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Apple, Microsoft and Google Struggle For Mobile Turf

This month's launch of Google Voice, an application that offers U.S. customers free landline and mobile calls, is not just a bold move to build a new-age phone-service provider. It's also the latest sign of official war among the big tech companies in the mobile-phone market: Apple, Google, and Microsoft. Remember Steve Ballmer's chest-beating launch of the new Windows Mobile OS in February—and then the iPhone's 3.0 update?

Google G1 Phone
Photo By: Alpha 
Google G1 Phone

You might wonder why, in the middle of a nasty recession, the major engine rooms of American innovation are jostling like crazy to break into a market that has existed since the Cold War, when Mikhail Gorbachev accidentally made the Mobira Cityman 1987's must-have accessory. But this contest is about much more than mobile phones as we know them. It's about smart phones, which have become the red-hot convergence point of telecoms and handheld computing. It's a battle that captures not only the rapid changes sweeping through this sector but the long-term strategies of three very different companies competing to realize alternative visions of the future. And with each, there's the cheery story firm flacks are peddling, and the other story—of insatiable greed and late-night scheming to achieve total market dominance.

Take Google. With its "Don't be evil" slogan, the company has offered smart-phone users an endless swoon of utopian applications—like the friend-finder Google Latitude and Google Book Search's 1.5 million free smart-phone e-books—since it launched the first Android phone with T-Mobile last year.

But beneath the marketing spin lies the cold, hard fact that 97 percent of Google's revenue comes from search advertising. And its main ways to expand this stream are to form a search monopoly by eating Yahoo and to find new (and, potentially, more invasive) methods of collecting data to target its ads more efficiently at Web users. To that end, the whole point of Google's push into the phone market is to force you to continue to search and navigate the Internet using Google products. The first Android-compatible phone, the T-Mobile G1, even has a dedicated "Google search" button, just to remind you what's at stake.

Google phones are also loaded up with a version of the Chrome browser, which doubles as a machine that feeds Web navigation and search data to Google's mother ship. This preserves Google's ability to expand its data vaults and grow its advertising model as the mobile Web takes off.

And there is even speculation that Google Voice-which uses speech recognition software to send you voice messages as SMSs and e-mails-could be linked into the same invasive advertising model behind Gmail, where the content of e-mails is scanned to target ads at users. Your idle phone chat could become a rich seam of information for Google's data banks.

Apple, however, appears to have entered the mobile-phone market in a way that enhances its unique brand equity. The iPhone, launched in June 2007, is a sleek handset with a user-friendly operating system that focuses on satisfying plug-and-play types rather than fiddly geeks. But beneath the veneer of Jonathan Ive's polished ceramic surely lies a larger plan.

Because Apple, Google, and Microsoft are really competing for ownership of the handheld-computing market. Convergence has meant you can't really go after one without the other. If Apple can create the killer smart phone—as it did for MP3 players—then by default it will also become the mobile operating system of choice. That would allow Apple to start building an operating system monopoly for handheld computer users in the way Microsoft did with PCs in the '90s. And once it's got users hooked on Apple devices for all their mobile computing, mobile Web, music, video and print media needs, well, why not encourage users to sync up all their devices with a nice ol' Mac desktop? It's the sort of aggressive multipronged pincer movement Apple would rather mask than—as PR buffoon Steve Ballmer might—trumpet to the world.

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Another long-term goal for Jobs and Co. appears to be the complete domination of the digital media market through the creation of a converged device that allows you to listen to music; watch video; and download books, newspapers, and magazines, supported by an overarching iStore stocked with any forms of media that can be digitized and sold. Last year, Apple's growing control over the distribution of video content forced the major studios to form a creepy consortium called the Digital Entertainment Content Ecosystem. In the music industry, Apple is so powerful that it was able to bluff its way through negotiations last October to increase the royalties paid to artists and record companies, simply by threatening to close its iTunes store. More recently, Amazon released an iPhone application that allows you to download its Kindle books onto your Apple phone, a concession to the potential for the iPhone to become the default e-book reader.

Microsoft, for its part, has been one of the slowest tech companies to react to the sector. But it has recently come out swinging with a new mobile operating system, a giant deal to distribute Windows with phone manufacturer LG, and a sexy retail plan that will soon see Microsoft-branded stores jostling for attention with Apple's hipster temples on a High Street near you. Like the launch of the Zune in 2006—five years after the iPod—it seems like another application of their well-known strategy "embrace, extend, extinguish." That is: Wait until someone comes up with a good idea, then copy it and try to muscle him out of the market with your sheer size.

Possible outcomes?

But is Microsoft really after a slice of the handset market? Like Google, Microsoft has a core focus that makes all its other projects look like pointless hobbies. That focus now is selling Windows and Office—and it's here that Microsoft is more blatant but also honest about its intentions. As Ballmer said at the annual Mobile World Congress in February: "Volumes speak volumes." More than 20 million phones sold last year used a Microsoft operating system, 46 percent more than Apple. And the deal it's just signed with LG, the world's third-biggest phone manufacturer, will see Windows on 50 new models over the next five years. Still, Windows Mobile holds only a 13.9 percent market share right now, behind Nokia's Symbian (52.4) and the BlackBerry OS (16.5), and it's a long way from achieving the 90 percent dominance it holds over home and office computers.

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With these three tech behemoths all in the ring, what are the possible outcomes? If Google emerges victorious, a world of smart phones that protect the search giant's ability to control most of the time you spend on the Internet. A world of Google phones is also likely to be one plagued by privacy issues as it tries to grow advertising income by farming more and more data. Under Microsoft's plan, we might see a mobile-phone market in which your handheld, home, and office computers all run Windows and the company gets to keep its global dominance of the operating system market. And if Apple has its way, it could realize a more audacious plan to take on Microsoft by claiming an operating system monopoly over mobile computing that can then be eased into homes and offices, making life so simple and synchronized for you that, like the atrophied residents of the Axiom, all your needs are supplied by one feel-good company.

Game on.