Answer the case study questions:

1. Compare the business models and core competencies of Google, Apple, and Facebook.
2. Why is mobile computing so important to these three firms? Evaluate the mobile strategies of each firm.
3. Which company and business model do you think is most likely to dominate the Internet, and why?
4. What difference would it make to a business or to an individual consumer if Apple, Google, or Facebook dominated the Internet experience?

Google, Apple, and Facebook Battle for Your Internet Experience CASE STUDY T hree Internet titans-Google, Apple, and always played a large part in the Apple ecosystem, Facebook-are in an epic struggle to dominate and they have emerged as a major revenue source. your Internet experience, and caught in the Apple has more than 1.3 billion active devices in cir- crossfire are search, music, video, and other media culation, creating a huge installed base of users will- along with the devices you use for all of these things. ing to purchase services and a source of new revenue Mobile devices with advanced functionality and ubiq streams. Apple's services business, which includes uitous Internet access are rapidly overtaking tradi- Apple's music (both downloads and subscriptions), tional desktop machines as the most popular form of video sales and rentals, books, apps including in-app computing. Today, people spend more than half their purchases, subscriptions and advertising), iCloud time online using mobile devices that take advantage storage, and payments, has been growing at a double- of a growing cloud of computing capacity. It's no sur- digit rate. prise, then, that today's tech titans are aggressively As Apple rolls out more gadgets, such as the battling for control of this brave new online world. Watch and HomePod, its services revenue will Apple, which started as a personal computer com- continue to expand and diversify. According to pany, quickly expanded into software and consumer CEO Tim Cook, Apple has become one of the larg. electronics. Since upending the music industry with est service businesses in the world. This service- its iPod MP3 player, and the iTunes digital music ser- driven strategy is not without worry because both vice, Apple took mobile computing by storm with the Google and Facebook offer stiff competition in the iPhone, iPod Touch, and iPad. Now Apple wants to be services area. the computing platform of choice for the Internet. Google continues to be the world's leading search Apple's competitive strength is based not on its engine, accounting for about 75 percent of web hardware platform alone but on its superior user in- searches from laptop and desktop devices and over terface and mobile software applications, in which it 90 percent of the mobile search market. (Google is a leader. Apple's App Store offers more than 2 mil- is also the default search engine for the iPhone). lion apps for mobile and tablet devices. Applications About 84 percent of the revenue from Google's par- greatly enrich the experience of using a mobile ent company Alphabet comes from ads, most of device, and whoever creates the most appealing set them on Google's search engine. Google dominates of devices and applications will derive a significant online advertising. However, Google is slipping in its competitive advantage over rival companies. Apps position as the gateway to the Internet. New search are the new equivalent of the traditional browser. startups focus on actions and apps instead of the Apple thrives on its legacy of innovation. In web. Facebook has become an important gateway 2011, it unveiled Siri (Speech Interpretation and to the web as well. In 2005, Google had purchased Recognition Interface), a combination searchavi- the Android open source mobile operating system gation tool and personal assistant. Siri promises per- to compete in mobile computing, Google provides sonalized recommendations that improve as it gains Android at no cost to smartphone manufacturers, user familiarity-all from a verbal command. Google generating revenue indirectly through app purchases countered by quickly releasing its own AI tool, and advertising. Many different manufacturers have Google Now. Facebook has developed an intelligent adopted Android as a standard. In contrast, Apple al- assistant called M. lows only its own devices to use its proprietary oper- Apple faces strong competition for its phones and ating system, and all the apps it sells can run only on tablets both in the United States and in developing Apple products. Android is deployed on over 80 per- markets like China from inexpensive Chinese smart- cent of smartphones worldwide; is the most common phones and from Samsung Android phones that have operating system for tablets; and runs on watches, larger screens and lower prices. iPhone sales have car dashboards, and TVs-more than 4,000 distinct started to slow, but Apple is not counting on hard- devices. Google wants to extend Android to as many ware devices alone for future growth. Services have devices as possible. Google's Android could gain even more market People use Facebook to stay connected with their share in the coming years, which could be problem- friends and family and to express what matters most atic for Apple as it tries to maintain customer loyalty to them. Facebook Platform enables developers to and keep software developers focused on the ios build applications and websites that integrate with platform. Whoever has the dominant smartphone op- Facebook to reach its global network of users and to erating system will have control over the apps where build personalized and social products. Facebook is smartphone users spend most of their time and so pervasive and appealing that it has become users' built-in channels for serving ads to mobile devices. primary gateway to the Internet. For a lot of people, Although Google search technology can't easily navi- Facebook is the Internet. Whatever they do on the gate the mobile apps where users are spending most Internet is through Facebook. of their time, Google is starting to index the content Facebook has persistently worked on ways to con- inside mobile apps and provide links pointing to that vert its popularity and trove of user data into adver- content featured in Google's search results on smart- tising dollars, with the expectation that these dollars phones. Since more than half of global search que- will increasingly come from mobile smartphones ries come from mobile devices, the company revised and tablets. As of early 2018, over 95 percent of ac- its search algorithms to add mobile friendliness" to tive user accounts worldwide accessed the social the 200 or so factors it uses to rank websites on its network via smartphone. Facebook ads allow compa- search engine. This favors sites that look good on nies to target its users based on their real identities smartphone screens. The cost-per-click paid for mo- and expressed interests rather than educated guesses bile ads has trailed desktop ads, but the gap between derived from web-browsing habits and other online computer and mobile ads fees is narrowing. Google behavior. instituted a design change to present a cleaner mo- At the end of the first quarter of 2018, 98 percent bile search page. of Facebook's global revenue came from advertising, Seven Google products and services, including and 89 percent of that ad revenue was from mobile Search, YouTube, and Maps, have more than a billion advertising. Many of those ads are highly targeted users each. The Android operating system software by age, gender, and other demographics. Facebook is has over 2 billion monthly active users. Google's ulti- now a serious competitor to Google in the mobile ad mate goal is to knit its services and devices together market and is even trying to compete with emerg- so that Google users will interact with the company ing mobile platforms. Together, Facebook and Google seamlessly all day long and everyone will want to use dominate the digital ad industry and have been re- Google. Much of Google's efforts to make its search sponsible for almost all of its growth. Facebook has and related services more powerful and user-friendly overhauled its home page to give advertisers more in the years ahead are based on the company's invest- opportunities and more information with which ments in artificial intelligence and machine learning to target markets. The company is expanding ad- see Chapter 11). These technologies already have vertising in products such as the Instagram feed, been implemented in applications such as voice Stories, WhatsApp, Facebook Watch, and Messenger, search, Google Translate, and spam filtering. The goal although the majority of ad revenue still comes is to evolve search into more of a smart assistance from its news feed. Facebook has its own personal- capability, where computers can understand what ized search tool to challenge Google's dominance of people are saying and respond conversationally with search. Facebook CEO Mark Zuckerberg is convinced the right information at the right moment. Allo is a that social networking is the ideal way to use the web smart messaging app for iOS and Android that can and to consume all of the other content people might learn your texting patterns over time to make conver- desire, including news and video. That makes it an sations more expressive and productive. It suggests ideal marketing platform for companies. But he also automatic replies to incoming messages, and you can knows that Facebook can't achieve long-term growth get suggestions and even book a restaurant reserva- and prosperity based on social networking alone. tion without leaving the chat. Google Assistant is During the past few years Facebook has moved into meant to provide a continuing, conversational dia- virtual reality, messaging, video, and more. logue between users and the search engine. Facebook is challenging YouTube as the premier Facebook is the world's largest social networking destination for personal videos, developing its own service, with over 2 billion monthly active users. TV programming, and making its messages "smarter" by deploying chatbots. Chatbots are stripped-down possibly Facebook and Google-at risk. Apple em- software agents that understand what you type or phasizes its privacy protection features and does not say and respond by answering questions or executing share customer data with others. tasks, and they run in the background of Facebook's These tech giants are also being scrutinized for Messenger service (see Chapter 11). Within Facebook monopolistic behavior. In the United States, Google Messenger, you can order a ride from Uber, get news drives 89 percent of Internet search, 95 percent of updates, check your flight status, or use augmented young adults on the Internet use a Facebook prod. reality to imagine what a new Nike sneaker looks uct, and Google and Apple provide 99 percent of like by superimposing a 3-D model of that sneaker mobile phone operating systems. Critics have called atop images or video. A new standalone app will for breaking up these mega-companies or regulating allow users to stream videos in their news feed them as Standard Oil and AT&T once were. In July through set-top boxes such as Apple Inc's Apple TV 2018 European regulators fined Google $5 billion for and Amazon.com Inc.'s Fire TV, as well as Samsung forcing cellphone makers that use the company's Internet-connected TVs. Android operating system to install Google search Zuckerberg has said that he intends to help bring and browser apps. Have these companies become so the next billion people online by attracting users large that they are squeezing consumers and innova- in developing countries with affordable web con- tion? How governments answer this question will nectivity. Facebook has launched several services in also affect how Apple, Google, and Facebook will fare emerging markets, such as the Free Basics service and what kind of Internet experience they will be designed to get people online so they can explore able to provide web applications, including its social network. Facebook wants to beam the Internet to underserved Sources. Associated Press, "EU Fines Google a Record $5 Million areas through the use of drones and satellites along over Mobile Practices," July 18, 2018; Christopher Mims, "How with other technologies. Zuckerberg thinks that Apps, Music and More Can Buoy Apple Beyond the iPhone, " Wall Facebook could eventually be an Internet service Street Journal, February 4, 2018; "Search Engine Market Share," www.netmarketshare.com, accessed April 16, 2018; "Facebook's provider to underserved areas. Advertising Revenue Worldwide from 2009 to 2017 (in Million U.S. Monetization of personal data drives both Facebook Dollars)," statista.com, accessed April 17, 2018; David Streitfeld, and Google's business models. However, this prac- Natasha Singer, and Steven Erlanger, "How Calls for Privacy May Upend Business for Facebook and Google," New York Times, March tice also threatens individual privacy. The consumer 24, 2018; Natasha Singer, "Timeline: Facebook and Google Under surveillance underlying Facebook and Google's free Regulators' Glare," New York Times, March 24, 2018; David Streitfeld, services has come under siege from users, regulators, "Google Wants to Be Everywhere with Everyone," New York Times, and legislators on both sides of the Atlantic. Calls for May 17, 2017; Tim Bajarin, "Learning This i Thing Helped Me Understand Apple's Strategy," Time, April 3, 2017; and Mathew restricting Facebook and Google's collection and use Ingram, "How Google and Facebook Have Taken Over the Digital of personal data have gathered steam, especially after Ad Industry," Fortune, January 4, 2017. recent revelations about Russian agents trying to use Facebook to sway American voters and Facebook's CASE STUDY QUESTIONS uncontrolled sharing of user data with third-party 7-13 Compare the business models and core compe- companies (see the Chapter 4 ending case study). tencies of Google, Apple, and Facebook Both companies will have to come to terms with 7-14 Why is mobile computing so important to the European Union's new privacy law, called the these three firms? Evaluate the mobile strate- General Data Protection Regulation (GDPR), that re- gies of each firm. quires companies to obtain consent from users before 7-15 Which company and business model do you processing their data, and which may inspire more think is most likely to dominate the Internet, stringent privacy legislation in the United States. and why? Business models that depend less on ads and more 7-16 What difference would it make to a business or on subscriptions have been proposed, although any to an individual consumer if Apple, Google, or effort to curb the use of consumer data would put the Facebook dominated the Internet experience? business model of the ad-supported Internet-and Explain your