Interesting story from Peter Burrows and Cliff Edwards at BusinessWeek:
Apple is in talks with Microsoft to replace Google as the default search engine on its iPhone, according to two people familiar with the matter. The talks have been under way for weeks, say the people, who asked not to be named because the details have not been made public.
The discussions reflect the accelerating rivalry between Apple and Google, now the main provider of Web search on the iPhone.
Later in the day, Yukari Kane and Ethan Smith at the Wall Street Journal reported similar news:
Apple’s divide with Google over how it views media content also drives the wedge deeper between the two companies. Apple’s iPhone, for example, currently closely integrates Google’s mapping and search technology, but a person familiar with the matter said Apple was in serious discussions with Microsoft Corp. to incorporate its Bing search engine into the iPhone as the default search and map technologies. Microsoft declined to comment.
No doubt the discussions do reflect the growing Apple-Google rivalry. Google is now clearly in the mobile phone business, and Apple just bought a mobile advertising company Quattro Wireless.
But there’s another angle here, besides the Apple-Google rivalry. Default search is important. It’s worth tens of millions of dollars per year for desktop Safari. (An informed source in June 2007 told me Google was then paying Apple around $2 million per month for its placement as the default search provider for desktop Safari.) Surely it’s worth millions per year for the iPhone as well. Probably a lot of millions. And the way the iPhone platform is growing, well, you get the picture.
And, in addition to monetary concerns, it’s an important feature. People use their iPhones to search the web, and most of them surely use the built-in search field in MobileSafari. The quality of the results is important.
Say what you want about Microsoft in general and Bing in particular, but the fact is, Bing is the only major competitor to Google left standing. Yahoo search is a lame duck — they’ve already inked the deal to power it with Bing. Who else is there?
As I see it today, Bing is it. For that reason alone, I hope Bing does well and grows, or at least holds its own, against Google. And I obviously hope it does so by providing equally good or superior search results. I don’t think it’s ever healthy, in any market, for one champion to obliterate all competitors.
But from a practical standpoint, whether Apple is rooting for Bing to succeed or not, and regardless whether Apple has any actual intention of perhaps switching to Bing as the default search provider for MobileSafari and Safari, Apple almost has to discuss such a potential deal with Microsoft. Even if what Apple ultimately wants is to stick with Google as their default search provider, how can Apple negotiate the best possible terms from Google if they don’t have any other option? (It strikes me as very likely that even if Google remains the default search engine for iPhone OS, Bing will replace Yahoo as the second choice, which you can toggle in the Settings app.)
So of course Apple is going to negotiate with Microsoft. And of course Apple is going to happily leak the existence of such negotiations to the press, as we’re seeing today, because they want Google to see that they’ve got competition to be the iPhone’s search provider. It’s Negotiating 101.
But then here’s the really interesting part of BusinessWeek’s report, buried in the last paragraph:
Even if it’s consummated, an Apple-Bing deal may prove short-lived. The person familiar with Apple’s thinking says Apple has a “skunk works” looking at a search offering of its own, and believes that “if Apple does do a search deal with Microsoft, it’s about buying itself time.” Given the importance of search and its tie to mobile advertising — and the iPhone maker’s desire to slow Google — “Apple isn’t going to outsource the future.”
Which is intriguing if true, and helps Apple’s negotiations with both Microsoft and Google even if it isn’t.