For the first time in ages, Google Inc (NASDAQ:GOOG) is striking back at Yahoo! Inc. (NASDAQ:YAHOO). In a move mirroring Yahoo! Inc. (NASDAQ:YAHOO)’s recent purchase of news summarization app Summly for $30 million, Google Inc (NASDAQ:GOOG) also purchased its own news summarization app, Wavii, for roughly the same price.
Summing up the news
News summarization apps, such as Summly and Wavii, aggregate news stories from various websites, then summarize them into bite-sized pieces through a special algorithm. This makes them ideal for mobile devices. Meanwhile, Apple Inc. (NASDAQ:AAPL) expressed interest in acquiring Summly’s rival, Wavii, to be incorporated into its voice-activated personal assistant, Siri.
These two developments apparently made Google nervous, so it reportedly purchased Seattle-based Wavii for over $30 million in cash. Whether or not this was a calculated decision or a knee-jerk reaction to Yahoo! Inc. (NASDAQ:YAHOO) and Apple’s recent actions is unclear. Google already has news aggregating apps, such as Google Currents and Google News, so the company may have simply taken Wavii off the market to keep it out of its rivals’ hands.
Wavii, founded by Adrian Aoun, has some big backers. PayPal’s co-founder Max Levchin, former Facebook executive Dave Morin and former Microsoft dealmaker Fritz Lanman were some of the company’s initial investors. Both Summly and Wavii have substantially changed the way mobile users consume news stories, making them viable threats to Yahoo! Inc. (NASDAQ:YAHOO)and Google, which both own highly visited, customizable news sites.
Yet Google, which owns its own mobile operating system, should have a much easier time integrating Wavii into its operations than Yahoo! Inc. (NASDAQ:YAHOO), on the other hand, needs a bigger partner to help it pull together all these mobile apps that it has been collecting over the past few months.
Could that ally be Apple?
The enemy of my enemy is my pal
It’s no secret that there’s a lot of animosity between Apple and Google. Much of that tension stems from Google’s industry-altering Android operating system, which the late Steve Jobs vowed to go to “thermonuclear war” over. Jobs and many Apple fans saw Android as an inferior clone of the iOS interface that made Apple’s iPhones and iPads so popular. However, that ‘clone’ system united a fragmented hardware market, and gave birth to Apple’s nemesis, Samsung.
Ever since that “betrayal,” made more acrimonious by the fact that former Google CEO Eric Schmidt was once a director on Apple’s board, Apple has been trying to rid itself of Google’s omnipresent services. Apple attempted to limit access to YouTube and Gmail by discontinuing their native apps, and it rolled out the much-maligned Apple Maps to replace Google Maps. In China, Apple chose Baidu.com, Inc. (ADR) (NASDAQ:BIDU) as its primary iOS search engine instead of Google. However, these efforts have made minimal impact on Google’s presence on iOS devices, since Google simply took app creation into its own hands.
Yahoo!, on the other hand, needs a major ally to boost its presence in the mobile arena. In an earlier article, I mentioned that many of Marissa Mayer’s recent acqui-hires and acquisitions are aimed at creating a Yahoo! ecosystem to rival Google’s. Since Mayer took the helm last July, Yahoo! has acquired recommendation apps similar to Yelp Inc (NYSE:YELP) and Open Table, social sharing apps similar to Pinterest, a video call app, and Summly. These are all pieces of a puzzle that I believe Mayer intends to wrap together in a single mobile platform that will replace Yahoo!’s aging mobile apps. I believe that Apple could be the ally that Yahoo! needs to help its apps achieve relevance with mobile users again.
Several weeks ago, The Wall Street Journal reported that Apple was considering adding more Yahoo!-branded apps to the iPhone as default apps. Two of Yahoo!’s mobile apps, ‘Stocks’ and ‘Weather,’ are currently available for all iOS devices. Some data from Yahoo!’s sites, such as sports stats, are accessed by Apple’s Siri on a regular basis. Some investors believe that Siri’s search capabilities, which bypass search engines like Google, could help Apple eventually achieve independence from Google’s web search apps.
Yahoo! is also the least threatening choice for Apple to partner up with, since the other major players – Google, Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT) – all compete with Apple through mobile apps, software and hardware. Yahoo!, on the other hand, simply wants to make mobile apps that can boost its profile and mobile ad revenue.
Too many strings attached
But before Yahoo! investors start celebrating in the belief that Apple will start offering a Yahoo!-based mobile ecosystem on all iOS devices, there are some serious hurdles that stand in the way of a deal.
First and foremost, Apple still has a long-standing partnership with Google to use the latter’s web search app on its iOS devices, and that doesn’t look to change anytime soon. Meanwhile, Microsoft’s Bing search engine actually handles Yahoo!’s search results, as part of a ten-year deal struck in 2009. Microsoft is relying heavily on Nokia Corporation (ADR) (NYSE:NOK)’s Windows Phone devices to carve out a niche in the mobile market, so it is unlikely to allow Yahoo! to plaster mobile search apps across Apple’s iPhones.
The Foolish bottom line
For now, there’s no reason for Google shareholders to be worried about Yahoo!’s recent talks with Apple. Although a potential partnership could benefit both parties greatly, there are currently too many strings attached to make it work.
Google investors should be confident in their company’s ability to produce services (YouTube, Maps, Gmail), that are so indispensable that smartphone and tablet manufacturers such as Apple have to offer (or at least allow) them on their devices. Yet that doesn’t mean that Yahoo!’s down for the count. Yahoo! could produce more mobile apps for Apple, creating a partial mobile ecosystem (minus search) that can still piggyback off of the success of iOS devices. In addition, if it is able to weave its recent acquisitions into a cohesive system of strong mobile apps, nothing is stopping Yahoo! from offering the same products on Android as well.
The article Are These Two Tech Giants Teaming Up? originally appeared on Fool.com and is written by Leo Sun.
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