Sunday, August 23, 2009

The iPhone and Google Voice app

In reading Apple's response to the FCC's questions concerning the apparent denial of the Google Voice app for the iPhone, one thing is clear. The Google Voice app (in its current or modified form) will eventually be approved by Apple for use on the iPhone.

Why: It would be a competitive misstep to deny iPhone users access to this service. The iPhone makes calls. But the iPhone is also conduit to sell iPhone apps. Thanks in part to the exclusive arrangement with AT&T, Apple charges an attractive fee for each iPhone sold. The fee (or price paid) by both the buyer and AT&T (via of the rich subsidy) is recognized by Apple over the two-year anticipated economic life of the phone. Beyond the issues of dollars and the intricacies of the deferred revenue accounting method used for each iPhone sold is the issue of the customer relationship or ongoing "conversation" between Apple and users of the popular device.

Apple provides two years of software upgrades on each iPhone sold at no charge (hence the deferred revenue of accounting as required by law). The iPhone is as much about the relationship between Apple and the iPhone owner as it is about the phone.

The iPhone is also about selling apps and building out a product eco-system. Apple keeps 30% of an apps selling price (inclusive of transaction fees and distribution costs). If one starts doing the simply math with reasonable projections for app sales growth the financial numbers become quite astounding. In the years ahead the iTunes app store will be a material contributor to Apple's revenue and earnings and provide a substantial aggregate investment by developers in the iPhone eco-system.

Google is also about the customer relationship, if even in an eerie, automated, detached and weird kind of way. Both Apple and Google are building technology empires on understanding the needs and desires of users and meeting those needs and desires in efficient and profitable ways. Apple isn't about to deny iPhone users use of Google Voice. it would eventually hamper sales of iPhone handsets and the corresponding sales of apps.

Google is a competitor of Apple in the device market via of the Android OS for smartphones. It's a principal reason Google's CEO was under heavy pressure from regulators to resign from Apple's Board of Directors. The two companies will increasingly become competitors as each expands their global portfolio of products and services.

But the competition between Google and Apple pales in comparison to the antithetical market approach of Google's biggest competitor and Apple's traditional rival - Microsoft. Google isn't about to let go of the potential for tens of millions of iPhone OS users to take advantage of its Google Voice service. The competition between Google and Microsoft to provide users with productivity solutions, search services and now communications tools will only get more intense with each passing day.

Google and Apple are inherently allied by business philosophy and market approach. Though competitors on an increasing number of fronts, both companies (in vastly different ways) are about the customer relationship, not the sale of individual products and services. They are naturally aligned and will increasingly become competitors without even trying, the natural alliance of the two enterprises and flash points of competition are inherent in the approaches each company uses to pursue growth in the global market.

Apple and Google will find a way to resolve the issues - both real and perhaps eloquently imagined by Apple - surrounding the Google Voice app for the iPhone. I suspect a resolution will be found within weeks. It's in the vested interest of both companies to make it work.

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