I have always thought Apple should have their own search engine. Way back when Altavista was being snapped up by Overture (then swallowed by Yahoo) I thought Apple should be in the search engine market. I still do, so here are five reasons why Apple should have its own search engine.

[Disclaimer: I own a few hundred shares in AAPL. These ideas are my own.]

1. Revenue

We know that Apple’s core source of revenue of hardware sales which is not about to change. However, stock market analysts Trefis suggest that 8.2% of Apple’s share valuation comes from App related income.

This is an income stream that has been around for about two years, in which time the share price has risen from $96 per share to $270 per share (date: 26 April 2010). Now this share boost cannot be attributed to the apps alone (lest we forget countless iPhone releases and the iPad) we can see that new income streams are helping grow the overall size of the company and diversify the revenue streams away from just hardware income.

Creating a search engine that sold ads, on competition with Yahoo, Google and Microsoft could create another source of income that would be valuable to the long term business of Apple.

2. Consumer Relationship Channels

If we look at Google for a minute, we can see that Google started with a pure search engine, then added other search related services before expanding to offer blogging tools, and productivity apps to compete with Microsoft and Apple. Google Apps like Google Docs and Google Mail work to bring the user relationship closer to the ‘start’ of their online behaviour as well as working to retain them for longer [and know more about the user through smart data management.] The development of Chrome Browser, the OS, the Nexus One and the rumoured iPad challenger are all reasons for Google to grow the relationship with the consumer to boost its core business of search related advertising.

Why is this relevant to Apple? Because Apple already has those channels and more. They have the top selling mobile Internet device, known as the iPhone. They sold out the first stocks of the iPad. They make their own desktop hardware, own an email service and email client [Mail] as well as desktop software with their iLfe suite of products. So Apple already has the customer relationships across a wider suite of hardware, software and services than Google. Microsoft would still be dominant in this category but have struggled to really make the connections pay pre Bing. Yahoo only has a search engine and some additional web services that seem to wither once purchased (MyBlogLog anyone?)

Where Apple has a further advantage is their connection in the living room of homes. Whilst the Apple TV is small beer in terms of sales and revenue, it is still a connection that could only be rivalled by the Windows Media Center. Whilst Apple still define the Apple TV as a hobby they aren’t cancelling it, more trying to work out what to do with it. Could this be their Trojan Horse?

3. Traffic

The Apple site is a well respected and active site on the web. With estimated traffic figures for Apple.com standing around 5.6m visits per day [source: statbrain.com] it is a long way off Google [estimated at 118m] but much closer to AOL with an estimated 8.267m visit per day. On a pure comparison basis, Apple would not be able to compete with Google, Yahoo or MSN for traffic. Nor should it need to. If we look back at the AOL comparison for size of site [if Apple.com just became a search engine which would of course not happen] we could see promising income. For Q4 2009 (the latest AOL earnings report) advertising income stood at $500m. [source] Basic maths says that’s a billion dollars a year business – something that could be achievable for Apple.

Again, taking AOL as a comparison, not all Apple’s income would come from the core search engine. iWeb, the website building tool from Apple has the ability to include advertising widgets. These widgets at the moment are Google AdSense based, so the ability is already there to include an Apple advertising widget to generate third party income. Creating their own search search widget to further harness search traffic and resultant income would not be difficult to achieve.

This ability to harness channels is already taking shape with the iAd platform for the iPhone and iPad apps. AppleInsider (very slow link at time of publishing) suggests revenue from iAd could generate add another 8% to their share price. The combination of factors here is the perfect example of what could be done with a search engine.

This joining of the dots [the iPad/iPhone, editorial approval and distribution of apps with the app store and the aderving capabilities of iAd] could be replicated across more of Apple’s products to make a very strong ‘funnel’ to populate their own search engine. Analysis from Trefis suggests that the iAd could earn Apple $2bn in gross ad revenue. If that is pure mobile related income, what could be generated from a search engine?

For the sake of balance, the potential revenue from iAd was based on rate estimates from AdMob which were challenged by BusinessInsider.com as being way too high in this current economy.

4. Brand Loyalty

If we were comparing just traffic, Apple would be a niche player. But the brand loyalty of Apple is huge, with new disciples being made with every new iPad sale. Not only could Apple be harnessing its various strands of user connections but it could also be building on the relationship and trust Apple has with its consumers. Can you tell me any other site that gets people so excited when it goes DOWN? This has to be a strong card for Apple to play.

Looking at the list of 100 global brands for 2009, Apple was ranked 20th best Global brand by Interbrand. Google was 7th, Microsoft was 3rd. Yahoo was not featured.

5. Ad Serving

I believe this is important enough to warrant its own point. You may recall back in 2007 that all the main search engines acquired their own ad-serving products. Google acquired Doubleclick for $3.1bn, Microsoft bought aQantive for $6bn which included the Atlas ad server. Yahoo moved to purchase Blue Lithium an ad network with proprietary technology and took full ownership of Right Media.

These deals were to connect the supply chain between ads, advertisers and the sites themselves. Again, as we have seen with the purchase of Quattro Wireless that became iAd, Apple have connected the parts to manage the supply chain to in app advertising. I am not an expert in ad serving but I would expect that once you have a good ad server, there shouldn’t be too much work to make it connect to web pages, rather than mobile devices.

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So, I believe Apple have many of the key elements in place to create their own search engine play. Consumers with Apple devices are already searching. Whilst Apple will be getting third party revenue from Google AdSense it will be a lot smaller than if Apple had its own direct stream.

To me it seems a logical extension, to join the dots. But for the purpose of balance, here are a few reasons why not.

i. Mobile is the future, why invest in old technology?

A recent ‘future internet’ prediction from Mary Meeker of Morgan Stanely pointed firmly to a future Internet dominated by mobile access, so why bother investing in parts that may be redundant in five years? Well, people still search – they are just doing it from more platforms, of which Apple has the bases covered. Even if in time the search function is packaged as a dedicated app, a search engine will need to be built.

ii. Apple is making so much money, why bother?

Yup, Apple is making a lot of money. The share price is at an all time high, with expectation building for it to reach $300 per share.  With many of the components already in place, it shouldn’t have to be a huge investment to create a search engine upon which ads can be served and income can be generated.

iii. Build or Buy?

Search engines aren’t easy to build from scratch, and the skills required probably aren’t working in Cupertino right now. So an acquisition may be worth looking at. AOL has gone from being the world’s largest ISP to a ‘niche’ player in the market. With a market cap of $3bn compared to Apple’s $247bn this could be a an easy purchase, but AOL don’t have a search engine of their own. Ask Jeeves? Since Jeeves handed all but the front page over to Google it has slowly lost its relevance. With the growth in ‘personal content’ (aka user reviews and UGC) is there a new role for a ‘human edited search engine’? Ask Steve anyone?

iv. Shareholder Sentiment

The challenge with creating a search engine to compete with Google is the comparison with Google. Both Yahoo and Microsoft achieve great revenue from their search products which if they weren’t compared to Google would be huge news. Instead, because of Google’s success at better monetising the search arena, Yahoo and Microsoft get unfavourably compared against Google, which doesn’t always work well for shareholder sentiment. Should Apple decide to go down the search route, they may get more negative reaction than positive. As a golden stock right now, they may not be keen to jeopardize this.

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So, these were just my thoughts. It seems to be me that Apple are in prime position to create a new revenue stream from search. They have many of the component parts already in place, and cash to build or buy what they don’t have. If we look at the ‘big three’ search engines (Google, Microsoft, Yahoo) it seems to me that Yahoo is the most vulnerable. It has been slow to cement strategic investments and lacks the hardware/software/services route to connect with customers that Microsoft has and Google is rapidly building. Could we see iSearch as a potential search player?

I picked up a recent copy of Rolling Stone magazine which carried a double page ad for the MyHero3G ‘phone from T-Mobile [the HTC Hero in the UK]. The ad, like the TV ad [at the bottom of the page] promotes the fact it is ‘with Google’ but makes no mention of the Android brand nor does it include branding of the Android. Is this a concious decision by Google to not promote the brand?

Similary, there is a full page ad for the Droid which carries no Google branding at all. Is Android not a selling point?

As a side note, the copy of Rolling Stone also included two ads for the iPhone [one solus for Rhapsody, one for AT&T and apps]

On a total side note, try www.google.com/android – nothing there!

Gameloft, the french mobile game maker of such hits as Assassin’s Creed, and The Settlers have announced that they ‘and other software developers were reining in their Android development budgets because the app store was not as nice as iTunes (very true) and they weren’t making as much revnue as iTunes (expected.)

The article doesn’t mention which other developers are cutting back, but quotes Gameloft finance director Alexandre de Rochefort,

We have significantly cut our investment in Android platform, just like … many others,

This announcement that they have cut their investment is interesting but not really a surprise if they are measuring the investment with direct sales, given they have a duty to their shareholders. However, I don’t believe this news is a ‘death knell’ for Android but merley the decision of a public company to scale back investment in an unproven market.

The news that they are selling 400 times more games on iphone [than Android] and that iphone apps are 13% of its profits is a sign of a successful and mature [in relative terms] market. What this report does not tell us is how much they had invested in Android Apps, nor how much they have scaled back.

Given that Android has the potential [at least according to Gartner] to leapfrog the iPhone by 2012, one would hope that Gameloft continue to invest in Android development, even if it is billed as ‘research and development’ rather than immediate income generation.

Mobile Apps are set to become even bigger business in 2010. With Apple already generating a reported $200m in app revenue (that’s only 30% of the pie) Google’s Market and Nokia’s Ovi Store have both opened this year to tap into this booming market. Whilst some way behind in scale, I believe these app stores represent a signifcant shift in mobile consumption and in turn the actual business model for mobile companies. No longer will mobile ‘phone promotions be purely about what the ‘phone can do but what you can do ‘on the ‘phone.’

The latest promotions from Apple and from Nokia both concentrate on the apps, rather than the handsets.

Joining the bandwagon today is Samsung, which will open an App Store for independent apps next year. To quote the FT,

Samsung’s first smartphones using its bada platform will be released in the first half of next year, together with an “app store” that is meant to include at least 1,000 applications.

The latest research from emarketer also points to next year and beyond as ‘big’ for app revenue. I quote,

Mobile applications are a major channel for content delivery to mobile devices. In September 2009, the Yankee Group estimated that US paid smartphone application revenues would reach $4.2 billion in 2013—an order of magnitude above the 2009 estimate of $343 million.

In time it will be the mobile ‘phone companies without mobile app capability [and associated stores] that will be the laggards.

Today, the one piece of news that has circulated ad infinitum is the story that Ruper Murdoch will block Google from visiting his sites. I will write a longer post tomorrow but,

What the fuck are you doing?

I have yet to see any article actually question this wisdom owing to the fact that he is one of the world’s most successful publishers. He can still get it wrong. Until he shows us how his subscription model will work we will have to assume it is a pile of crap (I am happy to be corrected in time.) His deal with Google for Adwords on Myspace is $100m adrift of the deal target (that’s one hundred million dollars adrift) and the offices for his Myspace digital vision remain empty at the cost of $1m per month.

So, that says to me, he needs Google. He needs Google for traffic, he needs Google for revenue. As some have argued this is probably a [very public] negotiation stance for future haggling but he really needs to be careful. He may have revolutionised the TV industry with SKY but that was when the channels and choices were closed. The Internet is the utter contrast to this.

I will post more tomorrow, but read this article from e-consultancy and this article from Andrew Girdwood, both of which I have commented on.

There is a new mobile ‘phone war happening, and its not just between handset manufacturers. In the past when mobile phones were being bought the questions were around style (remember the ‘clamshell’? ) and what the ‘phone would do .. Bluetooth, Tri Band etc. But now I believe these are changing to what can be done on the ‘phone. Applications that are freely available on computers and the web are now being touted as USP’s for a particular ‘phone brand. Take the UK network 3. Their promotions revolve around tools we take for granted online as being ‘free’ on their platform including Google Maps and Windows Live Messenger.

Furthermore, the latest promotions from Nokia, a company that has been struggling without a ‘hit’ smartphone (read Om Malik’s, “The iPhone & Nokia’s Troubles, By the Numbers“) has been not about the handsets but about what you can do with the handsets. This in the form of their OVI Store promotions which are taking full advertising on and offline (including TV spots) to promote what you can do, rather than their latest ‘phone.You may recall the OVI store launch being riddled with problems which will not have helped Nokia’s fortunes.

The big battle that I see is the iPhone vs. Google Android in which the number of apps available has been one of the benchmarks for comparison. Some put the numbers at 1m + apps for iphone, 100,000 for Android. Certainly, as a user of both ‘phones the number of apps available on the iphone and the ease of access [to these apps] on the iphone far outstrips the Android which is one of the main reasons I use the Android less than the iPhone.

The App as the Hookor ‘The Killer App’

The concept of the ‘Killer App’ is not a new one but one I feel is particularly relevant here. Nokia is trialling a free version of Shazam, the mobile music recognition software in the hope it will drive additional music interest and resultant sales of music on Nokia handsets. Music again is the promotion for the newishly released Spotify apps for iphone and Android. The app, limited to premium customers is one potential killer app that could generate interest in new mobile phones. I personally feel a smart move would be for a provider (Handset, Operating System or Network) to subsidise the premium Spotify price to gain market share, much in the same way as Nokia is doing with Shazam. However vested interests of music sales for most players (except Google) means such a tactic may not happen. Putting music to one side, the principle remains strong if there is a new killer app that will kick start interest in mobile ‘phone sales.

The Concept of App Loyalty

As the market matures, or in the interests of gaining customers one has to pay attention to App Loyalty. If the app becomes ‘the thing’ then each platform will need to have the common tools offered by others. Let me explain, I have an iPhone and a Hero (Android.) On my iPhone I love:

1. Tweetie for Twitter
2. Portfolio Live for tracking stocks
3. Evernote for filing
4. Spotify for Music
5. Flight Control for games

Which ones can I get on Adroid?

1. Twitdroid is as close as I can get, but not nearly as good
2. I cannot find a decent portfolio manager
3. I have to use a PixelPipe ‘hash’ version which requires a Pixelpipe account (I don’t have one)
4. Yes, and its great
5. No, I can’t find anything close

Now one of the issues with this is finding the apps. The app store Market on the Android is poor with little visibility of all the available apps, few categories in broad brush strokes like ‘finance’ which covers everything from mortgage calculators to tip calculators and share price tools. Trying to research these on the website for Android is equally hard as only a handful of apps are displayed. Furthermore the quality of some of these apps is questionable which,without better filtering brings down the overall quality of the market.All is not lost, however, there are some great apps for Android (I like the WiFi Analyser) but I find them through trial and error rather than a pleasurable shopping experience.Larva Labs post a great article covering more of the Market’s shortcomings.

If for final evidence, if you will, of the importance of apps it is the revenue they generate. GigaOm estimate Apple sells $2.4 billion worth of apps every year in their store. If Apple retain 30% of the sale value (says Infobeans) that would equate to around 15% of their 2008 profits. Something not to be sniffed at.

Google’s mobile aspirations continue apace. A Firmware update is planned for Android (2.0, known as Eclair) which will bring even more enhancements to the Android ‘phone and it looks [from this walkthrough] that the UI will become a lot smoother. News also reaches us that Google are building their own ‘phone to be sold directly and not through the Telco’s. To quote Thestreet.com,

In what is likely to be seen as disruptive to the wireless status quo, Google is working with a smartphone manufacturer to have a Google-branded phone available this year through retailers and not through telcos, according to Northeast Securities analyst Ashok Kumar, who has talked to Google’s design partners about the plan.

This news comes on the heels of a Garter report predicting the Android operating system to be the second largest mobile operating system by 2012. To quote Computerworld who ran the story,

Gartner forecasts Android will actually rank second globally, behind the Symbian OS, which is used in Nokia devices that are highly popular in Europe and many countries outside the U.S. Symbian now runs on about half of all smartphones, but will fall to 39% in 2012, Gartner says.

[I'm still trying to find the actual report quoted, I'll link it here if I do.]

And today we see Google Analytics add a rash of new improvements to help us understand traffic from mobile platforms including identification of which mobile platforms. Quoting econsultancy,

As part of an upgrade to Google Analytics announced today, Google is introducing a numer of useful enhancements,  including the ability to track traffic to both mobile sites and applications, and explanations of what device is being used. Meaning that marketers will be able to track digital campaigns across web and mobile platforms.

Whilst this is not a directly related point to Android it is also another important sign that Google is visibly growing the attention is it giving to mobile platforms.

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Eclair image courtesy of QuintanaRoo

OK, the Google Android ‘phone has been around for over a year now and has seen limited success but with real potential. As a die hard iPhone lover I had shunned an Android until I felt I really should understand where this is heading.

In the past week we have seen announcements that some major US carriers are going to be offering Android Smart ‘phones before Christmas. This news just adds to the reasons why we need to be paying very close attention to Google Android. If you pay attention to the Google share price (it has almost doubled in six months) you will see that some of the fuel for this growth in share price is the Android roll out.

So, here are my five reasons you need to pay attention:

1. Network Access. Verizon Wireless, the largest US carrier will start selling two Android handsets before Christmas, one HTC, one Motorla. Good news for these handsets, bad news for Apple, RIM (Blackberry) in the handset department. Bad news also for Microsoft whose outdated Windows Mobile is being shunned in favour of Google. Bearing in mind the choices Verizon no doubt had, and regardless of how many Android handsets are sold this Christmas, this deal should be seen as a strong endorsement for the future of Android.

(The iPhone is still available only on AT&T in the USA. The Verizon deal offers a very real alternative to those people looking for a s,art ‘phone but not necessarily a Blackberry. The deal with Orange (and soon Orange & T-Mobile) in the UK means this is less of a threat on this side of the pond)

2. The Google Android Operating System is free to handset manufacturers. In this market, free is a very good incentive for handset manufacturers to try your software. Remember, Windows Mobile is outdated (and probably costs a lot of money), and the iPhone software is and will remain exclusive to Apple. If handset manufacturers and carriers are looking for the iPhone killer, they have the potential to gain one with little upfront investment or risk.

3. Android is Open Source. iPhone is not. Whilst both systems have app stores, the open source structure offers a greater ability to really see where this can go. I feel it is important also as the Android system, its apps, and the app market (on the ‘phone is atrocious) is not as polished as the iPhone. By making this open source it puts the power and responsibility for growth into the hands of a much larger connected audience which could see step change improvements as we move forward.

To quote Scott Morrison, WSJ

Mobile apps are critical for two reasons. Yankee Group estimates the U.S. mobile app market will reach $4.2 billion in 2013; meanwhile, consumers are likely to be drawn to the mobile phone platform that boasts the greatest number of apps. However, it becomes a chicken-or-egg debate because developers will turn their attention to Android as more people buy those phones, but consumers might be reluctant to buy Android phones without a robust set of apps.

4. Android is Hardware Agnostic. In part because of its open source nature, the operating system can be tweaked to deliver the right customer experience for each carrier and the ability to run on different ‘phones. If we look at two other options, the iPhone and the Blackberry – you can only use the iphone system on the iphone or the ipod touch. If you don’t like the iphone then tough, and in the States, if you like the iPhone but not AT&T – tough. The Blackberry is similar – whilst there are umpteen different Blackberry styles, its still a Blackberry. Android can appear on any network (subject to contracts) and on (virtually) any ‘phone type. Of course, the handset choice is limited at this stage but that’s because of the audience size – as Android increases in popularity so the investment in hardware will follow from manufacturers.

5. It connects seamlessly with your Google accounts. If you look at any of the major search engines over the past 10 years, they have all worked to grow the reasons to stay on the site, not leave it. With Google this has been the investments with iGoogle, Maps, YouTube, Docs etc. So Google are taking this strategy mobile, giving you the ability to use Google as you would on a computer. This in itself is nothing new, nor is it fully harnessed (I don’t get the same experience on Google Finance, for example, as I do on the computer) but with the sheer size of Google users (and growth) this starts to become an attractive option, to have all of your ‘stuff’ in one place. Android needs to work hard to ensure there are additional benefits or greater harmony between computer and ‘phone (vs. a Google app on the iPhone or Blackberry) for it to become a true killer. I believe this is a strong point moving forward, but one that needs to work right now.

The Future’s Bright The Future’s Android

There are many reasons not to like Android right now, not least the lack of polish, the small number of users and the lack of apps. BUT the reason you need to pay attention is that these will be fixed. The Verizon deal is big news as it paves the way for much quicker potential growth. If growth kicks off, then in will come more manufacturers, more developers and more money. Once this happens we will see a snowball effect with growth coming quicker and quicker.

Make no mistake, Google are in this to make money. It is no accident there is a search button the handset – they want to be your partner in mobile surfing and mobile searching. If you watch their video for Android 1.6 you will see they focus on your ability to search.Their investment now will pay dividends in a few years. If I was a betting man, I’d say those are going to be big dividends.

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I have found a useful and free method to back up all my emails from Gmail to Evernote. There is a chance this method will work on most webmail accounts but I haven’t tried them to offer a recommendation.

To do this you will need your gmail account and an Evernote account. Depending on the volume of emails you receive and send you may need the premium version.

For this to work you will need to know your Evernote email address. You can find it in your account settings. It should look something like xxx.xx.x@m.evernote.com.

1. Back up incoming emails

In Gmail go to >> Settings >> Forwarding and Pop/Imap  – then select ‘forward a copy of your incoming mail’ – input your evernote email address and save changes. I suggest you leave a copy of the email on gmail so you can read it as usual.

Once you have done this, all future emails will be sent directly to your Evernote account, ready for your next visit.

2. Back up outgoing emails

I have yet to find an automated method for doing this but a simple BCC: to your Evernote email address on each email sent will ensure you back up the outgoing email as well as the incoming emails.

Flaws

This solution is a little heath robinson but works nicely if you want a simple method for backups. It is not perfect for a number of reasons, perhaps you have other ideas of how to improve this..

i. Knowing how email conversations can be threaded, there is a strong chance of high content repetition if every incoming and outgoing email is backed up.

ii. All the emails will be sent to the default notebook on your evernote account – unless you set your default notebook to email backups you will need to organise them in evernote as you go along.

iii. No auto categorisation – on from point ii, there is no method to ‘tag’ your emails so they can be filtered into a specific notebook. Tagging would greatly help the management of multiple email account backups.

iv. This method works on all emails moving forward, I have yet to work out how to do it for the existing inbox/old emails.

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This is just a little workaround I thought I would share – have you tried this or similar? Do you have any tips worth sharing?

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Google announced today the launch of the Chrome Operating System, an extension of the Chrome browser initially intended for the fast selling netbooks.

The announcement is a major one by any definition. However, it can also be seen as the culmination of a master plan which over time had many significant milestones. The offering of Gmail, Calendar, the purchasing of Writely, the introduction of Google Gears, then Chrome & Android.

Like the Mighty Morphin’ Power Rangers – each element of the Google Aresenal was powerful in its own right. But stick them all together into an operating system and the total is much more powerful than the sum of its parts.One can be confident the operating system won’t end with mobiles and netbooks.

This same game plan needs to be watched in the social media space. Take Gmail, Calendar, Picassa, YouTube, add a Jaiku purchase then launch Google Wave and Google are well on their way to another behemoth.

The next issue to watch after that is when the subscription model kicks in. Others have already noticed the quiet decrease of services offered free from Google Apps, and an increase in the promotion of ‘premium packages’.  Google’s game plan here is to become the essential partner for so many services before switching on a premium model. If that happens [even at a few dollars a month] we could see the next billion come easily for Google.

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