Google and Apple as mobile co-belligerents

The relationship between Google and Apple is an interesting one. It’s enticing to declare them “at war” with one another, but that type of relationship does not account for the collaboration and partnerships they enjoy. To wit:

• Google pays Apple for default Search placement on Safari. This means that Google treats Apple as a distributor.
• We can presume that there is a deal between the two over Gmail and Maps on the iPhone as well.
• AdMob is available on iOS without hindrance.

The business relationships between the two companies are self-evident. However, I would suggest that there are more important strategic reasons why Google and Apple are in fact implicitly collaborating against a common goal.

The concept of “co-belligerence” may describe the relationship: The state of fighting against a common adversary without a formal alliance and without a guarantee of non-agression against each other.

The common adversary is the telecom industry. It’s an industry being undermined by the technological change of mobile computing and its profits are up for grabs. Apple and Google have different approaches in implementing this change but in the end they dismantle and absorb profits from the same target.

They are also benefiting each other. Apple benefits Google by creating user experience innovations which Google can rapidly copy. Google benefits Apple by increasing smartphone consumption–educating markets to the value of mobile computing and crippling the profitability (and thus the ability to innovate) of Apple’s direct competitors.

If I may belabor the point, it’s like the concept of fast food. One company invents the fast food franchise process, another popularizes it and creates demand. Finally, the innovator comes in with a premium brand to split the market.

Apple innovates in product innovation with Google as a fast follower. Google then innovates on distribution and penetration enabling Apple to follow with a skimming strategy.

The end result is a more rapid and thorough profit evaporation from incumbents with corresponding condensation around the entrants.

To visualize it further, consider what the market would look like if one or the other of the co-belligerents was not participating. Could Google have developed their software without the iPhone as a reference design? At the same time, as Android eliminates the opportunity for alternative software investments by competitors[1] could Apple have remained the only integrated vendor with a uniquely high profit margin?

Of course, this is not a guarantee of success. New platforms may still take root and integration by HP may actually pan out. But the point I’m trying to make is that, for the time being, Google and Apple are not so much adversaries as comfortably busy winning against a rather weak common target.

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Notes:

1. Consider how hard it is for OEMs to justify investing in their own OS post-Android. Consider the desperate status of Nokia who abandoned a broad ecosystem and the paucity of alternatives.