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

by Vogelstein, Fred

  “It’s still not easy,” Michael Yanover said. “But the gap has been bridged much more than it ever was. I think that we’ve made tremendous progress since I started in this world. There’s a mutual respect. Hollywood people have had to embrace the technology because it’s either embrace it or get killed. And I think the Silicon Valley people have finally come to respect and understand Hollywood a little bit more. Thanks to Netflix, Hulu, YouTube, and others, they respect content and [do] not treat it quite as fungibly as they have previously. So I think there is much more than ever this coming together that’s occurring finally.”

  Andreessen concurs with this: “Every year for the past twenty years media-company CEOs have told me, ‘Someday you guys in Silicon Valley will discover you really need us, and someday you’ll start paying us.’ And it wasn’t true for years numbered one through nineteen. And it literally just became true. And so I think that is a very big change. I think these industries are going to intersect much more in the years ahead than they have so far.”

  Everyone agrees that the biggest issue in the transition remains finding a way to continue paying top dollar for content. This still makes everyone in Hollywood exceedingly nervous. Hollywood exists not just because it makes movies and television shows people want to watch, but also because executives there have shrewdly figured out how to divide the world into submarkets, allowing them to control the supply of content and sell it again and again for high prices. Without these windows everyone is worried that revenues from content won’t be large enough to support the cost of making it. What’s different now, however, is that companies in Silicon Valley are also footing the bills—and proving that thanks to their inventions there are indeed new ways of financing, producing, and distributing content. That isn’t the sort of challenge Hollywood can ignore or make go away with lawsuits as it has done before.

  * * *

  In mid-May 2013, at the end of a marathon keynote presentation to open its conference for software developers, Google served up a surprise to its exhausted listeners. At the three-hour mark, Larry Page, the company’s publicity-shy CEO, came out to deliver remarks and take questions from the audience.

  Page isn’t a rock star CEO as Steve Jobs and Bill Gates once were, or as Mark Zuckerberg at Facebook and Larry Ellison at Oracle continue to be. In fact, Page’s appearance was notable for the exact opposite reason: few could remember the last time they had seen him center stage. He has been Google’s CEO for two years and is one of its cofounders. But during that entire fifteen-year period—Google was founded in 1998—he has taken pains to avoid the limelight. He rarely grants interviews, or makes speeches the way Google’s former CEO, Eric Schmidt, does. There are many who believe that Schmidt is still Google’s CEO because of that. Page had been particularly out of the public eye during the previous year because, as he revealed the day before, he’d been suffering from a condition that has left both his vocal chords partially paralyzed.

  His effect was magical. Page is often guarded and stiff in public. But the lack of power in his voice made him seem more human and his remarks more intimate. The six thousand people in the audience and the roughly 1 million watching the live stream worldwide were rapt as Page spun up a vision of the world where technology solved many of its biggest problems—from commuting to education to world hunger. He also did something he rarely does: he talked about himself. He told his listeners how lucky he was to have had a father who was a geek like him. “He actually drove me and my family all the way across the country to go to a robotics conference,” Page said. But Larry had been younger than the cutoff age for the conference and was going to be turned away. The elder Page was adamant. “He thought it was so important that his young son go to the conference, it was one of the few times I’ve seen him really argue with someone.” His dad, who died a decade ago, convinced the conference organizers to make an exception.

  You take out your phone, and you hold it out, it’s almost as big as the TV or a screen you’re looking at. It has the same resolution as well. And so if you’re nearsighted, a smartphone and a big display are kind of the same thing now. Which is amazing. Absolutely amazing … We haven’t seen this rate of change in computing for a long time—probably not since the birth of the personal computer. But when I think about it, I think we’re all here because we share a deep sense of optimism about the potential of technology to improve people’s lives, and the world, as part of that.

  He went on like this for ten minutes, taking audience questions for another ten. In that short span he was alternately optimistic and visionary, and arrogant and sanctimonious. About Google’s fights with Apple and other competitors, he said,

  You know, every story I read about Google, it’s kind of us versus some other company, or some stupid thing. And I just don’t find that very interesting. We should be building great things that don’t exist. Right? Being negative is not how we make progress. And most important things are not zero sum. There’s a lot of opportunity out there. And we can use technology to make really new and really important things to make people’s lives better.

  This was more than a coming-out party for Page. Only executives atop companies that are winning in the marketplace make speeches like this. And Page, it appeared, wanted the world to know that this was indeed how he felt. The cynical might have called it Page’s “What’s good for the world is good for Google” speech—a reference to GM president Charles Wilson’s remark in the 1950s about the automaker. After all, it’s hard to imagine Page, or anyone at Google, calling its fight with Apple uninteresting in 2011, when the iPad controlled the entire tablet market, or in 2007, when Google was scrambling to get Android off the ground—or when Apple and Jobs began accusing Google and its Android manufacturers of wrongly copying their work. Page knows that Google’s five-year fight with Apple hasn’t been a distraction for either company. It’s made both companies better. Apple might not have had an app store if Google hadn’t planned one first. Android phones and software might still look as if they were designed for engineers, not consumers, if Google hadn’t been forced to compete with Apple. The list is enormous.

  But the momentum in Google’s mobile-platform war with Apple was definitely in Google’s favor by the middle of 2013. Google seemed as dominant in that fight as Apple had seemed in 2011 and in the three years after it unveiled the iPhone. Android’s share of the mobile phone and tablet markets was continuing to rise, clearing 75 percent in smartphones and 50 percent in tablets. Moreover, the competition had pushed down the prices Apple could charge for some devices and that was eating into Apple’s once unassailable profit margins. Apple’s stock price, which had doubled to more than $700 a share in the year after Jobs’s death in 2011, had deflated almost as fast during the following year. By 2013 Apple was no longer the most valuable company in the stock market. And Google’s stock price was at an all-time high.

  Apple’s losing its ranking as the most valuable company was, of course, just a symbolic change. What wasn’t symbolic were the scores of angry investors left in the wake of Apple’s plunging stock price. For four years Apple shares had been some of the best-performing of all time, rising nearly tenfold from about $80 in 2008. But investors who bought Apple shares in the fall of 2012—believing, as many did, that its stock was headed to $1,000 a share—watched their investment lose 40 percent of its value while the rest of the stock market was up around 15 percent. Jobs never discussed Apple’s stock price with investors. He rarely even met with them. But by early 2013 the shareholders refused to be ignored, forcing CEO Tim Cook to pledge more than $100 billion in dividends and stock buybacks.

  Indeed, when Page made his remarks, the innovation gap between Apple and Google for dominance of the mobile Internet looked downright stark. In the fall of 2012, Apple had released the iPhone 5, its bestselling phone to date, and the iPad mini, which was also a success despite its smaller profit margins. But it had been more than three years since the last breakthrough product—the iPad. And the TV/device th
at Jobs had mentioned in Walter Isaacson’s biography, and which Cook has also alluded to, was nowhere to be seen.

  Meanwhile, Google had unleashed a slew of new and improved software that was astonishing in its breadth and depth. Google unveiled Google Now, a mobile application that slickly anticipates and displays information users might need on the fly, such as travel and restaurant reservations and their expected commute time. It launched a music streaming service to compete with Spotify, leaving many wondering how Google had beaten Apple—the inventor of iTunes—to that market. It showed off a remarkable automatic photo editing feature for Google Plus. Using the horsepower in Google’s millions of servers, the feature goes through your entire photo library, auto-selecting and auto-editing the best pictures. And it demonstrated improvements to Google’s voice search that would make it finally useful for everyday tasks—like the voice-activated computers in Star Trek and other science fiction movies. When it’s rolled out, Google says, you’ll be able to ask your laptop, smartphone, or tablet anything—and it will respond accurately. The improvements made Siri, Apple’s voice-command technology in the iPhone, seem quaint. In August 2013 it unveiled its first Motorola smartphone.

  Even the products Google had no intention of selling immediately were generating enormous buzz. It demonstrated that its driverless-car software actually works. It showed that Google Glass—a computer in a pair of eyeglasses—may indeed fuse man and his machine.

  It’s tempting to predict that it’s only a matter of time before Apple comes back with its own new revolutionary device. Certainly that’s how the competition between the two has been up until now. What’s unclear is whether Apple can do it without Jobs at the helm. Apple certainly encouraged investors to feel as if this question had been answered when its stock and profits skyrocketed after Jobs’s death. But a year later, by the fall of 2012, Jobs’s absence was, if anything, becoming more obvious by the day.

  Take Apple’s advertising, for example. It no longer sparkled. Jobs had personally reviewed Apple’s advertising, and its TV spots had always been iconic. But the television ads that aired during the 2012 London Olympics—the Genius Bar employee spots—were so bad, they generated headlines. Indeed, the best phone ads of 2012 and 2013 came from Samsung, Google’s biggest Android phone maker. After Apple unveiled the iPhone 5, Samsung pounced with a barrage of TV spots that amusingly depicted iPhone users as misguided elitists waiting in line for a phone that was inferior in every way to the Galaxy S III.

  Apple was also taking heat for the way it was making its phones. The New York Times, in a handful of long articles about the “iEconomy,” presented evidence that Apple was making its iPhones and iPads in Asian sweatshops, forcing CEO Tim Cook to acknowledge Apple could do more to make its contractors provide safer workplaces. A year later he was apologizing to Chinese customers for Apple’s unresponsiveness to customer service and technical support issues.

  But perhaps the most notable example of Jobs’s absence was the public relations disaster surrounding Apple’s new mapping application. Apple had made a big deal about how it and Google had parted ways over maps, saying that Google was using its control of the technology as a cudgel in negotiations. But when Apple unveiled its homegrown solution along with the iPhone 5, the application was full of bugs. For nearly a month chat boards and social networks teemed with examples of egregious errors—the Washington Monument in the wrong place, the Brooklyn Bridge melting, and directions that led drivers to the wrong destination—that made the app effectively useless and prompted Cook to apologize to customers and then push out many of those responsible, among them the iPhone software boss, Scott Forstall. Most of all, it made many wonder whether Jobs would ever have allowed such a blunder to get through.

  The maps fiasco not only made Apple look bad, it made Google look heroic. Google quickly rewrote its own maps application, making many improvements. Then, when Google updated it three months later, headlines worldwide made note of how much better it was than Apple’s. Ten million users downloaded the Google maps application in forty-eight hours.

  Apple’s Tim Cook knows all the challenges he faces and says he has the answers. “We’re still the company that is going to do that [change the game]. We have some incredible plans that we have been working on for a while. The culture is all still there, and many of the people are still there. We have several more game changers in us,” he said during an onstage interview at the end of May 2013. Apple was widely believed to be working on a complete redo to the look of its iPhone and iPad software. Cook didn’t deny this in the interview. And Cook continued to talk generally about Apple’s interest in making the television-watching experience better.

  But there wasn’t much more to Cook’s remarks. Instead of using the stage—as Google’s Larry Page had—to lay out a broad vision for the future, it seemed that Cook’s overall goal was to say as little of substance as possible. He said “I don’t want to go into detail about that” often. That’s typical for many CEOs in these situations. Cook’s problem is that he is not being compared to most CEOs. He is being compared to Google’s cofounder Larry Page and, of course, to his predecessor, Steve Jobs.

  Jobs was a master at moments like this. In 2010, when he was asked about why the iPad was important, he said, “When we were an agrarian nation, all cars were trucks, because that’s what you needed on the farm. But as vehicles started to be used in the urban centers, cars got more popular. Innovations like automatic transmission and power steering and things that you didn’t care about in a truck as much started to become paramount in cars … PCs are going to be like trucks. They’re still going to be around, they’re still going to have a lot of value, but they’re going to be used by one out of X people.” Jobs was equally unspecific about future products, but his vision was so clear and compelling that it seemed not to matter.

  Comparing anyone to Steve Jobs is unfair. And during his two years as Apple’s CEO, Tim Cook has taken pains to point out that Jobs himself had made it clear to him that he didn’t want Cook running Apple the way he thought Jobs would want to but the way Cook thought it should be done. It’s nice that Jobs let Cook off the hook like that. What isn’t clear is how meaningful a gesture it was. Jobs is gone, and Apple’s customers, vendors, investors, employees, and fans do want Cook to be just like him—even if they won’t admit it. They are unlikely to leave him alone about that shortcoming until Cook shows the world his own revolutionary new thing. During the audience question-and-answer period, Dan Benton, the well-known technology hedge fund investor, laid out these concerns plainly: “Why won’t you give us a view of the future,” Benton asked, suggesting that Google has become better at painting a picture of things to come. Cook’s response: “We believe in the element of surprise.” Perhaps by the time you read this, that will once again, from Apple, be considered a good thing.

  A Note on My Reporting

  This book is the outgrowth of, depending how you count, two, seven, or sixteen years of work. I’ve been writing about technology and media since 1997, first for U.S. News & World Report and Fortune, and since 2006 for Wired. I’ve been writing about the mobile revolution since the iPhone was unveiled in 2007. The reporting and writing for this project has been my full-time job since 2011. Along with previous reporting I had done, it is the product of more than a hundred interviews. That was supplemented by my reading thousands of pages of books, newspaper and magazine articles, trial transcripts, and exhibits. It was also supplemented by my attendance at dozens of Apple and Google public presentations, industry conferences, and the Apple v. Samsung patent trial in 2012. Where I was unable to attend presentations and conferences personally, I relied on official video feeds cross-checked with unofficial video and other reporting. I have relied on court transcripts for both the Apple v. Samsung Electronics trial and the Oracle America v. Google trial—both in 2012—even for the days when I attended. Where I relied on books, articles, transcripts, and video for my reporting, I have footnoted it. Where I relied on i
nformation from interviews, I have not.

  For the history of patent law—about a third of chapter 8—I relied on the skilled research and writing help of Erin Biba, whom I worked with when she was a correspondent at Wired and who is now a columnist for Popular Science. I received fact-checking help from Bryan Lufkin, Katie M. Palmer, Elise Craig, and Jason Kehe. I found Bryan through my Wired contacts. He found Katie, Elise, and Jason. I take full responsibility for all errors and omissions, however.

  Writing about any company is hard. It, like all of us, wants the world to see only its triumphs, not its worries, fights, and failures. So it is a journalist’s job to get behind that facade and find out what is really going on. Writing about Apple presents an even greater challenge. More than just about any other company, Apple goes out of its way to make it difficult for outsiders to see behind the facade. There are roughly half a dozen journalists with whom it occasionally cooperates around product launches. It also cooperated with my friend Steven Levy for a book about the iPod that was released in 2006. And Jobs himself solicited Walter Isaacson to write his acclaimed biography, which was published at the end of 2011. Every other book in the past twenty years that has involved Apple or Jobs has been done without his and Apple’s cooperation. That includes this one. I informed Apple about the project at its inception, and I kept them informed until the manuscript was finished. But they did not make anyone at the company available for an interview. Google did cooperate somewhat—it didn’t make Larry Page and Sergey Brin available for an interview, but it has made many other executives available over the years for this project and/or for other stories I have written, including its former CEO Eric Schmidt and former Android boss Andy Rubin.