Opinion

Why software-driven Google is sitting prettier than aesthetics-driven Apple

Google's smart and varied investments in innovative software, and its corporate restructure, has given it the edge over single-focus Apple, writes Omaid Hiwaizi, president global marketing at Blippar.

Google: investments in software over hardware have won investors over
Google: investments in software over hardware have won investors over

Which will be the company of the future, Apple or Google? According to investors on Wall Street, Google is a far better bet. That’s why Google’s parent Alphabet has just overtaken Apple to become the most valuable business in the world.

This seems crazy really. Apple’s sales and profits are three or four times bigger than Google’s. It will take the smaller company many years to catch up.

But Google’s share price soared this week after better than expected financial results. Meanwhile Apple’s stock price has been sliding over the past year, falling even further since its admission that iPhone sales are flatlining. Where will Apple’s growth come from if not from the iPhone, which accounts for two-thirds of its sales?

Google, on the other hand, continues to rake in ever greater search, website and YouTube advertising revenues, even while its ad rates decline. And it seems to have so many potential aces up its sleeve with interesting long-term projects, from artificial intelligence to driverless cars.

That’s part of the reason Alphabet’s market capitalisation - its share price multiplied by the number of shares - hit $568bn earlier this week, overtaking Apple’s then-market cap of $535bn.

Moving away from hardware experiments

Apple has dominated WPP's BrandZ brand valuation rankings for much of this decade, but it is under constant challenge from Google. Apple may have created a more desirable brand, but Google’s surge reflects an important point about the future of technology.

Google has had limited success with its forays into making hardware (how many of you have bought a Nexus phone or Pixel C tablet?). But it has succeeded with data-driven artificial intelligence algorithms and dynamic business models, producing really strong utilities and services people use all the time. Remember owning the data doesn't necessarily mean you land a powerful business model, as Twitter is currently demonstrating.

Apple has succeeded with a hardware and software mix, but is driven above all by the aesthetics and user experience. We're seeing the growth of software driven by data outstripping the advantage Apple has had with its fashionable hardware. The gap will widen.

All businesses are software businesses now

Of course, you should never write off Apple, as it can surprise us with incredible new products. There will always be a place for beautiful devices, but the future is more about clever uses of data and software.

Google’s main business of search is already being transformed as people increasingly turn to discovery through social media and other technology. In future, there is likely to be a huge role for visual search, which allows you to interact with the real world by pointing your smartphone at objects and images (that's what we at Blippar are focused on).

Apple is ramping up its data and software business such as iCloud and the App Store. The company is looking into virtual reality and is understood to be developing a car.

For the moment though, it looks as though Google’s business model is more impressive than Apple’s premium brand-led approach. Google is a utility service provider, a weightless business, which leaves the heavy lifting of hardware to others - such as Apple. Data, artificial intelligence and machine learning are the future and Google seems to be getting there first.