Verizon & Google Start to Tip the Scales Against Apple

Great news for Apple, with the 70% surge in quarterly earnings. Things look mighty good, at least in the near-term. On the other hand Google's prudent long-term plan in entering the wireless market with a competing mobile platform to better enable connectivity and search capabilities, and oddly not to sell smartphones, is proving to be a winning strategy. After all Google's core competency is search as well as displaying relevant ads, not smartphones. With the increasing popularity of Android based phones, Google is reaping huge long-term rewards. Just recently Apple announced that the iPad will be sold in Verizon stores, and that the iPhone will be sold on Verizon's network next year. (On a side note, some suspect the iPhone will only be released for Verizon's 3G CDMA network. But I'll wager a humble bet with anyone that it will be released for their new 4G GSM network as well. More to follow via my tweets at grochejr.) Why is this significant and how is this news tipping the scales against Apple?

Some may argue that moving their products to work on the Verizon network was all in Apple's eventual and original plan. Why would Apple choose to purposely stay exclusively on AT&T's network? I'll tell you why. Apple, I suspect, was leveraging consumer demand for their iPhone in their negotiations with wireless providers, and hoping to do the same with the iPad. Why? Some quick history first...

Back prior to the launch of the iPhone, AT&T was quick to bow to the whims of Apple and agree to give them a considerable chunk from the monthly data plan fees they charge consumers. All for the temporary exclusivity to sell the iPhone and gain more of the untapped smartphone market share. Apple felt, and probably still does, that the demand for their products will be so great, with the threat of having tons of customers switching wireless providers, that eventually the other telecommunication companies would follow suit and agree to the terms of sharing the profits from their monthly consumer data plans. This would mean huge recurring monthly revenues for Apple that far beat the old one-time hardware sales model. This same sales model is probably playing a significant role in Apple's quarterly earnings announcement yesterday. But the sudden news about the iPad being sold in Verizon stores this fall season of 2010 points to the fact that things didn't go exactly according to plan for Apple.

It's rumored Verizon, with its larger customer base, was first approached by Apple but declined to share the data plan fees. And like a scorned lover, with the foresight of potentially losing market share to AT&T, Verizon made a concerted effort to combat AT&T and Apple. By partnering with Google, HTC, Motorola, as well as other handset makers, true rival mobile touchscreens arose to challenge the iPhone. They then employed their strategy to heavily market and promote the branded "Droid" phones, thanks to Lucas Arts. The Droid phones of course were based on the Android mobile operating system (OS)/platform by Google. And as sales have shown, especially due to Verizon's reputation for a more reliable network than AT&T, consumers were and still are flocking to Droid phones. [Update: Verizon has done well for itself as a result.]

Given strong demand and competition that Android based phones have shown, and Verizon completely keeping its revenues from their monthly data plan fees, perhaps Apple sought to make a peace offering. They no longer can afford to ignore the combined Google-Verizon threat. Therefore Apple is now warming relations with Verizon and them giving an opportunity to sell the iPad. Granted it will only be WiFi enabled, but it will work with Verizon hotspots and mobile MiFis. The 3G enabled iPad will be reserved for AT&T stores, so as to not to let AT&T feel Apple has been ungrateful to them.

In making the recent iPad-Verizon announcement, Apple acknowledges the (Google) Android-Verizon threat. More than anything else, the Android-based touchscreen phones powered by Verizon's network and strong customer base has shaken Apple to the point where they don't necessarily see the scales tipped in their favor any longer. Let's be perfectly honest, selling the iPad in Verizon stores isn't really a peace offering. Given the strong fight Droid phones have given the iPhone, Apple is definitely seeking to preemptively stem the flow of sales to the upcoming Android Tablet by Google and Verizon, slated to come out early next year.

Yes, there are gaps in the user experience on Android phones unlike the superior ones found on the iPhone. And yes, Google isn't making this a priority since they are focused primarily on their core competency, search. This is explanation given by Apple for their onerous and stringent rules for authorizing apps that can be sold on their platform. The goal, to ensure quality with the best (simple) user experience. But with the open platform by Google, the marketplace can provide opportunities for companies to bring about these efficiencies on their own. Enter Amazon, which has now announced they will be publishing their own controlled app store for Android based systems where the quality control issues can be addressed.

The small headline here is that the previously viewed invincible iPhone could be at risk for becoming commonplace. An Apple monopoly on touchscreen devices seems unlikely now. The big news is that due to this fierce competition on pricing, revenue, branding, and innovation, the consumer ultimately wins.

Innovation vs Privacy on the Battlefield between Google & Facebook

Innovation and Privacy are at war on the battlefield where the machinations of both Google and Facebook are at work. These two companies have dynamic competitive opportunities. On the one hand, to stay competitive and profitable both companies need to continue the innovation spawned from their existing platforms and products. On the other, how do they continue to balance user privacy successfully. Facebook has had several close-calls with the pushing of the privacy envelope. While suffering some user backlash, they've been managing it well thus far. Google risks being left competitively behind and losing momentum if it doesn't more aggressively look to use its super rich user data (a combination of Gmail, Google Docs, Android OS, and search data).

A simple truth that challenges Google's supremacy: web visitors funneled from Facebook spend an average 20% longer on the site than from search engines like Google. The combination of Facebook's profiles and networks of friends provides rich user data that makes advertising more relevant than based on search terms used on search engines. This could be considered a close equivalent to the phrase: "virtual word of mouth." With Facebook nipping at their heels, Google needs to consider how to leverage user tracking data profitably without committing privacy evils.

In one Google example they are combining the power of its Android mobile operating system with the synergies of Gmail, contacts synchronizations, and Google maps that can help lead to more relevant ads. In a similar example Facebook is leveraging it's "I Like" feature on web sites and the discerning tastes of users gained from the profiles and social interactions on their platform. Both companies are developing powerful tools to better sell targeted ads for advertisers. The problem is can they continue to, as Google unofficially says, "do no harm."

Ultimately I believe that some privacy will be forsaken in the name of better customer value - through innovation. It's the price that the public will probably have to pay for "free" services. Now both Google and Facebook will not outright eliminate privacy, as it would risk corporate suicide. But to continue to be competitive and profitable, I suspect some of that privacy will be interpreted and handled differently in the name of innovation.

BEWARE! If you wish to keep complete anonymity, then consider other providers or only share what you don't mind to have publicly known (even as there are privacy controls in place today, they are not 100% fool-proof).

The public will find it difficult to stymie this web/mobile trend of leveraging innovative synergies to provide rich customer value over privacy. Until a reasonable and just as innovative fee-based service appears that can serve as a counter to what may be perceived as violations on privacy, consumers will have little choice. And as a result of this a potential future trend may materialize for the paying for such services when compared to, as I reported in an earlier post, paid-for content/news from media organizations (like the Rupert Mudroch News Corp model).

In the Digital Age: Paying for Quality Independent News

The Wall Street Journal published Rupert Murdoch's December 1st remarks to the Federal Trade Commission's workshop on journalism and the Internet in today's paper. It's clear Murdoch is running headstrong through new frontier. He stated that there are two principles media companies need to come to grips with:

• Provide the people with news they want.

• Quality content is NOT free.

There have been some rumblings the past couple of weeks around the topic of paying for quality news content online. It was recently reported that News Corp has been in talks with Microsoft in making all their online news content available on exclusively on Microsoft's Bing search engine, for a price. This leaves Google and other search engines out in the cold. Perhaps a bold move by Microsoft to disrupt Google's dominance by taking away some prevalent and respected news content. News Corp owns a slew of media outlets, such as: The Wall Street Journal, The New York Post, The Times of London, the The Sun, etc.

In a move to appease the likely move by more media giants, and avoid legal wrangling, Google has just recently made it possible for companies to avoid turning up on their search engine by embedding some special tags in their web pages.

In my opinion, Murdoch delivered a compelling argument in his remarks before the Federal Trade Commission.

• The experiment with online advertising is not bringing in the revenue that media companies have been looking for, and quite frankly need to sustain the independent and quality content being delivered.

• People will only pay for content if they believe that they're receiving value. With this, media companies can support their business model to deliver this quality content to the people.

• The need to protect and recognize the professional investments of time, effort, and resources of distinguished journalists to provide this quality.

Without what Murdoch is proposing, think of the alternative. Unable to manage a profitable business model, more and more print media are closing their offices. There are several reasons for this, but part of it has to do with trend towards digital media. Without reputable and independent media sources to provide quality content, it will be difficult to discern what digital news is worth noting and listening to in the massive sea of the web. Just search the blogosphere. You won't need to search too far to find a ton of misinformation being spewed on there today. Wikipedia has already had trouble keeping their entries clean, not to mention maintaining incentives for volunteer contributors to continue to contribute their content.

To stay ahead of the technology curve, News Corp and other media outlets are also pursuing an innovative mobile strategy to provide their print and televised content on any number of mobile devices. (I plan on following up on the potential impact of this for the Amazon's Kindle, Barnes & Noble's Nook, e-readers, Blackberrys, iPhones, etc., in another posting.) This strategy I believe will be the catalyst for these media moguls to find the balance between a sustainable and profitable business model, and delivering independent quality content to customers at a modest price.

To read the WSJ's article on Rupert Murdoch's remarks to the Federal Trade Commission on December 1st, click here.

Gain Market Share & Early Adopters of Technology by Being Free

Students at universities all across the country have been complaining that their inboxes are too small for the tsunami of emails that they receive on a daily basis. As a result, many universities have been outsourcing email services to companies such as Google and Microsoft. Most entrepreneurs and businesses would see a profitable business opportunity to charge at least small fee for such services to universities, just as several already do for companies. The interesting thing is that Google and Microsoft charge nothing to the universities for email services.

Universities benefit in cost savings by avoiding costly equipment upgrades/maintenance and number of employees managing information technology services. Also students' satisfaction with a university's outsourced technology services, in this case email, dramatically increased.

So what's in it for Google and Microsoft? College students are generally early adopters of new technology. The idea is to gain the participation and feedback of students for other web services, beyond email, being developed and deployed by Google and Microsoft. The hope is to gain early acceptance and adoption for those products/services and have them become mainstream. This approach doesn't only apply to companies following a Web 2.0 model. Chris Anderson talks about such strategies leveraged by cutting edge companies in his book, "Free: The Future of a Radical Price."

So...got a new idea? Desire early and free feedback to perfect your product or service? Want to quickly gain market share? Then consider rushing out to offer it for free to the students of your nearest university before your competitors do. Come to think of it, didn't Facebook start off as a college social networking site?

Want to know more? Click here to read the Time news article on free web services for students at universities.