For anyone wondering why, when, or if Apple (AAPL) will ever make an attempt on the search market currently dominated by Google (GOOG), they already have. As you probably know, the name of their search engine is Siri.
The conspiracy theorist in me didn't view Siri as the flop that many did. I believe that the genius behind Siri was that behind all of the fireworks of the classy female speaking robot and her iffy-beta voice recognition was a search device that was immediately placed on every new iPhone.
Don't underestimate the subtle difference between a high stakes rollout a la Microsoft (MSFT) with Bing versus Apple rolling out their own search engine, albeit in a much more subtle and probably effective manner. Microsoft has already lost $9 billion on Bing, and most of the increase in their search engine market share came at the expense of Yahoo! (YHOO). (Yahoo!'s search is powered by Bing).
Here is the current breakdown:
The caveat with the search market share breakdown is that it does not include mobile search, which is the obvious direction that anything web-related is moving. Here are the mobile search results:
The pertinent question is, how does Siri fit into this Google-dominated mobile search market? As we all know, Siri is not technically classified as a search engine. But despite it's differing delivery, the end result is the same as Google or Bing (plus the authoritative female voice).
As an investor, I can't claim to be prescient, but I can logically speculate that the steps taken by Apple are the most obvious indicators of their plans to smash head on into Google's search market share. Truth be told, it won't be a smashing collision, as Siri has shown that Apple is taking the subtle and furtive route, by using their impressively growing flagship product to dominate the mobile market.
One relatively overlooked step taken by Apple was the of hiring Amazon search guru Bill Stasior to oversee all things Siri. Stasior's background includes creating A9, a search engine that Amazon uses for their website, but more importantly, A9 uses an algorithm for advertising, which could lay the groundwork for a serious Siri buildup, and probably give a boost to Apple's innovative iAd.
If you're not convinced yet, that's fine, because I have the smoking gun in this very paragraph. Or maybe the next paragraph. I might get caught up in peripheral data, so bear with me. Yahoo!, despite its recent shortcomings (losing the search title belt to Google, not completing the Facebook purchase) is still the 4th biggest website in the world. That's something. In regard to their 12% search market share, Yahoo! currently outsources to Bing. However, their contract with Microsoft can be terminated as soon as March 2013. With Yahoo! CEO Marissa Mayer at the helm, one can only guess the direction that she will take in regard to search. Or can they? Check out this now-mesmerizing question and answer from Mayer, back in 2009, when she was Google's Vice President of Search Products and User Experience, while talking with IDG News service.
IDG News Service: What is the perfect search engine? If you had a magic wand and could create it, what would it look like? What would it do?
Marissa Mayer: It would be a machine that could answer that question, really. It would be one that could understand speech, questions, phrases, what entities you're talking about, concepts. It would be able to search all of the world's information, [find] different ideas and concepts, and bring them back to you in a presentation that was really informative and coherent.
Sounds like an accurate description of Siri. So does Marrissa Mayer love Siri? Can we deduce that from this fascinating 3 year old quote? Why would Yahoo! stick with Bing anyhow? Has it even helped Yahoo! with their search market share? Google is still dominating the search market, and it would be both logical and enticing for Yahoo! to take its business elsewhere, to Apple, and try something new. 3 years ago, Mayer had a relatively unique vision, and she now has the opportunity to implement it. I believe that Apple would jump at the opportunity to make a concerted strike at Google with a Yahoo! and Siri union.
The still nagging question that I have is whether Apple is developing a unique search algorithm for Siri. While I am not a search engine expert, until now it seems that Siri is more of a keyword-based location finder. To my knowledge, Apple has not developed a search algorithm anywhere near the level of Google or even Bing. Though it would be foolish for me to say they are not secretly working on one. I have no idea. But much in the same way that Apple went out and bought Siri, it would seem possible for Apple to seek an outright purchase of a search engine and integrate Siri into it. Another interesting route would be to purchase search patents, perhaps some of which Google infringed on, and utilize those. Come to think of it, a combination of these two methods seems like the most enticing route.
Say Apple were to purchase an underrated search engine such as DuckDuckGo. While integrating Siri and iAd into it, Apple looks for ways to cleverly monetize the search engine, using DuckDuckGo's algorithm. In the process, they run into an issue that Google recently had with Vringo (VRNG), in which Google infringed on Vringo's patents. Vringo's patents pertain to determining which search ads are most relevant, and the courts found that Google's lucrative AdWords business infringed on two of Vringo's search filtering patents. Google didn't go to zero, but the verdict came down against them.
Apple could use the combination of a cheap and unknown yet effective search engine, as well as valuable patents that Google already infringed upon. Additionally, Vringo's patent cache does not stop at search (the search patents were the basis for the former search giant Lycos). Check out page 11, 13, & 14 of Vringo's communications and mobile patent cache. (Ken Lang, the brains behind the patents that he developed for Lycos, is currently leading Vringo's mobile development team in Israel). Licensing Vringo's patents would give Apple a great amount of freedom in development.
There is little doubt in my mind that Apple has been planning a Google search attack. While Steve Job's infamous quote about waging "Thermonuclear War" on Google seems a bit hackneyed, it makes sense that Jobs looked at Google's search dominance with disgust and acquired/built Siri with the long term intention of hacking into the search market. And despite Jobs' death, the Google Maps flap proved that Apple still has disdain for Google, (even if they have no choice but to continue using Google Maps).
In its current form, Siri is not a flagship product that has launched Apple search onto all of our computers. However, Siri's future is immense, and depending on Apple's plans, could become a search force to be reckoned with. (Apple is currently working with car manufacturers (scroll to the bottom), which further stretches Siri's capabilities for future integration).
As mentioned earlier, my worries of Siri's still current search limitations is a hindrance to Siri's potential search dominance. Siri still routes through Google (as a default search engine on the iPhone), and as currently constructed, is not yet a threat to Google search. But with clever maneuvering, courting Marissa Mayer, buying a real search engine and licensing enticing patents, Apple has a myriad of opportunity to defeat the search Goliath that is Google, on either our desktops or in our mobile phones.
Disclosure: I am long VRNG.
Additional disclosure: I may initiate a position in YHOO & AAPL in the next few days.