $30 billion last year, to many companies that put their services in a prominent position.
Google also has a strong incentive to keep its payments to Apple high enough to deter the iPhone maker itself from trying to enter the search space. But as Apple's intense interest in search suggests, things may finally be starting to change.
