Apple & Google – Scrappled & Scroogled?

Apple would be in less danger than Google.

• The advent of LLMs potentially creates a dislocation in the market that has many start-ups and every beaten-down and written-off competitor of Apple and Google in the digital ecosystem wondering whether the time for revenge has finally come.
• Apple and Google have had the digital ecosystem (ex-China) market pretty much to themselves for nearly 10 years, and from this, they have been able to extract trillions of dollars of value.
• This has been based on the fact that for 10 years, the combination of an operating system and an app store has allowed them to create digital environments where users choose to live their digital lives.
• They have reached such scale that the general view is that while users live their digital lives on smartphones and tablets, nothing will knock them off their perch.
• All may not be as it seems as there are tiny signs that change is coming and if the stars line up in the right way both Apple and Google could be in trouble although there is more that Apple can do to push back (regulators permitting).
  • First, natural language which has the potential to change the way users interact with their devices.
  • In 2017 the use of voice as the man-machine interface was widely hyped by the technology industry but because the technology didn’t work properly, AI faded into relative obscurity for a few years.
  • However, when LLM-powered services like Gemini, Bing, ChatGPT, Claude and so on came onto the scene it rapidly became clear that LLMs had solved the natural language problem.
  • This means that the industry is finally in a position to keep the promises that it made in 2016 and 2017, and we may be able to use natural language as a good and engaging man-machine interface.
  • At the moment, this is being done mostly with text but there is no reason why this could not migrate to voice as the really difficult technical problem has been solved.
  • This would mean that users either talk or type to an agent which then goes off and executes the user’s request using one or more apps and returning the result via natural language.
  • The agent will be LLM-based meaning that the model weights could be adjusted by usage meaning that the understanding of the user accrues to the agent and not necessarily to the app or apps being used.
  • This is dangerous for the incumbents because if it is not their agent that is being used, then they risk losing relevance with the user.
  • This is how empires have fallen many times in the technology industry meaning that even if this notion is completely wrong, it is worth following given that it could start an earthquake.
  • Second, Search: where Google is facing the first credible challenge to its dominance and its business model in many years.
  • Google’s differentiation in search for many years has been its ability to search the long tail of the Internet as well as work out what the user is searching for even when he or she is vague or types incorrectly.
  • LLMs and the AI that they power, are visibly closing this gap and Google is no longer the only obvious place to start an Internet search.
  • This could be extremely dangerous because, search is the backbone of Google’s revenue and its market position and if we really are seeing the first credible threat, then there is cause for great concern.
  • There is no sign of this whatsoever in revenues, market share or internet traffic and I don’t think we will see any in the short-term, but there are ripples everywhere.
  • Furthermore, most of the credible competition is so small that they would have to double their user base every year for 7 years or more just to equal what Google currently has.
• These are very early signs of trouble and given Google’s panic over the last 18 months, it is clear that it is doing everything it can to ensure that upstarts are beaten with improving the quality of products and that it is the Gemini agent that will be used with Google ecosystem products and services.
• The problem is that the open-source nature of Android will make it very hard for Google to stop competing agents from working well although it should be able to block them from its own services.
• If this results in its services being used less, then it will be in real trouble.
• Apple is in a much better position because its vertical integration gives it the ability to prevent any competition for Apple Intelligence or Siri from getting a foothold on its products.
• However, the current litigious climate in the USA and especially in Europe may have something to say about these sorts of practices.
• The net result is that nothing is going to happen now or even in the short term.
• Furthermore, using natural language as a user interface either by text or voice is not a given by any stretch of the imagination.
• It will have to improve the user experience substantially to encourage large numbers of people to switch, but the ramifications of this, should it come to pass, are so large that it is worth keeping an eye on it.
• I still don’t like the shares of either Apple or Google, and this possibility only serves to increase my dislike.