Google vs. Apple: Apple's iPhone 'Monopoly' Leaves 80% for Google

Is Apple being unfair to Google/AdMob by limiting the iPhone to iAd?

There are many sides to this question.

• What obligation does any company have to open its product to work with the competition?
• Is Apple able to dominate the market so much that it can block a competitor from access?
• Will iAd spread to other platforms and take over?

Standards vs. Secrets

Every company wants to enjoy the advantages of standards when it enters a market. Later, when it is successful, it wants patents and trade secret protection to ward off competition. Being "competitive" is a race to the bottom in a commodity market that only certain types of companies are good at doing. Google protects its search algorithms as trade secrets, and Apple patents dozens of ideas every year.

Standards have their place when connecting to other systems, but they are not a requirement. If Company X wants to build a car that runs on coal, it can, but it risks losing customers who want the convenience of filling up at a local gas station.

Some standards are regulated by law. For instance, the FCC won't let you broadcast your radio station at any frequency or power level. There are other rules, but the size of knobs, color of the enclosure, and type of plugs on your radio or TV can be whatever you want. A custom plug for the microphone is not covered by FCC regulations, but you may lose business if customers expect something standard.

An Unregulated Market

Unless there are mobile phone regulations that control how companies can advertise, Apple, Google, RIM, Motorola, etc., can advertise however they want. The key is to not allow advertising that will upset customers and make them switch to competing brands. As long as we have no reports of any specific regulations that are being broken and there are no major customer complaints, phone makers are free to choose.

If there are no standards to phone advertising or regulations to break, then Apple, Google, RIM, Motorola, etc., can advertise however they want. Google may think that Apple should play fair and let it collect statistical data on software used on the iPhone, but that is not a requirement - nor is it truly fair.

Apple vs. Google

Google lost its ability to cry foul when it got into the smartphone business. Any data it can collect from advertising on the iPhone could be used to make improvements on Android phones, which compete with the iPhone. Apple will never willingly let a competitor data mine its customers. It wants to control that information for itself. Who Apple's customers are and their buying habits is valuable information.

In the same way that Google was allowed to purchase AdMob after Apple got into advertising - because Apple's iAd creates competition that dilutes Google's "monopoly" in online advertising - Google's entry into smartphones allows Apple to deny Google access to the iPhone. With Android, Google created a strong competitor that diluted Apple's growing market share.

Google/AdMob wants to have its cake and eat it too. It wants fair and open competition, but Google gives away the Android OS for free, while Apple uses iPhone sales to generate revenue. Google is the far stronger, established competitor in the advertising market that Apple has to fend off from its fledgling business.

Google will not be forced out of the Android phone market just because Apple is using iAd for the iPhone. It remains to be seen if Apple will extend the iAd service to Android phones. Maybe in a few years iAd will grow so strong that it will threaten Google, but until then, Google is in no danger of being forced out of the market.

There Is No Monopoly

The final issue is that Apple only has the iPhone, which is much less than half of the smartphone market.* Apple's iAd is not the only game in town, even if so many likes its products. Google/Android, RIM, and Nokia are not switching to iAd. They can ignore what Apple is doing. In fact, Apple hasn't and probably won't extend its iAd service to any of these other platforms.

Apple is important, but it is not using iAd to control what anyone else is doing. Apple either needs a lot more market share for the iPhone or it needs to extend iAd onto other platforms before any claim of monopoly control would be valid.

This all sucks for Google, but it picked this fight when it bought AdMob after entering the smartphone market with Android. Android is doing well and growing fast (nearly 20% of the mobile market).

Google should focus on what it has and stop crying that someone else has a bigger piece of the pie. Google is being childish when it does this.

* The iPhone OS has 60% of the mobile market, but that figure includes the iPad and iPod touch. The iPhone itself accounts for about 22% of the North American smartphone market, while Android is projected to reach 19% this year, which makes it a stiff competitor. The two platforms combined have less market share than BlackBerry (49% in 2009, 43% projected for 2010).