Dogfight: How Apple and Google Went to War and Started a Revolution

by Vogelstein, Fred

  And Rubin had designed a partnership that was much more carrier-friendly than anything Apple had come up with. On both Apple and Android platforms, app makers get about 70 percent of the revenue from selling their software. But Apple takes the remaining 30 percent, whereas Rubin decided to give what might have been Android’s share to the carriers. Some thought he was crazy to leave that kind of money on the table. Rubin thought it was a small price to pay to give the Droid every possible chance of succeeding. A carrier’s commitment to a device could mean the difference between its success and failure, and Rubin wanted to give carriers every incentive to strongly back the Droid. If the Droid succeeded, Android and Google would benefit in so many other ways—higher search traffic, improved advertising revenue, increased customer loyalty—that it would be worth it in the end.

  The potential of the Droid partnership was exciting. But Rubin said the work to produce an actual phone made the stress levels of the G1 seem tame by comparison. At the end of 2008, Jha had promised Rubin a device far faster than any other smartphone. He’d said its touchscreen would have a higher resolution than the iPhone’s; that it would come with a full keyboard for customers who didn’t like the iPhone’s virtual keys. And he promised a phone that was thin and sleek, one that could compete with the iPhone on pure aesthetics. But when the first prototypes started showing up at Google in the spring of 2009, they looked nothing like the designs Jha had presented. Indeed, they were hideous. There was no way to sugarcoat what had happened: Rubin and his team had had so much faith in Jha that they hadn’t questioned him closely enough. Now it appeared that faith was going to cost them enormously.

  Despair set in. “It looked like a weapon. It was so sharp and jagged and full of hard lines. It looked like you could cut yourself on the edges,” says Tom Moss, who was Rubin’s head of business development. “We were really concerned. There were a lot of conversations where we asked, ‘Is this really the device we want to do? Should we try to talk Motorola out of it?’” The implications of canceling the project were huge. Another dud, right on the heels of the disappointing G1, might cement the public’s perception of Android as a flop. Executives at Verizon would look inept. They were still taking heat for passing on the iPhone. And a failure would likely mean the end of Motorola, the company that had invented the cell phone. “There was a lot riding on it,” Rubin said to me in 2011. “I was betting my career on it.”

  A sense of doom—and panic—hung over the project all summer. The phone needed to be delivered to stores by Thanksgiving, but that now felt more like an execution date than anything to look forward to. Android engineers worried the phone wouldn’t sell, but still needed to work weekends and holidays to develop the software. Meanwhile, Jha, Rubin, and Stratton spoke almost every day trying to figure out a way to tweak the design without having to reengineer all the electronic components. And the phone still didn’t have a name. McCann, Verizon’s longtime ad agency, had come up with a list of possibilities—including Dynamite—that few liked. As late as Labor Day, the phone still went by its code name, Sholes—the last name of the man, Christopher Latham Sholes, who invented the first commercially successful typewriter in 1874. Feeling cornered, Stratton reached out to McGarryBowen, a young ad agency known for its unconventional thinking. “We told them they had a week,” said Joe Saracino, who was Verizon’s executive in charge of the new phone’s marketing. “A few days later, cofounder Gordon Bowen comes back and says, ‘What do you think when I say Droid?’”

  In retrospect, what the agency had done was simple: it turned the phone’s menacing looks into its biggest asset by marketing it as an anti-iPhone. The iPhone was smooth and refined, so they would pitch the Droid as rough and ready for work. The iPhone’s electronics and software were inaccessible, so they’d market this phone’s hackability. “If there had been a phone in the movie Black Hawk Down, it would have looked like the Droid,” Bowen told the executives. A few weeks later, in early October 2009, Verizon and its new agency presented the Droid campaign to a group of two hundred Android staffers. One ad featured stealth bombers dropping phones on a farm, in the woods, and by the side of a road. Another attacked the iPhone as a “digitally clueless beauty pageant queen.” A third listed all the things the Droid could do that the iPhone couldn’t. When the ads were over, the room erupted in applause. The Android team had been demoralized, but “when they decided they were going to do this full-on attack on the iPhone—that we were going to war—we got really excited,” Tom Moss said.

  When the Droid launched, on schedule, it was a tremendous hit, outpacing sales of the original iPhone in its first three months. In January 2010, Google launched another salvo at Apple with a phone it had developed itself called the Nexus One, which was a commercial failure because Google tried to market and sell the phone itself, instead of through a carrier. But it was a technical triumph. It had a bigger touchscreen than the iPhone. It had a noise-canceling microphone so that users could talk in a busy street without annoying their callers with background noise. It used a phone chip that worked on every carrier frequency so users could switch carriers without buying a new phone. It had a better camera, and it allowed users to talk longer on a single charge. Most significant, it had all the multitouch features Jobs had demanded Google remove from the G1 roughly eighteen months before. Motorola had released the Droid without those features. But a week after launching the Nexus One, Google released a software update for the Droid that added multitouch there too.

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  For Jobs, it was the final straw. He had told Google that if it included multitouch on its phones, he would sue, and true to his word he sued the Nexus One maker, HTC, a month later in Delaware Federal District Court. More noticeably, he began seeking out public opportunities to attack Google and Android. A month after the Nexus One was released—and days after Jobs announced the first iPad—he tore into Google at an Apple employee meeting. “Apple did not enter the search business. So why did Google enter the phone business? Google wants to kill the iPhone. We won’t let them. Their Don’t Be Evil mantra? It’s bullshit.”

  In October, at the end of the quarterly earnings conference call with investors and Wall Street analysts, Jobs spent five minutes laying out in detail why Android was an inferior product in every way. He said Android was hard for consumers to use because every Android phone operated differently. He said the Android was hard to write software for because of that. He said that meant Android software would not be very good and would not work well. He said the argument that Android was better than the iPhone because the Android platform was open and Apple’s was closed was “a smoke screen to hide the real issue: What’s best for the customer?” He said the marketplace supported those claims. “This is going to be a mess for both users and developers.”

  His strongest comments, which he made a week after Apple sued HTC, have been repeated hundreds of times since they appeared in Isaacson’s biography at the end of 2011:

  Our lawsuit is saying, “Google, you fucking ripped off the iPhone. Wholesale ripped us off.” Grand theft. I will spend my last dying breath if I need to, and I will spend every penny of Apple’s $40 billion in the bank to right this wrong. I am going to destroy Android because it is a stolen product. I’m willing to go to thermonuclear war on this. They are scared to death because they know they are guilty. Outside of Search, Google’s products—Android, Google Docs—are shit.

  Privately, Jobs was just as animated. In public he had a long history of fibbing to hide his true intentions. In 2004 he said Apple would never make a phone while Apple was working on—a phone. Some therefore wondered if Jobs’s public trashing of Android also had ulterior motives. But during Apple executive-team meetings, Android was almost an obsession for him. It was one of the reasons why he bought Quattro Wireless at the end of 2009, for $275 million. Quattro was one of the early companies with expertise in selling, creating, and distributing advertising for smartphones. Google controlled online advertising on desktops and laptops. Jo
bs didn’t want Google extending that control to the smartphone too. “I think he felt that content [games and other apps on phones and tablets] was going to be ad supported, and that those developers needed to make money,” said Andy Miller, Quattro’s CEO and cofounder. “He thought that if Apple didn’t have a home team providing them with a check, and all their advertising dollars came from Google and AdWords, then they would think about developing for Android first. So he set out to do that when he went out on leave [to get a liver transplant]. He told Scott [Forstall] that that was what he wanted to do, and Scott met with us.”

  Miller said it was an amazing experience working for Jobs, but that it was quickly clear to him that Apple wasn’t set up to be successful as an advertising company any more than Google is set up to be a consumer-products company. iAd now probably generates roughly $200 million a year in revenue for Apple, Miller said. It is what Apple is using to finance its newly launched free Internet radio service. But at the beginning of 2010 it was difficult to integrate ad sales into Apple’s “We make and sell the most beautiful things on earth” culture. Miller remembers it as being one of the most exciting and exhausting experiences of his career. “I was a VP reporting directly to Steve, and I had to do a presentation to him, Forstall, Eddy Cue, and Phil Schiller every Tuesday. I was doing a presentation every week for the leader of the free world, so that was a huge amount of stress. Meanwhile, Steve got sicker and sicker. We started to do meetings at his house. Nobody would make a[n advertising] decision without Steve because he understood advertising better than anyone at the company. I mean, he was the miracle man. He kept coming back and coming back. But [he was obviously so sick that] you just couldn’t look at him after a while. It was awful. But he was really incredible. I think he was doing stuff until two days before he died. The worst part about it all was that he was almost always right.”

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  An irony that is often lost in discussions about the Apple/Google fight is that for all the lawsuits that now have been filed, Apple has not yet actually sued Google itself. It has only sued the makers of Android phones, such as Samsung, HTC, and Motorola. The private assumption by Google, and the phone makers as well, is that Apple understands it’s easier to convince a judge and/or a jury of theft if lawyers can put two phones side by side, as Apple did successfully in front of a jury in 2012 in its suit against Samsung. It’s much harder to prove theft with software—especially software such as Android, which carriers and manufacturers can modify at will, and which Google gives away for free. This has created a strange dynamic in the Apple/Google fight. It has allowed Google—especially Schmidt, who is still Google’s most public face—to remain oddly removed from a battle that is really about him and Google’s executive team. The Apple/Google fight is now one of the nastiest, longest, and most public corporate battles in a generation. But when you listen to Schmidt or any other Google executives talk about it, they sound almost as if Google were a bystander. Schmidt has been so good at staying above the fray that he has at times sounded like a parent talking to a child in the midst of a tantrum when he talks about Apple and Jobs.

  On Android’s evolution, he said to me in the middle of 2011, “Larry and Sergey and I understood the strategic value of Android, but none of us I think foresaw how strategic it would become. Every once in a while a perfect storm occurs. Your competitors make some mistakes. You end up with the right product at the right time. There are really no other good choices of products. It all sort of happens in a moment. That’s what happened with Android.”

  In the middle of 2012 I asked him to explain how it took so long for Jobs to understand Google was a competitor, and Schmidt said, “Remember this [Android] was a small business for Google [in 2008]. This was not a big deal. So we [Jobs and I] monitored it.”

  He wouldn’t answer my questions about Jobs, saying it was unseemly to talk about him in this context now that he is dead. But in 2010 he said to Isaacson, “Steve has a particular way that he wants to run Apple, and it’s the same as it was twenty years ago, which is Apple is a brilliant innovator of closed systems. They don’t want people to be on their platform without permission. The benefit of a closed platform is control. But Google has a specific belief that open is the better approach because it leads to more options, competition, and consumer choices.”

  And at the end of 2012, Schmidt told The Wall Street Journal, “It’s always been on and off [our relationship with Apple]. Obviously, we would have preferred them to use our maps. They threw YouTube off the home screen [of iPhones and iPads]. I’m not quite sure why they did that.” But he said whatever their disagreements, none of Google and Apple’s conflict was nearly as bad as the media made it out to be. “The press would like to write the sort of teenage model of competition, which is ‘I have a gun, you have a gun, who shoots first?’ The adult way to run a business is to run it more like a country. They have disputes, yet they’ve actually been able to have huge trade with each other. They’re not sending bombs at each other.”

  Schmidt is an old hand at these kinds of interactions, and he is good at it. Anyone who has ever worked for Schmidt will tell you that he is one of the toughest, most competitive executives walking. Ask Rubin what it was like to be on the receiving end of a few “Don’t fuck it up” lectures from Schmidt. “Not fun,” Rubin says. But in public Schmidt comes across as anything but the ambitious, competitive Silicon Valley tycoon that he is. He looks and sounds like an economics professor. Dressed typically in khakis and either a sweater or a blazer and tie, he goes out of his way to make journalists feel comfortable in his presence. He often solicits follow-ups to make sure, as he often says, that he has answered your question “crisply.” He is one of the rare executives unafraid to answer questions head-on. His answers are filled with facts, data, and history. He always has an agenda, but he rarely appears evasive. Most CEOs avoid detailed discussions with journalists at all costs. They’d rather seem evasive than miss an opportunity to repeat a talking point. Schmidt prefers to overwhelm with facts and knowledge. He’s not afraid to talk about facts that don’t support his thesis. He just supplies other facts that do.

  Schmidt’s public diffidence serves many goals. Many still don’t understand how Google works—how it makes money and what it does and doesn’t do with all the information about the Internet and its users that it sees. Schmidt is so good at explaining it all that even after handing over CEO duties to cofounder Page, Schmidt has been called Google’s explainer in chief. These explanations solve two problems: They truly keep the debate about Google focused on facts. They also make Google seem less ambitious and competitive than users, customers, and competitors are being tempted to believe.

  It’s been astonishingly effective—especially on Microsoft. For five years, Schmidt denied that Google was competing with Microsoft Windows for control of desktop computing, and Microsoft sounded as if it believed that for a while. By 2005, however, Google, not Microsoft, had more influence over what users did with their computers. Schmidt denied that Google was building an online version of Microsoft Office, and Microsoft believed that effort wasn’t much of a threat either. By 2010, however, big commercial customers such as the City of New York started using Google’s applications to force Microsoft to lower its Office prices. And Schmidt denied that Google was building its own Internet browser—to compete with Microsoft, Apple, and its open-source partner Mozilla, which makes Firefox. Then, in 2008, it released Chrome, its own Internet browser. Schmidt said, quite reasonably, that over time it had become clear to him that a company such as Google that depended on Internet-browser access for people to use its products should not cede control of the browser to anyone. But it would have seemed less Machiavellian if he hadn’t been denying Google’s plans so forcefully for so long.

  Google has seemingly played a similar game with Apple over its mobile ambitions. It told Apple and Jobs that it wasn’t serious about Android, that it might scrap the project, that it would never compete with the iPhone, until one day
they were the fiercest of rivals. Schmidt consistently denies that he or anyone else at Google has done anything improper in dealing with Apple, and that is probably true. As Schmidt has said, innovation is messy; it wasn’t clear for a while that Android was going to be successful; Google needed to get its software onto mobile devices; and the iPhone and Google’s relationship with Jobs were transformative. But it is also true that by 2008, Schmidt along with the rest of the senior executive team at Google talked privately about what Google would do if the iPhone became as dominant in mobile as the iPod was in music—if the gateway to the mobile Internet ran through Apple. “It was the elephant in the room of all our Android meetings,” Cedric Beust, the Android engineer said. “An iPhone-dominated world could threaten Google financially [by perhaps forcing Google to pay Apple a toll for mobile Internet access through the device]. But also the model Apple pushes was not the one engineers and everyone at Google are comfortable with. It’s not the kind of future they want to live with. I think those people saw that Apple might even be worse than Microsoft—the way they curated out everything they didn’t like from their app store and all that. I think we came close to that [problem], but I think the timing of Android prevented it and forced Apple to become a bit more humane and bit more humble.”