Yahoo Search Aims to Dethrone Google on AAPL Devices

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Yahoo (YHOO) CEO Marissa Mayer has a plan to aggressively increase her company’s display advertising revenue, and the key is to boot Google (GOOG) out of its coveted spot as the default search engine for Apple’s (AAPL) iOS.

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Apple isn’t officially part of this plan yet, but Re/Code broke the story that Yahoo is well under way in its plans to convince AAPL, including two projects being fast-tracked to boost its in-house mobile and contextual search capabilities.

What are the odds that YHOO could actually pull this off and move from being an optional choice to having Yahoo Search be the default setting on iPhones and iPads? It’s a tough sell, but it’s not impossible.

Yahoo Search as Default on AAPL iPhone Could Happen

YHOO has been on friendly terms with AAPL, and its Yahoo Weather app for iOS is a stellar example of how an app can make the most of Apple’s mobile platform — it works well, it’s intuitive and it looks stunning. It won an Apple Design Award in 2013. In delivering this showcase app that does all the things right (according to Apple’s exacting design principles), YHOO showed the high quality user experience it is capable of delivering on an iPhone or iPad.

Yahoo’s high-priority internal search initiatives — known as “Fast Break and Curveball” — are evidence the company is serious about mobile search.

Outside of anything Yahoo does, there’s AAPL’s often combative relationship with Google. Starting from when former Apple CEO Steve Jobs threatened to go “thermonuclear war” over Android in 2010, the two tech giants have been at odds. AAPL has watched Android dominate first the smartphone market, then kick iPads out of their position as the leading tablet platform. Apple has developed its own apps to remove Google versions from their position on iOS and turned to Microsoft’s (MSFT) Bing as the default search technology behind its Siri personal assistant.

All the while, Google has relentlessly come after Apple, including releasing the Chromebook Pixel to take on AAPL’s MacBook Pro with Retina Display, targeting the Apple TV with the Chromecast, and releasing Google Now for iOS to take on Siri. Google’s Project Ara is designed specifically to kill off the smartphone upgrade cycle companies like AAPL have come to rely on as a primary profit center.

Kicking Google out of its primo spot as default search engine on iOS would not be just a symbolic gesture for Apple. With iOS punching far above its weight class in mobile ad revenue generation, a move to make Yahoo Search the default would also hurt Google financially and take a big step towards ending iOS subsidizing the efforts of the enemy — Google’s Android.

The Long Odds YHOO Must Overcome

Unfortunately for YHOO and AAPL, things are never as simple as they sound, and there are many obstacles to overcome.

First, AAPL is currently under contract with Google and will be until next year. Apple is estimated to be raking in $1 billion yearly for the arrangement, and even if it’s willing to risk that cash by switching to Yahoo Search (remember, iPhone users can simply switch their search preference back to Google), matching that revenue sharing agreement could be tough for YHOO — even with its expected Alibaba IPO windfall.

AAPL is also reluctant to make any moves that could risk the premium experience it’s cultivated for its premium-priced iPhones and iPads. Yahoo Weather has been well received, but YHOO has been less successful with its Yahoo Mail and Flickr products. Going with Yahoo Search could be a user experience risk for Apple — which is still smarting from the PR nightmare when it first kicked Google Maps off iOS and replaced it with its own version.

Next up, YHOO itself is under contract with Microsoft to have Bing power Yahoo Search, and that deal doesn’t run out until 2019. Those Yahoo search projects involve ways to get around or end the Microsoft deal, but there are no guarantees of success. Besides the many legal hurdles to overcome, Yahoo would have to build out a lot of infrastructure and search technology in a very short time.

Finally, with Bing currently powering Yahoo Search as well as being the search tech for Siri, there’s another obvious solution for AAPL and Microsoft. If the aim is to kick Google out of its default iOS search position, it would be easier to just cut out the middle man and go with Bing instead of Yahoo Search. With Microsoft finally releasing Office for the iPad and a new CEO on board in Redmond, AAPL and Microsoft could be in position for a closer relationship. No need for YHOO and the risks it carries.

At the end of the day, any decision to remove Google from its default search position is going to come down to how angry AAPL is with its rival. And with its current legal battles with Samsung (SSNLF), Apple may be too focused on that battle for the moment to re-open a second front against Google. Even if it does decide to shake up iOS search next year (once that Google agreement is up for renewal), AAPL may well take the safe route and choose Bing instead of Yahoo Search.

While it could be very productive, an Apple/Yahoo Search marriage seems like a long shot.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

 

Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.


Article printed from InvestorPlace Media, https://investorplace.com/2014/04/yahoo-search-aapl/.

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