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Siri Buy Opens New Front in Apple's War on Google

By John P. Mello Jr. MacNewsWorld ECT News Network
Apr 29, 2010 9:23 AM PT

Apple has stuck its nose under Google's search tent with the purchase of a leading-edge maker of a mobile virtual personal assistant application.

Siri Buy Opens New Front in Apple's War on Google

News of the company's acquisition of Siri, which just launched its iPhone app in February, broke after blogger Robert Scoble revealed that the Federal Trade Commission had approved the deal by granting Apple an "early termination notice" under the Hart-Rodino Act. Hart-Rodino approval is typically the final regulatory hurdle that must be vaulted before an acquisition is finalized.

Both Apple and Siri have been mum on the details of the deal, which may be worth as much as US$200 million.

"Definitive agreements have been signed," Gary Morgenthaler, a member of Siri's board of directors and a partner in Morgenthaler Ventures, one of Siri's bankrollers, told MacNewsWorld.

"This is an excellent outcome for everybody involved," he added. "It's a great outcome for the founders, employees and investors, and Apple is extremely happy or they wouldn't have done this."

Pure Magic

Siri applies natural language understanding to both speech and text to respond to requests for information from a person. For example, you can say, "I need a cab," and it will find local taxi companies for you.

"Siri works magically well," Morgethaler declared. "It can take an utterance in almost any form that you would choose and extract the semantics or your intent out of that statement."

The company also has a strong business model. It acquires information to respond to users' requests from a growing number of partners. When a partner's information is accessed by a user, Siri receives a referral fee from the provider.

Because of the quality of those referrals -- most of the time they lead to the purchase of a product or service -- Siri receives premium fees for them. "Mobile users who request a service is the highest value lead referral on the Internet," Morgenthaler explained. "The prices for those are higher than for any other marketing lead referral."

Attacking Google's Sweet Spots

Siri's initial application was designed for the iPhone 3GS, but before the purchase, it was reported that it was working on versions of its product for other platforms, such as Google's Android phones.

"[The deal] keeps Siri on Apple's platforms," Michael Gartenberg, a partner with the Altimeter Group, told MacNewsWorld. "It also gives Apple a chance to blunt one of Google's biggest strengths -- integrated search that's very tight and deep at the operating system level."

The Siri buy coupled with the introduction of the iAd mobile advertising platform impinges on two Google sweet spots. "Apple is now not only in the advertising business, but apparently is also getting into the mobile search business a well," Gartenberg observed.

"There's a lot that Apple can do here with the technology," he added. "It provides them with a foundation for making deep search as part of the mobile experience, as something that's a table stakes function."

Sun Setting on iPhone?

Both Apple and Google have been maneuvering in recent weeks to bolster weaknesses in their mobile app offerings, according to Jonathan Allen, director of Search Engine Watch.

For example, Google's recent purchase of mobile gadget developer LabPixies was a move to strengthen the Android game market, Allen said. "The iPhone beats the Android as a gaming platform," he told MacNewsWorld. "It's got way more games."

On the other hand, he continued, the Siri acquisition strengthens Apple's mobile search position. "All the good games on the iPhone will eventually get on Android," he asserted, "and some of the cooler apps on the Android, like voice-activated search, you can now get on the iPhone."

With Siri in the Apple fold, it's likely that Google mobile apps will no longer be welcome on the iPhone, he predicted.

"Android is likely to eclipse the iPhone in the next five years because of the open nature of the platform," he maintained. "Apple appears to be locking down the iPhone platform and what developers can do with it."

"Android is a more open and sustainable platform," he added. "It's easier for developers to innovate on. The recent lockdown of the iPhone OS and blocking of Adobe mean that Apple is losing trust among the development community, or at least they have raised the barriers to entry."

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