Apple vs. Google – Where’s the power?

Apple and Google.  For the longest time, these two companies seemed to be the best of friends, united by two things: their “creative” reputation, and their mutual loathing for Microsoft.  All that seems to have come to a screeching halt with the release of a constantly-growing slew of Android-powered cell phones and Apple’s less-than-friendly response.  The latest salvo?  After Apple reportedly started chatting with Microsoft about making Bing the default iPhone search engine, just this week Google fired back with a Google Voice HTML5 site that bypassed the App Store and Apple’s death grip on VOIP apps.

The clash of the icons has begun.

But in a war between the traditional peddler of search and the traditional peddler of devices, who holds the advantage?  For Chitika Research this week I ran a study on how influential the default search engine was to iPhone traffic, and the results were stunning: not only did Google hold over 97% of the iPhone’s search traffic, but it held over half of all iPhone web traffic! All!  Check the graph below for a visual:

iPhone Web Traffic Breakdown

To put it into perspective, the Internet in general sees about 2/3 of its traffic come from “non-search” sources – direct links from sites, social networks, IMs, emails, etc. etc. etc.  Google makes up about 30% of the traffic.  Google at that ratio is considered extremely dominant, and nigh untouchable, and yet on the iPhone the number is some twenty percentage points higher.

So, it appears, then, that Apple has the distinct advantage.  A captive audience of iPhone users, locked into AT&T contracts and the Safari browser, are highly unlikely to ditch their beloved, cult-inducing phone (I know I won’t) because of the name attached to the search box.  And make no mistake, that default search box will continue to be the easiest, fastest, and by-far most-used way of browsing the mobile Internet on iPhones.  So while Google keeps firing shots at Apple, the geniuses in Mountain View have to realize that they have much, much more to lose in a Google/Apple divorce than do the Cupertino-ites.

Microsoft, meanwhile, has to be loving this.  Their two strongest competitors (sorry Linux fans), throwing heavy haymakers at each other, trying to eat into each other’s major market, all while Bing and Windows 7 have quieted the majority of Microsoft’s loudest critics.  Throw Bing in as the iPhone’s search engine of choice, and suddenly walls between Apple fanboys and Redmond’s product lines are torn down, and violently.  Not only does Microsoft immediately become relevant in the iPhone market, but given Apple’s dominance of the smartphone field, Bing could immediately take over a quarter of all smartphone traffic (see the Chitika Research story for supporting numbers).

So what’s Google got to gain in all this?  Why wouldn’t they just concede some points to Apple, maybe pay them a bit more for their searches, and keep on dominating the mobile search market?

Personally, I think it comes down to Google realizing that the balance of power is, as it stands, skewed towards Apple in this relationship.  Google has never been one to let anyone have the advantage on them – at least, not for long.  Android is Google’s way out of this imbalance – if phones like the Droid and the Nexus One are any indication, Android may well be the smartphone OS of 2010 and beyond.  To continue to placate Apple might be a smart idea in the short term, but that mentality would certainly hinder their attempts to become a major force themselves and, perhaps, take the iPhone’s crown.

In the end, the only company that is nearly guaranteed to benefit from this strife is Microsoft.  As long as Google and Apple are fighting, they’re not focusing on threats to their properties like the cloud-enabled Office 2010 and Windows 7, the first threat to OSX in nine years.  Opportunities abound for Redmond, and signing Bing on as the iPhone’s default search engine would be a momentous first step.