Is Apple Really “Crushing” Google?

A piece on Business Insider tries to describe why Apple is “crushing” Google, reducing it to two main components: the makeup of the employees and the design of the products. While I agree with what they say to some extent, the sensational headline gives an impression that Apple is “winning”. It would be useful to clear that up a bit.

First, a disclaimer: I like both companies. I use a lot of their products daily. I have several piece of Apple hardware that I use on a constant basis. I also use Google technology for much of what I do via the Internet. The two, together, comprise a significant portion of my daily-use technology.

The Realities of Market Share

It is important to recognize some realities. Despite the image, Apple is still not dominant in personal computers (outside of tablets), set-top boxes or smartphones. They look and act as if they own the market. Almost all of the other platform and device manufacturers act as if Apple owns these various markets. But let’s be clear: Android phones outsell iPhones nearly 2:1. Without the iPad, Apple’s Mac commands about 10% of the PC market. Numbers on set-top boxes are thin, but most are either traditional PVRs offered by the various cable and satellite companies, or people are using their game consoles to some extent. The one mainstream market that Apple dominates is the iPad, and they dominate it, in part, because they largely created the market space in the first place. In all the other markets where Apple is perceived as the leader, the numbers say they aren’t the big dog on paper.

It is also difficult to say one product “crushes” another based on subjective criteria. Yes, I prefer the iPhone and iPad over the various Android phones and tablets. I find them to be a bit more cohesive and a little more consistent. But that is an opinion. There are plenty of other people who are quite happy with their Android devices. While some could argue that the iPhone is easier to use, that doesn’t mean the Android is an unusable piece of junk. Hardly. The Android devices and apps may lack a degree of polish and consistency, they are still usable in the real world. I could certainly live with an Android phone if the need arose.

Big vs. Little Picture

Big picture, Apple is “crushing” Google in terms of revenue, profitability and share performance. While both stocks trade in the $600 range (Google’s price is higher), Apple’s market cap (the total value of all shares) is more than double Google. Apple has more revenue and a higher profit (both in absolute and relative terms), as well as strong growth. From a broader view of overall corporate performance, Apple certainly is “crushing” Google.

However, if you look at things like marketshare, Apple is doing quite well, but in areas where the two compete, in many ways it is a draw. Apple is killing everyone in tablets. Google, however, is leading in smartphones. I would guess that the AppleTV is outselling Google’s failed set-top box, but that’s still a pretty small market (for now). But Google is killing Apple when it comes to mobile ads (iAds has not done well at all, and AdMob continues to be one of the leaders in mobile advertising). If you count the Chromebook in the PC mix, then certainly, Apple is dismantling Google there. But if we just focus on the areas where both companies are serious, it sounds like a bit of a draw: Apple “wins” on tablets and set-top boxes, Google wins on smartphones and mobile advertising. Sure, subjectively, Apple could be considered the winner when it comes to design and usability, but arguments could be made to support Google as well. That one is harder to measure in a way that isn’t influenced by opinion.

Now and The Future

Where Apple is stronger is on future growth. Apple is in markets where there is still plenty of potential for growth and expansion. The tablet market is still new, and Apple continues to see significant increases in unit sales, revenue and profit. The iPad and the Mac are displacing Windows PCs in traditional personal computing. There is still huge growth in smartphones, since there are still more feature phones out there, and those will be replaced at some point. Apple also sees growth in revenue as a content provider, both in direct sales (music, books, movies, TV shows) and as a facilitator for 3rd parties (apps, in-app purchases). The content and the hardware form a virtuous circle for Apple: iPhones lead to iPads which lead to Mac sales, which leads to app and content sales. That increased content makes iPhones, iPads and Macs more attractive, so they sell more. Round and round it goes.

Google’s future, however, is less certain. They make virtually nothing from Android, GMail, Maps, search, etc. except for what they get in terms of ad revenue. Advertising is still almost all of Google’s revenue. In the mean time, overall advertising growth has declined, and Google has been losing marketshare to competitors in this space. This, combined with reduced share of search, has an impact on their numbers today, and if the trend continues, will remain an issue for their medium-term prospects. Ads pay for everything else, basically. Unfortunately, Google’s brand is now such that they will have a hard time charging a premium. They are known as a purveyor of “free stuff”, but they aren’t the only game in town. Google needs to find a way to generate revenue, other than ads, from their various ventures if they expect to have a growth path. And before anyone says “but they have things in the pipeline”: none of that is new, and all of it will be appearing in mature (or nearly mature) markets with established players. As Google has discovered, size and a well-known brand is no guarantee of success. You just need to look at Wave and Google+ to see how well that has worked out for them.

So Who Is Crushing Who?

Big-picture, Apple is “winning”. Their brand, coupled with their industrial and software design, have allowed them to charge a premium on their product. They continue to see increased unit sales, and that drives up revenue from all the ancillary areas. Apple is perceived as the leader in pretty much every market they play in.

Taking a micro view, in areas where the two compete, it is effectively a tie. Apple leads in tablets and set-top boxes. Google leads in smartphones and mobile advertising. In terms of hard numbers, neither is “crushing” the other when you look at the sum of everything. While design and usability are important, it clearly isn’t the biggest driving factor in their various markets. Otherwise, the iPhone would be outselling the Androids. That isn’t the case.

So yes, big picture, Apple is currently on top, and Google has some uncertainty. But that isn’t just because of superior design or “engineers vs. designers”. It is about a bigger, broader view, and one about focus and vision. Apple has a vision of what it wants to be, and where it wants to go. Its products reflect that vision. If Google has a vision, it is a bit murkier and uncertain, and their product mix and product approach reflects that fuzzier view of the future. Where Apple is “crushing” Google isn’t necessarily in product execution. It is in business execution. Product is a key part of that, but it happens because of the vision from the top. But Apple’s success is driven more by their vision (part of which includes design, and the insight that design sells) and the execution on that vision. Apple’s secret isn’t strictly about where they get their people, or how they design the products. Their “secret” is their focused vision, and relentless application of that vision to everything they do.

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