Why Google Needs Apple

There are few rivalries like the one between Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOGL). But underneath the rivalry between these two titans of technology is a different kind of connection, one that explains why Google needs Apple a lot more than Apple needs Google.
Though the smartphone market is fluid and regularly changing, I can safely make a few general statements about it. For instance, the sheer number of devices running Google’s Android operating system continues to dominate those running Apple’s iOS system.
The latest data from market research firm IDC suggests that Google Android devices account for 78% of mobile devices, while 18.3% of devices run Apple’s iOS.
But despite the wide majority with which Android leads iOS in device market share, Android is actually losing to Apple in terms of the total amount of business generated through its users.
Indeed, this chart from TechCrunch illustrates how the Google Play store sees over 50% more downloads than the Apple App store, yet the App store generates nearly double the revenue.

When you look at the total amount of revenue generated through mobile devices, the results look similar. Though there are significantly more Android devices, iOS users spend significantly more money.
Just take a look at the data from Cyber Monday, the online shopping equivalent to Black Friday.
Though Web traffic originating from a PC on Cyber Monday still dominates that originating from mobile devices, the gap continues to close. Smartphones brought in 28.5% of total traffic on Cyber Monday in 2014, while tablets brought in 12.5%. PCs led with 58.6% of traffic.
Though there are roughly one-fourth the total number of iOS devices, these devices were responsible for two-thirds of all traffic originating from a mobile device on Cyber Monday. What’s more, Android users only accounted for 4.4% of total mobile sales on Cyber Monday, compared to 17.4% for iOS users.
You read that right. Though there are four times as many Google Android devices, Apple iOS users spent nearly four times as much on Cyber Monday in 2014.
This is important. But the amount of commerce taking place on mobile devices is just one piece of what is a very important puzzle for Google.
Google still generates nearly 90% of its revenues through advertising. Indeed, Web traffic is almost as important to Google as the electricity that powers its network of Web servers.
The uncomfortable reality for Google is that, without Apple, it would have significantly less traffic. A recent op-ed in The New York Times about the future of Android included an alarming sentence:

“A recent analysis by Goldman Sachs estimated that Google collected about $11.8 billion on mobile search ads in 2014, with about 75% coming from ads on iPhones and iPads.”

Of course, I find the sentence to be incredible more than I find it to be alarming, but it’s worth noting that I own shares of Apple and not Google.
Google made news recently by readjusting its search algorithms to penalize sites that are not optimized for mobile devices. The event was dubbed “mobilegeddon.”
The move sent a shockwave across the Internet. It was basically a directive from Google informing website owners around the world that the Internet is moving toward mobile devices and they can either get on board or pay the price.
But if Google is publicly shifting the Internet – from which is derives almost all of its profits – toward mobile, surely the company must be quietly doing all it can to maintain its relationship with Apple. After all, when a Fortune 500 company makes the vast majority of its money selling advertisements, the relationship behind 75% of the revenue generated through that company’s fastest growing ad category becomes an important one.
It seems Google needs Apple – or, more specifically, its default user search traffic – a lot more than we previously thought.
DISCLOSURE: I personally own shares of Apple.

First Apple, now this…

On Friday, April 24^th, the Apple Watch finally became available. And if history is any guide, it’s going to catapult Apple even higher—as did the iPod, iPhone and iPad before it. Now, Apple would prefer you didn’t know this…but there’s another company that’s destined to soar even higher because of the Apple Watch. Apple has long tried to keep it a secret. But you can discover it right here.