Apple takes on Google search

2012-06-21 21:34
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San Francisco - When Apple sends out its coveted invitations to major events, one CEO has always been making the guest list of late: Jeremy Stoppelman.

The co-founder and chief executive officer of consumer review website Yelp has never taken the stage at these gatherings, but his company has become an important weapon in Apple's arsenal as it steps up its assault on ally-turned-rival Google.

Yelp and a handful of other major consumer content sites, including movie reviewer Rotten Tomatoes and restaurant reservation service OpenTable, will be helping to power Apple's Siri, the voice-activated iPhone personal assistant, in the new mobile operating system iOS6.

The relationship between Apple and Yelp illustrates the power struggle over how people find what they are looking for on the internet. Much more than just a clever feature, Siri is emerging as a key tool for what some in the industry call "casual search" - quickly finding routine information such as a restaurant location.

This can bypass Google and other traditional search engines. That serves the interests of Apple, which sees an opportunity to muscle in on its rival's core business and build related advertising revenue.

Lifeline

Siri is also a potential lifeline for Yelp and other content companies, which have found themselves competing with Google.

"Google is a direct competitor to Yelp, and I’m sure Yelp is aware of that," said Larry Cornett, founder of product strategy firm Brilliant Forge and former head of consumer products at Yahoo. Yelp, which depends a lot on Google for traffic, will probably be "ecstatic" about the direct traffic it will get through Apple's upcoming version of Siri.

Google still reigns supreme in search, loved by consumers for its relevant results and advertisers for its reach.

Deep-pocketed rivals, particularly Microsoft with its Bing search engine, have tried in vain for years to reduce Google's dominance.

Rather than compete with Google on keyword search - which would mean battling algorithms refined by the millions of searches performed every day - Apple is taking a different tack by focusing on a subset of the search universe that users are mostly likely to scour while they are out and about.

That includes restaurants, movies, sports, business listings, maps and locations - where quick, digestible bite-sized results are desired, rather than the more involved research that users perform with Google. The increasing use of mobile devices for accessing the internet only plays into this trend.

Advertisers value these searches, which are closely linked to location, time and intent, said David Tennenhouse, venture capitalist with New Venture Partners and former CEO of A9.com, the search unit of Amazon.com.

"You can think of this as cream-skimming," Tennenhouse said. "Can I skim off some of the most valuable searches? There is a huge range of value here."

High stakes

The stakes are high, said Oren Etzioni, a search and artificial intelligence expert at the University of Washington's computer science department.

"Google is very difficult to dislodge on the desktop," he said, "but mobile search is a very different beast, and the jury is still out on the question of who the ultimate winner in mobile [search] is".

Apple and Google are increasingly at odds, largely due to the rivalry between the iPhone and Google's Android smartphone software. As the rivalry escalates, Apple is systematically dialling back its reliance on Google services - most recently by announcing it is going into mapping big-time.

Siri is still in a beta or "trial" version, and users have criticised failings such as misinterpreted words, odd results and incomplete data. But Apple is betting that the fast-evolving technology will improve enough over time to spearhead its foray into Google's domain.

Google is still available on the iPhone, and users can even ask Siri specifically to search it for answers. Apple's strategy, however, is to reduce Google's relevance on its devices as it doubles down on the investment in the voice-enabled software, experts said.

The company's goal is to build Siri into a "trusted personal assistant", Tennenhouse said.

"The disintermediation of Google by Apple is really a matter of Apple putting together a front end, which happens to be Siri for now, and linking it directly to the high-frequency searches," said Roger Kay, technology analyst with EndPoint Technologies. "And in doing so, bypass the general search mode and more importantly, bypass Google's advertising pages."

Growth

Marketing research firm eMarketer forecast 30% growth in the US search advertising market to $19.5bn this year from $15bn in 2011. Google accounts for about three-quarters of that market.

The company has a lesser, but still substantial, hold on the mobile advertising market. That generated $1.45bn last year, with Google controlling about half, while Apple had 6.4%, eMarketer said. It expects the total market to be worth $2.6bn this year.

Apple devices running the company's iOS operating system are the biggest source of Google's mobile revenue, generating roughly 40% of the total, according to Piper Jaffray analyst Gene Munster.

Mobile search has long been focused on local information, such as finding which local stores have discounts or which French restaurant in the area is the best-rated. But no one has yet been able to develop the content fully.

Google signalled its seriousness about the sector when it bought Zagat last year and vowed to make the popular dining ratings authority a cornerstone of its local information offerings. In late 2009, Google was in talks to acquire Yelp for at least $500m, according to news reports at the time, but no deal resulted.

Yelp is now one of the few websites that is deeply integrated into iOS, featured not only in Siri but also in business listings for Apple's new map service.

Yelp's Stoppelman said the mapping integration was key, as searches are often location-based. He also says the Yelp app on the iPhone can readily integrate user reviews into the search functionality.

"Google just doesn't have that data," he said. "Yelp has the most word of mouth."

But Apple's success in search hinges almost entirely on the success of Siri.

Voice-recognition technology is not new, and users have so far not taken to it in great numbers. Google added this capability in its flagship search engine and its Android phones far earlier than Apple, but it is unclear how many people use it.

Whether Siri will be the answer also remains to be seen, New Venture Partners' Tennenhouse said. "The test always is: If you were to take this away from people, will they feel impoverished?"

Read more on:    apple  |  microsoft  |  internet  |  mobile
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