The challenge in analyzing the Apple v. Google rivalry is deciding which metrics to use. Here are four data points to get a grip on who's winning.
The showdown between Apple and Google has evolved into the most heated rivalry in the business world and the tech industry. The moment Google announced its entry into the smartphone market in November 2007, tension began to brew between the two tech giants. As the companies engaged in PR and legal fisticuffs, hardcore users took their sides and began spewing venom.
While Apple was originally focused on hardware and Google was all about internet services, the two companies have increasingly infringed on each other's space. Apple beefed up its online services with iCloud and the iWork suite, while Google has refocused resources on smartphones and wearables. While some authors recommend "promiscuity" when it comes to ecosystems, the majority of fans take a hard stance for one or the other.
And, the battle rages on.
Apple and Google are often compared using a variety of metrics, without a clear understanding of what those metrics mean. Here, we will look at four metrics and how we can use them to draw conclusions about how these two companies really stack up.
Mountains of cash
One of the obvious choices for measuring the success of a company is how much money it is making. The chart above shows the quarterly revenue for Apple and Google from each throughout in 2012 and 2013. It should be noted that while Apple reports revenue on a traditional fiscal calendar (Q1 ending in December and reported in January), this chart reflects calendar year quarters, with Q1 ending in March.
The first thing to note is that while Apple tends to make between three and five times as much revenue as Google does, their revenue is far more volatile than Google's. The first thing that we can infer is Google's revenue strategy is still largely dependent on selling ads. Apple's revenue spikes wildly around the holiday season because of their retail operation, but Google's remains far more stable throughout the year. According to Frank Gillett, a principal analyst at Forrester Research, this is because their physical product offerings have yet to make up a substantial part of their revenue.
"They're not fundamentally a product-driven company. When you sell a physical good you are beholden to seasonal buying cycles," Gillett said.
Even as Google positions itself to sell more hardware in the coming years, their revenue will probably never reach the level of volatility experienced by Apple. According to Gartner analyst Van Baker, Google is seeding the market with an OS to get more people to use their services, so it can sell more ads. So, it is likely that ad revenue will remain the foundation for Google's overall revenue moving forward.
The challenge for Apple is that it has long been rumored to be working on a television set and a smartwatch, but it hasn't entered a new product category since it released the iPad in 2010.
"The longer it goes without them launching a new product offering, the more people will question their ability to innovate," Baker said.
Race to the top
When it comes to understanding just how valuable a company really is, many people will turn to that company's stock price. Of course, stock prices are unstable. As I am writing this piece, Apple's stock (AAPL) is sitting at $528.39 and Google's stock (GOOG) is bringing a cool $1,200.93 per share.
But, the price of the stock alone doesn't tell you how valuable a company is. You have to take into account the total number of outstanding shares along with the price, which determines "market capitalization." Apple's market cap peaked most recently in Q3 of 2012 with the announcement of the iPhone 5, then fell quite dramatically over the next year, but it has started to rise again. Apple's run over the last few years has been unprecedented, but it's not clear if it can continue their momentum from the past decade.
"Apple has had such a dramatic run, there is skepticism as to whether or not they can sustain it." Gillett said.
Google, on the other hand, has seen a steady rise in their market cap over the last two years, despite coming under increased scrutiny for their privacy practices. Unlike Apple, whose ability to innovate has come into question in the post-Jobs era, projects like Glass, Tango, and Ara have shown Google's willingness to take risks.
"Google has certainly shown the ability to lead innovation efforts," Baker said.
Innovation is not dead at Apple, but is has yet to announce another breakthrough, revolutionary product like the iPod, iPhone, or iPad. Both companies have been regularly buying up new, young companies; hopefully to revitalize their product offerings.
Those product offerings will likely fuel the biggest fire between Google and Apple — the war for mobile customers. The battle for mobile OS users is the face of the Apple/Google rivalry, and the numbers behind it are largely misunderstood.
Misunderstanding the market share
"The smartphone market is a basically two-horse race right now."
That's how Van Baker described Android's scrap with iOS in the mobile market. While many people try to equate the iOS/Android with Apple/Google, that is a misguided comparison as each mobile OS does not define its parent company's revenue stream. Still, mobile OS market share does help us to understand how each company is doing. Well, sort of.
The initial problem of measuring success by market share sales is that you are comparing Apple, which created the iOS software and accompanying hardware with Google, who created the Android platform, which is mostly distributed through third-party vendors like Samsung. Baker said that a more fitting comparison of market share by sales might be Apple v Samsung. According to Baker, "In some ways the battles with Samsung are a proxy for battles with Google." Even still, Google is dealing with a bigger issue than just iOS v Android.
"Whose operating system is on the device is not a very insightful metric for what the heck is going on," Gillett said.
If you look at the raw numbers for sales market share between Android and iOS devices, Google seems to be dominating the space. In Q4 2013, Gartner reported that Android had 77.8% worldwide market share while iOS had only 17.8% share. One quarter prior, Android had 81.9% and iOS took second place with 12.1%. It is worth noting that, according to ComScore, iOS market share in the lucrative US market is about 40%, while Android accounts for around 50% of US sales. The problem with these numbers is that the do not take into account the fragmentation that Google has allowed with the Android platform.
Gillett said that when you see these big Android market share numbers, it represents parties who have done one of two things. It represents a party that either grabbed the open source code and created a device that is nominally Android, with no access to the Google secret sauce; or, that is using the Google Play services to create a device that is fully integrated into the Google ecosystem.
Many of the low-end "Android" devices coming from the Asian market are of the open source variety, but even the branded orthodox Android devices have their own challenges. Devices like the Kindle Fire and some of the Lenovo tablets run a version of the Android OS, but push their own proprietary apps above the standard Android apps. For example, some of the Lenovo tablets might encourage a user to use their own proprietary mail client for the device instead of Gmail.
"I'm going to crudely assert that less than one third of Android devices are truly engaged deeply with Google's digital platform," Gillett said.
The fragmentation and confusion we see here are reason enough that we shouldn't be measuring success by sales number alone, but we should also look at how consumers are using these devices.
OS usage and engagement
The chart above shows the percentage of total web traffic worldwide, across all platforms, that is taken up by Android and iOS. While Android's usage percentage is climbing, it only started to climb to a competitive level toward the end of 2013. Apple, on the other hand, has seen consistently higher usage than Android, despite capturing less of the fewer overall shares in 2012 and 2013.
These numbers assert that Apple has more engaged customers than Android does and it sees more mobile usage. While Google may be innovating more than Apple currently and working to make tech integration more seamless with services like Google Now, that's not yet selling point for average customers. The fact of the matter is that Apple has established itself as a trusted brand, it has created a product that is a status symbol to own, and it prides itself on the ease of use of its products.
Another measure of engagement, and possibly a measure of trust, is the number of credit cards that each company has on file. Forrester Research conducted a US survey that found Amazon had 91 million credit cards on file. In second place was Apple with 41 million cards on file, and Google came in a distant third with 22 million cards on file. So, Apple has nearly twice as many customers who trust them with their financial data as Google does.
Bottom line: More people are engaged with their Apple devices, and more people are spending money on their Apple devices.
"The biggest opportunity for Apple is to dramatically expanding the capabilities and usage of their online services platform," Gillett said. "Google's opportunity is to figure out how to create more of a win-win between Google and the device makers who use Android today."
Google has built more momentum in innovation and product development, while Apple has maintained momentum building a more profitable business. Whether it is Apple or Google at the top of the heap, you cannot deny that they are both building platforms and business models that will shape the next decade in the tech industry.
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