The Apple vs. Google Battle Is a Scorcher by Design

A: Both Apple and Google are gunning for the same thing: dominance of the mobile Internet.And winning in technology isn’t usually a group affair.

Over time, after Google released its Android operating system, the relationship between the two titans has been strained. Before Android, Apple was able to charge premium pricing, cementing its enviable profit margins.

Even today, Apple has a commanding 27% net profit margin, a manifestation of its ability to charge more for its products. Compare that with Google’s 22% profit margins. But unlike Apple, which must collect cash from customers, Google essentially gives its Android operating system away for free in exchange for being able to bundle its search advertising system on smartphones.

For Apple to compete, it must continue to convince consumers they need a whole new class of products. As soon as that stops, the company’s profit margins will be in jeopardy. “Apple is the monopoly now. When you have a dominant position like they do, there can be a tendency to not innovate as quickly and keep products out longer if trying to dethrone the king,” says Jack Ablin of Harris Private Bank.

USA Today

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