Over the last years Google Inc (NASDAQ:GOOG) has been strengthening its competitive position in mobile to an amazing degree. Not only has the company´s Android operating system reached a market share of more than 75% in global smartphone sales, but Google has also been gaining ground in iOS with its high quality apps and services that are becoming increasingly important for users.
Be it via Android or iOS, Google is in the right place to benefit from the mobile revolution.
Frenemies
Google Inc (NASDAQ:GOOG) has taken a “frenemies” approach to war against Apple Inc. (NASDAQ:AAPL) for mobile dominance. The online search giant allows iOS users to have access to official Google apps like Gmail, YouTube and Google Maps among many others. These applications are among the most popular and demanded in the iOS ecosystem, and in some cases the iOS version of the app is even better than the Android one.
Apple doesn´t reciprocate, the company doesn´t share its apps with other manufacturers, so Android users cannot use apps like Siri or Facetime. Needless to say, this gives Apple a considerable advantage versus its competitors when it comes to ecosystem depth.
If you like Google Inc (NASDAQ:GOOG) Maps, you can choose either an iPhone or a Samsung smartphone, but those who enjoy Facetime or Siri need to stay with Apple Inc. (NASDAQ:AAPL) in order to have access to the official application.
What matters to Google is to make sure that everyone is using its services applications so the company can monetize them via advertising, that´s why the company builds high quality apps for Apple Inc. (NASDAQ:AAPL).
Besides, this helps keep Samsung´s ambitions at bay. According to The Wall Sreet Journal, nearly 40% of all gadgets running Android are made by Samsung, so Google Inc (NASDAQ:GOOG) fears that the Korean manufacturer may demand a greater share of the online advertising revenue that Google generates from those devices if it continues gaining participation in the middle term.
By providing high quality apps for iOS – hence strengthening Apple´s competitive position – and also having the possibility to go deeper into hardware after the Motorola Mobility acquisition, Google has some valuable tools to keep its dependency on Samsung under control.
Big money
Not only that, the Apple customer is particularly valuable in economic terms too. According to data from several sources, iOS users are more likely to engage in activities like online shopping or watching streaming video. Maybe it’s due to the fact that Apple Inc. (NASDAQ:AAPL) has a customer base with higher average income levels, or perhaps it has to do with design and user experience. Regardless of the causes, usability tends to be higher in iOS products.
Web browsing, watching video or shopping online are activities which are more frequent in iPhones and iPads than on any other device. In fact, Google Inc (NASDAQ:GOOG) is believed to make more money on iOS devices than on Android products, so it´s no wonder that the company makes its best effort to deliver the best possible apps for Apple users.
Gaining strength
And it looks like Google will be making even more money from Apple devices in the future; the company has recently released an update to its Gmail for iOS application that allows users to follow links directly to the Chrome browser, the YouTube application, or Google Maps.
Until these recent changes, links to Maps and other Google utilities have directed users to Apple Inc. (NASDAQ:AAPL)´s Safari browser or to applications like Apple Maps rather than to the respective Google programs. The company has also rolled out an API that lets iOS developers integrate Chrome with their apps. Google Inc (NASDAQ:GOOG) is extending its influence inside iOS and allowing users to remain within the company´s own ecosystem even when using an Apple device.
In another move in the same direction, Google has also released its Google Now app for iOS. Google´s well reviewed digital assistant has proven to be a serious challenge to Siri, and it also competes against the Safari based Google search, which has been quite profitable for Apple over the last years.
Morgan Stanley estimates that Google paid Apple Inc. (NASDAQ:AAPL) $701 million in traffic acquisition costs last year in exchange for being the default search engine on iOS, a sum which could reach $877 million this year and 1.1 billion in 2014 according to the bank´s calculations.
Building and strengthening its ecosystem inside iOS could save Google Inc (NASDAQ:GOOG) some money in traffic acquisition over the next years; and higher quality also means more usage and increased revenue for Google too.
Besides, the strategic implications could be even more important than the economic ones in the middle and long term: Google is proving to device manufacturers and to users of both Android and iOS that the company is almost irreplaceable when it comes to critical functions like mail, web browsing, maps and video among others.
The company is simply better than the competition, and by being better it´s becoming bigger and more dominant, this is great news for investors.
Bottom line
Android is a remarkable success, and Google is also gaining strength in iOS by consolidating and integrating its own applications inside Apple products. When it comes to making money from mobile advertising over the following years, Google could hardly be in a better position.
Andrés Cardenal owns shares of Apple and Google. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google.
The article Google´s Strength in Mobile Is Amazing originally appeared on Fool.com.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
