Yahoo! Inc. (NASDAQ:YHOO) is said to be talking with Apple Inc. (NASDAQ:AAPL) about a partnership, according to a report from Bloomberg. Given the mobile-focused strategy that Yahoo!’s CEO, Marissa Mayer, has laid out, the report should not be a surprise.
But while closer integration would obviously benefit Yahoo!, Apple Inc. (NASDAQ:AAPL) would be just as well served. In particular, working closely with Yahoo! Inc. (NASDAQ:YHOO) would help Apple stymie Google Inc (NASDAQ:GOOG)‘s Android.
Future risks to Apple’s mobile strategy
Apple’s iPhone and iPad are arguably the best devices in their respective markets. However, Apple’s apps (outside of the company’s operating systems) are sorely lacking. Business Insider has provided a list of 16 apps better than the ones bundled with the iPhone.
In that category, Google Inc (NASDAQ:GOOG) is much better positioned than Apple. In fact, many of the company’s web services — Google Maps, Google Drive, Google Search — are top downloads on Apple Inc. (NASDAQ:AAPL)’s app store.
Apple is clearly interested in opposing Google’s dominance in these services. Apple booted both Google Maps and YouTube from iOS when it upgraded the mobile operating system to iOS 6 last year (the apps are still available, but must be manually downloaded).
Yahoo!’s planned ecosystem
Mayer has been in charge of Yahoo! for less than a year, but her strategy is already starting to take form. Without getting into the actual device manufacturing process or operating system game, Mayer wants to make Yahoo! Inc. (NASDAQ:YHOO) the focal point of a user’s mobile experience.
Theoretically, a consumer purchases an iPhone because they want access to the mobile Internet — social networking, web browsing, video consumption and so on. In an interview with Bloomberg, Mayer explained that she hopes Yahoo! can be the hub to best facilitate the satisfaction of these needs, providing services like Yahoo! email, Yahoo! Sports, Yahoo! Finance, and the company’s endless news feed.
In addition to Yahoo! Inc. (NASDAQ:YHOO)’s existing services, the company is also rumored to be in the market for a few major acquisitions, in particular Yelp and Dailymotion. These sites serve a consumer’s need for local information and video content, respectively, and compete directly with Google’s Zagat and YouTube.
Partnering with Yahoo! would be the answer to Google’s dominance
If Yahoo! was to purchase both Dailymotion and Yelp, for example, and partner with Apple Inc. (NASDAQ:AAPL) to integrate the software directly into Apple’s iPhones and iPads, it could deal a blow to Google Inc (NASDAQ:GOOG). Even if it didn’t acquire these properties, closer integration with Yahoo!’s existing properties could benefit Yahoo! at Google’s expense.
Since its introduction in 2004, Google’s gmail has been slowly increasing in popularity. Last November, Gmail passed Microsoft’s hotmail to become the most popular email service. Yahoo!’s email remains popular, but its growth has stagnated.
By integrating Yahoo! Inc. (NASDAQ:YHOO)’s email with Apple’s phones, it could incline some users to make the switch from Gmail to Yahoo!.
Yahoo! is a better option than Google
In the long-run, Apple Inc. (NASDAQ:AAPL) may have to step up and bolster its own online services (perhaps it could, like Microsoft before it, try to purchase Yahoo! Inc. (NASDAQ:YHOO) at some distant future date). To some extent, the company clearly realizes this, as it has been working on its own maps.
But in the meantime, working with Yahoo! Inc. (NASDAQ:YHOO) would be a better option than allowing customers to flock to Google’s services.
Devices running Google Inc (NASDAQ:GOOG)’s Android operating system are the biggest threat to Apple’s dominance in smartphones and tablets. A few years ago, Android devices may have been nothing compared to Apple’s — but that’s no longer the case.
Samsung has made great strides in creating high-end Android devices. In fact, Samsung has become so confident in its devices that it priced its Galaxy Note 8.0 at $399 — $70 more than Apple’s competing iPad Mini.
At the same time, there are more cheap Android tablets and smartphones available than ever before.
A consumer who purchases an Apple iDevice, but uses Google Inc (NASDAQ:GOOG)’s services, seems intuitively more likely to jump ship to an Android device. Thus, if Apple wants to retain its mobile market share against a wave of Android competition, it should work to reduce further reliance on Google. Partnering with Yahoo! could accomplish just that.
Yahoo! would be the big winner
But in the end, the biggest winner in any deal would be Yahoo!. Many years ago, Yahoo! competed directly with Google; yet, at some point, the company was passed by. Mayer seems to be poised to bring Yahoo! back to Google’s level, and a deal with Apple Inc. (NASDAQ:AAPL) would dramatically accelerate that process.
For its part, Apple would do well to go along for the time being. Helping Yahoo! compete with Google Inc (NASDAQ:GOOG) once more could help slow the growth of Android and keep consumers flocking to Apple’s iDevices.
Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google.
