It has long been noted that iPhones running iOS, made by Apple Inc. (AAPL), are more secure than smartphones using the Android operating system developed by Alphabet (GOOG, GOOGL). All things equal, this gives AAPL stock an advantage over GOOG stock.
Android phones running Google’s apps generally are cheaper, but apps developed by Google generally track user information in order to generate advertising revenue. While Apple’s iPhones may be more expensive, they offer more security and privacy in return. This will be an advantage for Apple in a world where more data is stored on mobile devices. What will this mean for AAPL stock and GOOG stock?
Can AAPL Stock Gain From GOOG’s Shortfall?
You can use mobile apps to shop and make payments, meet people, track your blood glucose levels and count your calories, and control your household appliances. That’s a lot.
As we put more of our lives on our mobile phones, including financial information and medical data, and are able to control our homes from afar, privacy and security will become even more important. Users will want their data to be safe from the prying eyes of those they mistrust, including hackers, cybercriminals, data brokers, and governments. This is where AAPL stock has an advantage over GOOG.
Chalk it up to different business models. Internet companies such as Google and Facebook Inc (FB) depend on ad revenue, so they track user data and use this to better target consumers and charge higher ad rates. Google tracks what you search and displays ads based on this. AAPL, on the other hand, sells products such as iPhones and services such as the iCloud, and does not need to monetize user data like GOOG.
This allows Apple to move in the opposite direction: increasing user privacy and security. Recently, AAPL’s commitment to privacy was tested. In February, Apple CEO Tim Cook refused to comply with a court order to supply the FBI with custom firmware that would allow the Feds to hack the dead San Bernardino shooter’s iPhone. Cook argued that this would threaten the security and privacy of the over 800 million iOS users worldwide.
Indeed, Apple’s iOS 8 had such strong privacy settings that in September 2014, the New York Times reported that:
“Apple says it has become technically impossible for it to comply with government warrants asking for customer information like photos, email, messages, contacts, call history and notes, to be extracted from devices….The company said all this information was under the protection of a customer’s passcode, the four-digit number used to log in to the device.”
The iOS also receives updates more frequently than Android, allowing vulnerabilities in the software to be patched. Additionally, Apple’s App Store is vetted more carefully than GOOG’s, which means that malware apps putting users at risk are less likely to be allowed in.
AAPL is also threatening Google’s core search business by including the search engine DuckDuckGo on the Safari browser. DuckDuckGo, unlike Google, does not collect information about its users. This could really have a disruptive impact on Internet companies such as Google which are seen as being more lax on privacy.
The Verdict: AAPL vs. GOOG
Privacy will become a valuable selling point in a world where mobile devices play an increasing role in our lives and more information than ever is being generated. Firms that are seen as wobbly on the issue of privacy and security will stand to lose customers. In the long-term, this should be a good thing for AAPL stock, but not so much for GOOG stock.
As of writing, Lucas Hahn did not hold a position in any of the aforementioned securities.
