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Apple and Google: New CEOs, old strategies

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Both Apple and Google saw their CEOs stepping into the background this month, for different reasons, but there was still a sense of an old guard standing aside. However, the change is likely to come from outside.

Apple and Google, two of the companies that have helped define the new web age – once the closest of allies, now bitter enemies – will not be steered onto a radically new course by their new operational chiefs. Indeed, to the disappointment of some observers, they have stuck firmly with the old guard.

Apple COO Tim Cook is reprising his now-familiar role of standing in for Steve Jobs while the CEO takes leave for health reasons (though he remains involved in strategy and may still return to day-to-day control). And Google CEO Eric Schmidt, who becomes executive chairman, is replaced by co-founder Larry Page. There is good reason not to mend things that aren’t broken, but by sticking to their old courses, especially in the volatile world of mobile, Apple and Google may come under threat from the real forces of change, the new wave of web giants personified by Facebook.

One of the speculated reasons for Schmidt’s abrupt change of status was his failure fully to respond to Facebook. Google, despite various efforts, has not exploited the huge social networking boom, which is changing working and leisure habits as surely as browsing and searching did. If it continues to be weak on the social front, it will also be disadvantaged in other key areas that should, logically, expand its core advertising business – location services, recommendation engines and payments.

One of the critical challenges for Google’s reshuffled executive team will be to follow through on the aim of creating an end-to-end platform that embraces the entire web value chain, and is open to all types of developers and devices. This is no longer a far-sighted vision but an urgent necessity – because Facebook clearly has something similar in mind.

In recent months, the social network has started to transform its app into a fully fledged developer platform with open APIs, has added a range of location and purchasing capabilities, and this week reports surfaced that it was striking right at Google’s heart by acquiring a mobile advertising engine, start-up Rel8tion.

This may be a minnow compared to Google’s AdMob or Apple’s iAd, but Rel8tion taps into the modern face of the mobile internet, particularly with support for ‘hyper-local’ advertising, which can be precisely targeted. According to AllThingsDigital, the start-up is working on a platform to synchronize a subscriber’s location data with the most relevant advertising inventory. This could integrated with the Facebook Places location service. Co-founder Peter Wilson has a strong heritage – he has also been consulting with Facebook, and previously worked for Google and Microsoft.

This deal sees Facebook making serious efforts to monetize its vast user base and brand, and achieve a fully-fledged web platform, and should be a wake-up call to Google’s new CEO. Although the official reason for Page’s elevation was to “simplify our management structure and speed up decision making”, many are hoping for faster action in the mobile and multiscreen services environment. Android, of course, is a huge success, but in many ways embodies the ‘traditional’ mobile web model, focused on downloads and conventional cellular data plans, while the world is shifting towards browser/cloud approaches and new-style devices and content.

In the new structure, Page will lead product development and technology strategy, while Brin “will devote his energies to strategic projects, in particular working on new products”. Schmidt will take the role of executive chairman, “focusing externally on deals, partnerships, customers and broader business relationships, government outreach and technology thought leadership”. He will also act as internal advisor to the two others.

He hinted that one of his key roles would be communicating with, and lobbying, government agencies, as calls for antitrust probes rise on both sides of the Atlantic. “People don’t understand what we do or don’t do,” he said on the firm’s fourth quarter earnings call. For the quarter, net income was up 29% year-on-year to $2.54bn on revenues up 26% to $8.44bn, with mobile activities a critical driver.

Indeed, Schmidt marked his new role by writing an article in the Harvard Business Review, outlining Google’s strategies for the year ahead, which he says are “all about mobile”.

This broke down into three main areas. One, harnessing the spread of 4G networks, which “will usher in new and creative applications, mostly entertainment and social, for these phone platforms”. This, of course, raises the specter of Google’s failure, so far, to exploit the social networking phenomenon. Two, developing new applications, especially mobile money and payments systems, which could be another area where Google could gain huge influence across the whole value chain, as it has in advertising and search. Three, increasing the availability of cheap smartphones in poor regions of the world to allow “literally a billion” people to use mobile services.

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