RPT-ANALYSIS-With Siri and new alliances, Apple takes on Google search

Thu Jun 21, 2012 4:30pm IST

(Repeats story originally published overnight)

* Apple’s Siri emerging as key tool for ‘casual search’

* Local content websites find a new ally

* Apple’s success in search seen hinging on Siri uptake

By Poornima Gupta

SAN FRANCISCO, June 21 (Reuters) – When Apple Inc (AAPL.O)sends out its coveted invitations to major events, one CEO hasalways been making the guest list of late: Jeremy Stoppelman.

The co-founder and chief executive officer of consumerreview website Yelp Inc YELP.O has never taken the stage atthese gatherings, but his company has become an important weaponin Apple’s arsenal as it steps up its assault onally-turned-rival Google Inc (GOOG.O).

Yelp and a handful of other major consumer content sites,including movie reviewer Rotten Tomatoes and restaurantreservation service OpenTable, will be helping to power Apple’sSiri, the voice-activated iPhone personal assistant, in the newmobile operating system iOS6.

The relationship between Apple and Yelp illustrates thepower struggle over how people find what they are looking for onthe Internet. Much more than just a clever feature, Siri isemerging as a key tool for what some in the industry call”casual search” – quickly finding routine information such as arestaurant location.

This can bypass Google and other traditional search engines.That serves the interests of Apple, which sees an opportunity tomuscle in on its rival’s core business and build relatedadvertising revenue.

Siri is also a potential lifeline for Yelp and other contentcompanies, which have found themselves competing with Google.

“Google is a direct competitor to Yelp, and I am sure Yelpis aware of that,” said Larry Cornett, founder of productstrategy firm Brilliant Forge and former head of consumerproducts at Yahoo Inc (YHOO.O). Yelp, which depends a lot onGoogle for traffic, will probably be “ecstatic” about the directtraffic it will get through Apple’s upcoming version of Siri.

Google still reigns supreme in search, loved by consumersfor its relevant results and advertisers for its reach.Deep-pocketed rivals, particularly Microsoft Corp (MSFT.O) withits Bing search engine, have tried in vain for years to reduceGoogle’s dominance.

Rather than compete with Google on keyword search – whichwould mean battling algorithms refined by the millions ofsearches performed every day – Apple is taking a different tackby focusing on a subset of the search universe that users aremostly likely to scour while they are out and about.

That includes restaurants, movies, sports, businesslistings, maps and locations – where quick, digestiblebite-sized results are desired, rather than the more involvedresearch that users perform with Google. The increasing use ofmobile devices for accessing the Internet only plays into thistrend.

Advertisers value these searches, which are closely linkedto location, time and intent, said David Tennenhouse, venturecapitalist with New Venture Partners and former CEO of A9.com,the search unit of Amazon.com Inc (AMZN.O).

“You can think of this as cream-skimming,” Tennenhouse said.”Can I skim off some of the most valuable searches? There is ahuge range of value here.”

The stakes are high, said Oren Etzioni, a search andartificial intelligence expert at the University of Washington’scomputer science department.

“Google is very difficult to dislodge on the desktop,” hesaid, “but mobile search is a very different beast, and the juryis still out on the question of who the ultimate winner inmobile (search) is.”


Apple and Google are increasingly at odds, largely due tothe rivalry between the iPhone and Google’s Android smartphonesoftware. As the rivalry escalates, Apple is systematicallydialing back its reliance on Google services – most recently byannouncing it is going into mapping big-time. [ID:nL1E8HB6UC]

Siri is still in a beta or “trial” version, and users havecriticized failings such as misinterpreted words, odd resultsand incomplete data. But Apple is betting that the fast-evolvingtechnology will improve enough over time to spearhead its forayinto Google’s domain.

Google is still available on the iPhone, and users can evenask Siri specifically to search it for answers. Apple’sstrategy, however, is to reduce Google’s relevance on itsdevices as it doubles down on the investment in thevoice-enabled software, experts said.

The company’s goal is to build Siri into a “trusted personalassistant,” Tennenhouse said.

“The disintermediation of Google by Apple is really a matterof Apple putting together a front end, which happens to be Sirifor now, and linking it directly to the high-frequencysearches,” said Roger Kay, technology analyst with EndPointTechnologies. “And in doing so, bypass the general search modeand more importantly, bypass Google’s advertising pages.”


Marketing research firm eMarketer forecast 30 percent growthin the U.S. search advertising market to $19.5 billion this yearfrom $15 billion in 2011. Google accounts for aboutthree-quarters of that market.

The company has a lesser, but still substantial, hold on themobile advertising market. That generated $1.45 billion lastyear, with Google controlling about half, while Apple had 6.4percent, eMarketer said. It expects the total market to be worth$2.6 billion this year.

Apple devices running the company’s iOS operating systemare the biggest source of Google’s mobile revenue, generatingroughly 40 percent of the total, according to Piper Jaffrayanalyst Gene Munster.

Mobile search has long been focused on local information,such as finding which local stores have discounts or whichFrench restaurant in the area is the best-rated. But no one hasyet been able to develop the content fully.

Google signaled its seriousness about the sector when itbought Zagat last year and vowed to make the popular diningratings authority a cornerstone of its local informationofferings. In late 2009, Google was in talks to acquire Yelp forat least $500 million, according to news reports at the time,but no deal resulted.

Yelp is now one of the few websites that is deeplyintegrated into iOS, featured not only in Siri but also inbusiness listings for Apple’s new map service.

Yelp’s Stoppelman said the mapping integration was key, assearches are often location-based. He also says the Yelp app onthe iPhone can readily integrate user reviews into the searchfunctionality.

“Google just doesn’t have that data,” he said. “Yelp has themost word of mouth.”

But Apple’s success in search hinges almost entirely on thesuccess of Siri.

Voice-recognition technology is not new, and users have sofar not taken to it in great numbers. Google added thiscapability in its flagship Web search engine and its Androidphones far earlier than Apple, but it is unclear how many peopleuse it.

Whether Siri will be the answer also remains to be seen, NewVenture Partners’ Tennenhouse said. “The test always is: If youwere to take this away from people, will they feelimpoverished?”

(Additional reporting by Sarah McBride; Editing by JonathanWeber, Martin Howell and Lisa Von Ahn)

((poornima.gupta@thomsonreuters.com)(415 677 2536)(ReutersMessaging: Follow me on Twitter @PoornimaGupta))Keywords: APPLE GOOGLE/SEARCH

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Article source: http://in.reuters.com/article/2012/06/21/idINL1E8HIACT20120621

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