Better Than Apple? Google May Have the Best Smartphone Strategy

Source: Google

Although the two companies are often compared, there's very little tech giants Apple and Google have in common. Sure, the two do have a direct competition in the smartphone markets on both a device and operating system standpoint, but to characterize the fight as a rivalry does a disservice to Apple on a device basis and Google on an operating-system one, as the results aren't even close.

Even though Apple's picked up market share with its iOS recently, the battle is decidedly one in Google's favor. For example, on a worldwide basis, Android had a whopping 80%-plus market share in the recently reported second quarter, while Apple has mostly consolidated the remainder of the market.

However, when it comes to specific devices, Apple's host of high-end iPhones dominates Google's Nexus line. For a quick comparison, over the past four reporting periods, Google reported $69.6 billion in revenue total and does not divulge revenue for its Nexus line of devices. For a comparison to how that compares with Apple -- actually, just its iPhone business -- see this visual:

Quarter* (Calendar) Q3 '14 Q4 '14 Q1 '15 Q2' 15 LTM
Google $16,520 $18,100 $17,258 $17,727 $69,605
Apple's iPhone Revenue $23,678 $51,182 $40,282 $31,368 $146,510

and Apple's quarterly reports. Revenue figures in millions.

*Apple reports fiscal quarters on a T+1 basis (e.g., calendar Q4 '14 is reported by Apple as fiscal Q1 '15).

When it comes to the smartphone market, it can be argued that Google perhaps has a stronger strategy. And if that sounds crazy to you, as these figures seem to suggest, let's step back and discuss how both companies make those aforementioned billions in revenue.

Smartphones to Google = ecosystem to Apple

An unlikely comparison can be made between Google's Nexus line of smartphones and an ecosystem-building service such as Apple Music. The strategy is similar; for Apple, the service will net Cupertino a small, incremental profit, but the real benefit is secondary. Apple Music is to create a sticky ecosystem -- in this case, a music library -- that makes it difficult to change brands. And each time you buy a new iPhone to access your content, Apple's top line expands.

Unlike Apple, however, Google's core business is search and advertising. To grow its top line, Google needs users to spend more time perusing the Internet and performing those searches, or it needs searches to be more targeted and pinpointed. And here's where the Nexus' secondary effects come into play. The device is outfitted with Google's suite of services that exist to collect information on you to support the core business, not to mention the added time its mobile-based users are performing search functions.

This simply isn't on Nexus phones

However, unlike Apple, which keeps a tightly controlled ecosystem, Google went hybrid-open source with its Android OS, letting a host of vendors use Android. The hybrid designation is important, because Google still controls Android's ecosystem with most vendors (setting aside Chinese vendors for this conversation), as it holds the application programming interfaces, or APIs, that allow third-party apps to properly interface with each vendor's smartphones.

In exchange for these APIs, which increase the user experience greatly, Google asks for its host of services (Google Play, Google Search, Google Maps, etc.) to be on the unit. As a result, Google's global mobile search engine market share is a dominant 92% and is even the default search engine on Apple's devices, as other search engines haven't been able to get a significant foothold enough to properly scale and compete with Big G.

So, unlike Apple, which needs to continue to sell its devices at a high clip to reward investors (side note: it's doing quite well in this endeavor ), Google's phone -- and pretty much every phone -- is simply an access device to bolster Google's core business: search. Recently, the company announced the newest generation of its Nexus line of phones, the Nexus 5X and Nexus 6P, but to compare them to Apple's line of iPhones is a folly for investors.

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The article Better Than Apple? Google May Have the Best Smartphone Strategy originally appeared on

Jamal Carnette owns shares of Apple. The Motley Fool owns and recommends Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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