“Given the stark contrast between Apple’s and Google’s strategies and the recent disentanglement of the boards, investors are really focusing on the Apple vs. Google battle to see who will win the mobile Internet war. My verdict–in the near term, they both win and other competitors will lose market share; over the longer term, they will redefine the old Microsoft-Intel investment thesis to an Apple-Google investment thesis. Apple has more momentum and focus, while Google has broader-based distribution,” Darcy Travlos writes for Forbes.
“First, over time, mobile advertising and search has the potential to be a more effective lead to actual purchases than does desktop advertising and search. The ability to target ads to consumers when they are in the vicinity of ‘point of purchase’ will be extremely effective in generating sales,” Travlos writes. “Both Apple and Google have recently purchased companies that enable them to deliver mobile ads embedded in applications. Thus, distribution of these mobile ads will be dependent upon the number of handsets that can deliver the ads and the number of apps that have ads embedded in them. Currently, Apple has a head start in both camps, with over 30 million iPhones sold to date, with a 55% market share in OS requests in the US, an estimated 36 million to 40 million more to be sold in 2010 and 125,000 applications.”
“Second, the age-old debate around ‘open’ (a la Google) vs. ‘closed’ (a la Apple) systems doesn’t apply here. The knock against closed and the lure of open has always been innovation. People embraced ‘open’ when ‘closed’ did not meet all its needs. This was relevant years ago when the enterprise had IT departments that needed open, flexible systems in order to customize systems for their specific needs,” Travlos writes. “Mobility, on the other hand, is largely a consumer-based groundswell and customization is provided by third-party applications. In fact, Apple has overcome the legacy disadvantages associated with closed systems and boasts the greatest number of opportunities for users to customize their iPhones while maintaining all the advantages, namely quality control, of a closed system. Again, Apple offers approximately 125,000 apps to Google’s 18,000.”
“Third, Apple has much more experience and is among the most successful companies in the world with product introductions. Over the next several weeks, Apple is rumored to announce its tablet or e-reader and is expected to begin selling sometime in the next three months… The concern investors will have when Apple introduces its tablet will most likely be the price point and, if so, this will offer investors a nice opportunity to buy on a dip,” Travlos writes. “Apple has been successful at creating value to consumers at higher price points. Given its success with the iPod, the iPhone and the market share gains with Mac computers, track record is on Apple’s side.”
Travlos writes, “The tech cycle from the mid-’80s to the end of the ’90s created enormous wealth, and we all wished for just one more shot. Here it is: the mobile Internet is a secular growth cycle with strong momentum… Investors have the opportunity to take advantage of this new technology cycle still in nascent stages.”
There’s much more in the full article here.