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The comparisons between Google and Apple aren't as apples-to-apples as everyone in the media seems to think. If we're talking about the future of these companie

by cryptoz 11y ago

The comparisons between Google and Apple aren't as apples-to-apples as everyone in the media seems to think. If we're talking about the future of these companies, and their earning power, they are situating themselves very differently. Apple is really a consumer electronics company, Google is an artificial intelligence company. And investors think more money will be in the future of AI instead of consumer hardware and software, so even though Google's earnings are smaller than Apple's, the future earning power is so much more. If Apple starts going faster on AI then I think it will be very interesting between these two companies.

jonesb6 11y ago
I absolutely agree that comparing Google and apple is silly. But calling Google an "artificial intelligence" company is just feeding another buzzword into the fire.
- jonknee 11y ago
  Why? It's obvious that is where they are going.
  - rsp1984 11y ago
    Where they are going yes but not what they are today.
    - Mangalor 11y ago
      AI is basically learning technology, and they already employ AI in search ranking.
    - jonknee 11y ago
      Wall Street values you based on future expectations and Google is being valued in part for its perceived lead in AI and the growth that will bring. Their main product (search) uses plenty of AI so it's not a stretch whatsoever.
  - mwfunk 11y ago
    Calling someone an "X company" means that they make their money from X. There are aspects of AI in targeted advertising, but not enough to call them an AI company rather than an advertising company. It doesn't really matter where they're going- that's what they aspire to be, not what they are. If you judge companies based on their aspirations, you end up judging them based on their most positive and idealistic version of themselves, rather than what they are, which is much more meaningful. A much more cynical way to look at it is, judging a company based on its aspirations means judging them based on their marketing rather than their products, services, or actions. Think of how differently Comcast would be perceived if everyone wanted to talk about the company Comcast wishes it was, rather than company that it is. Or any company you don't like for whatever reason.
    - lazaroclapp 11y ago
      How about "Alphabet/Google is trying to position itself as an AI company" instead of "is an AI company". That direction is still important to explain why it is valued like it is: investors are betting that it has good chances of succeeding in becoming an AI company.
    - skybrian 11y ago
      The stock price of a company is based on predicting future earnings, so talking about the future of a company is pretty much unavoidable in this sort of discussion. You can ignore what management says and predict the future in some other way if you prefer, but ignoring the future entirely isn't possible. (Assuming that nothing will change is also a prediction.)
    - dragonwriter 11y ago
      > Calling someone an "X company" means that they make their money from X. Sure, but even so (except for the way some people treat Google), we typically call companies that make their money by placing ads in a service or media offering an "X company" where X describes the service or media offering, not "advertising". From that perspective, Google is an online services company, with AI playing an important role in some of its services.
  - jfuhrman 11y ago
    How much of Google's profit(or even revenue) is not from tracking user data and advertising? Search, Gmail, Android, Chromebooks, Nexus, Pixel, Youtube, Maps etc. everything is about selling advertisements after scanning user provided data. The rest are either loss leaders or moats, or ones with unclear monetization scenarios like Fiber. One exception is GCE and GAE, but I don't know how much profit/revenue they're making. I would count Google Apps, but until recently they were scanning even paid Google Apps for Business accounts for ad tracking purposes.
    - stvswn 11y ago
      Your question is answered explicitly in the press release, if you wanted to Google it. But are you instead making a point about how that's bad or something? The business model is to give away services for free and then show ads to monetize, that's no secret. Do you contend this is a poor business model, or somehow immoral or something?
      - jfuhrman 11y ago
        If you follow the thread, it's about calling Google an AI company.
    - jonknee 11y ago
      They use AI to sell advertising and services (be it search relevancy, contextual awareness, filter out spam, etc)... The reason why it's not incorrect to call Google an AI company is that Wall Street thinks they'll be able to shake out ever more cash from their machines in the future because of their position in ML and AI. It's their competitive edge and one that becomes more and more valuable as software continues to eat the world.
    - krakensden 11y ago
      Eric Schmidt has been claiming that fiber is making good money. Which doesn't seem impossible.
- shimon 11y ago
  Google's flagship product is a box that you can type words into, and get relevant texts/references/facts in response. It seems like a textbook example of AI.
  - rimantas 11y ago
    AI with quickly advancing dementia.
  - drewrv 11y ago
    AI is whatever hasn't been done yet https://en.wikipedia.org/wiki/AI_effect#AI_is_whatever_hasn.27t_been_done_yet https://en.wikipedia.org/wiki/AI_effect#AI_is_whatever_hasn....
    - taneq 11y ago
      Precisely. The image recognition and natural language processing that's "just a deep learning algorithm" today would have blown the socks off anyone ten years ago. Chess playing programs were AI until they could decisively beat all humans, and then we decided that chess doesn't require intelligence. Self-driving cars were AI until they got close to market and now apparently driving a car doesn't require intelligence. It would seem that only True Scotsmen are intelligent.
      - dhimes 11y ago
        Don't forget that Facebook is going to be a big player in this game as well- especially facial recognition, where everybody is helping them by tagging people in their photos.
        tajen 11y ago
        If we characterize companies as strongly as "Apple, a consumer product company" and "Google an AI company", then Facebook is a worldwide identity tracking agency. They could pivot and be in charge of delivering birth certificates, DNA groups, ethnicity mapping, insurance-bank-police profiling... In fact I expect it to play a very major role in wars to determine targets.
- abraham6464 11y ago
  “Larry, I still don’t get it. There are so many search companies. Web search, for free? Where does that get you?” “Oh, we’re really making an AI.” -Larry Page [0] [0] http://www.wired.com/2014/10/future-of-artificial-intelligence/ http://www.wired.com/2014/10/future-of-artificial-intelligen...
- deciplex 11y ago
  They mostly use the AI to try to convince you to buy shit. It may be an uninspired use of artificial intelligence, but it's still artificial intelligence.
- osoti 11y ago
  Cutest Exotic Animals you can Legally have as Pets http://goo.gl/tlx5LD http://goo.gl/tlx5LD
- turingbook 11y ago
  Actually, Larry Page himself thought from very early beginning that Google is an AI company: AROUND 2002 I attended a small party for Google—before its IPO, when it only focused on search. I struck up a conversation with Larry Page, Google’s brilliant cofounder, who became the company’s CEO in 2011. “Larry, I still don’t get it. There are so many search companies. Web search, for free? Where does that get you?”… But Page’s reply has always stuck with me: “Oh, we’re really making an AI.” http://www.wired.com/2014/10/future-of-artificial-intelligence/ http://www.wired.com/2014/10/future-of-artificial-intelligen...
whitegrape 11y ago
Nerds have known for years that Google is really an AI company, but do investors really see things that way yet? The stock didn't go up with the announcement of AlphaGo, though that could just be because they think that particular AI work won't give Google any competitive advantage in future revenue...
- azinman2 11y ago
  It's been a machine learning company. We'll see what the shift to AI looks like, but those are two very different things.
Steko 11y ago
> investors think more money will be in the future of AI instead of consumer hardware and software No, first you are mistaking a bet on a single company for a bet on an industry. The obvious counterexamples being that there are no shortage of wannabe AI companies valued orders of magnitude lower than Apple, that doesn't mean wall street thinks devices beat ai as an industry gold mine. Google is valued highly today because they print money today. They print money because of search and advertising. They are really good at this and that's why their market cap exceed's Apple's today. These prices are not remotely rational. There's no serious investor that thinks Apple is going to shut the lights off inside 7 years which is what the current 'market cap' would tell you.
- bradshaw1965 11y ago
  ... Google is valued highly today because they print money today. They print money because of search and advertising. They are really good at this and that's why their market cap exceed's Apple's today. ... That would be correct if they were value companies throwing off discounted cash flow but both Google and Apple are priced as growth companies. The market believes Apple has peaked in growth and that Google has a bit more potential. It's not clear why exactly from the earnings report of the holding company. Revenue for Google is 99% ad sales so it's not clear exactly where that bottom line revenue is going to come from. All revenue from the rest of the holding company was less then $500 million.
  - CydeWeys 11y ago
    > That would be correct if they were value companies throwing off discounted cash flow but both Google and Apple are priced as growth companies. AAPL's P/E ratio as I write this is 10.26. I would strongly make the argument that Apple is thus NOT priced as a growth company.
    - simonh 11y ago
      Which shows you how much the market knows. Apple's PE ratio was 11 back in 2009. In fact the first years of the iPhone corresponded with a precipitous plunge in their PE ratio as their revenues rose rapidly, but their share price was dragged kicking and screaming along behind them.
jdoliner 11y ago
I feel like this comparison of the two started during the handset wars. If you'll recall they were very chummy companies before that with Eric Schmidt sitting on both boards. With the handset wars cooling down a bit I think the comparisons are becoming a lot less apt.
bradshaw1965 11y ago
Both companies will struggle for the kind of revenue growth Wall Street is looking for. Ad sales account for 99% of Google revenue, with speculative ventures generating less then $500 million. It's all about finding products and services that people are willing to part with cash.
- imaginenore 11y ago
  Self-driving cars market can probably double Google's value when it takes off.
tn13 11y ago
I agree that they aren't same but I doubt if Apple is even in the same league as Google when it comes to AI. Apple is a product company that makes iOS+Hardware for profit and also seeks rent to access this platform. Google is synonymous with search/advertising which is fancy word for media. For google that media comes first and platform monopoly comes second. That is why Google continues to offer all its services on iOS despite virtually owning Android. For every product that Apple builds in future its success will be like a toss of a coin (of course biased). Google succeeds no matter which platform succeeds.
peter303 11y ago
AI had big VC run in the 1980s. At that time it focused on expert stems and logic computing. Now the emphasis is on big data and deep learning neural nets. Google can afford to nuture a technology for a decade while VCs wont.
petke 11y ago
Also apple only spends about 3% of revenue on R&D. Google spends about 15% (and so does ms) if i remember correctly. I think at some point this is going to show. If apple isn't careful they might end up making the pretty but dumb phones of tomorrow.
- aroman 11y ago
  If you consider the fact that Apple's revenue is almost four times that of Google's, the actual difference in spending is not very substantial. Presumably there's some point of diminishing returns on R&D for one company in the billions of dollars range...
  - simonh 11y ago
    Indeed. Apple has been ramping up R&D spending by about 40% per year for many years, which is a phenomenal ramp up, it's just that its revenues have grown even more dramatically.
Dolores12 11y ago
Apple is an Iphone company, not consumer electronic one.
partiallypro 11y ago
Both are at "peak margin," but Google's margins will fall slower than Apple's. Hardware margins are notoriously hard to maintain, Apple is the outlier, and it can't last forever.
apsec112 11y ago
"Google is an artificial intelligence company." Google has great AI people - arguably more than anywhere else - but the bulk of the company is not based on AI. I'm a former Google employee, and up until a few years ago, most of the company was very skeptical of machine learning. Many people still are. I left because my machine learning project was canceled - a manager had an older solution that didn't use machine learning, and he didn't want his pet project to be replaced (even though it had worse performance and was much harder to use), so we were canceled while about fifty lines of code away from launching. Other parts of the company may be different, but in our product area AI was a minus, not a plus.
HeavyStorm 11y ago
Google is not an AI company. Google is a "knowledge" company. (Most of AI-like stuff from Google is actually a software that extracts relevant knowledge from a big database.) Google makes money from that crazy amount of information they have available, albeit we must admit that thus far, they haven't been able to turn a real business from most of it: the real profitable way they use that knowledge is to serve us ads.
HSO 11y ago
No need to make it about Apple vs Google or some newspaper narrative. In a world with negative short rates, money essentially becomes a "bad" (or negative good). Ceteris paribus, companies who deliver a lot of it today or in the immediate future will be valued less than those with cash flows farther out. I still think the market is making a mistake here, in that the real difference between Google's and Apple's investment projects is not in their nature ("moonshot" vs "mundane") but in their PR. Google just talks more about them. Given that investors think that Google's stream of cash flows is weighted towards the future and Apple's to the present, though, it makes sense that in the current rate environment valuations are as they are. See also Facebook, Amazon, or Netflix. No need for grand narratives about the relative merits, product and management philosophies, or management personalities. That said, I disagree with the market and am betting this is a bubble that will pop soon.
6stringmerc 11y ago
>Google is an artificial intelligence company. That's an interesting take, because for many years I'm pretty sure the largest portion of their income was from advertising revenue. That makes them an ad firm. Yeah they've diversified, but let's be honest, they're in sales straight up first and foremost.

by cryptoz 11y ago

jonesb6 11y ago

I absolutely agree that comparing Google and apple is silly. But calling Google an "artificial intelligence" company is just feeding another buzzword into the fire.

jonknee 11y ago
Why? It's obvious that is where they are going.
- rsp1984 11y ago
  Where they are going yes but not what they are today.
  - Mangalor 11y ago
    AI is basically learning technology, and they already employ AI in search ranking.
  - jonknee 11y ago
    Wall Street values you based on future expectations and Google is being valued in part for its perceived lead in AI and the growth that will bring. Their main product (search) uses plenty of AI so it's not a stretch whatsoever.
- mwfunk 11y ago
  Calling someone an "X company" means that they make their money from X. There are aspects of AI in targeted advertising, but not enough to call them an AI company rather than an advertising company. It doesn't really matter where they're going- that's what they aspire to be, not what they are. If you judge companies based on their aspirations, you end up judging them based on their most positive and idealistic version of themselves, rather than what they are, which is much more meaningful. A much more cynical way to look at it is, judging a company based on its aspirations means judging them based on their marketing rather than their products, services, or actions. Think of how differently Comcast would be perceived if everyone wanted to talk about the company Comcast wishes it was, rather than company that it is. Or any company you don't like for whatever reason.
  - lazaroclapp 11y ago
    How about "Alphabet/Google is trying to position itself as an AI company" instead of "is an AI company". That direction is still important to explain why it is valued like it is: investors are betting that it has good chances of succeeding in becoming an AI company.
  - skybrian 11y ago
    The stock price of a company is based on predicting future earnings, so talking about the future of a company is pretty much unavoidable in this sort of discussion. You can ignore what management says and predict the future in some other way if you prefer, but ignoring the future entirely isn't possible. (Assuming that nothing will change is also a prediction.)
  - dragonwriter 11y ago
    > Calling someone an "X company" means that they make their money from X. Sure, but even so (except for the way some people treat Google), we typically call companies that make their money by placing ads in a service or media offering an "X company" where X describes the service or media offering, not "advertising". From that perspective, Google is an online services company, with AI playing an important role in some of its services.
- jfuhrman 11y ago
  How much of Google's profit(or even revenue) is not from tracking user data and advertising? Search, Gmail, Android, Chromebooks, Nexus, Pixel, Youtube, Maps etc. everything is about selling advertisements after scanning user provided data. The rest are either loss leaders or moats, or ones with unclear monetization scenarios like Fiber. One exception is GCE and GAE, but I don't know how much profit/revenue they're making. I would count Google Apps, but until recently they were scanning even paid Google Apps for Business accounts for ad tracking purposes.
  - stvswn 11y ago
    Your question is answered explicitly in the press release, if you wanted to Google it. But are you instead making a point about how that's bad or something? The business model is to give away services for free and then show ads to monetize, that's no secret. Do you contend this is a poor business model, or somehow immoral or something?
    - jfuhrman 11y ago
      If you follow the thread, it's about calling Google an AI company.
  - jonknee 11y ago
    They use AI to sell advertising and services (be it search relevancy, contextual awareness, filter out spam, etc)... The reason why it's not incorrect to call Google an AI company is that Wall Street thinks they'll be able to shake out ever more cash from their machines in the future because of their position in ML and AI. It's their competitive edge and one that becomes more and more valuable as software continues to eat the world.
  - krakensden 11y ago
    Eric Schmidt has been claiming that fiber is making good money. Which doesn't seem impossible.
shimon 11y ago
Google's flagship product is a box that you can type words into, and get relevant texts/references/facts in response. It seems like a textbook example of AI.
- rimantas 11y ago
  AI with quickly advancing dementia.
- drewrv 11y ago
  AI is whatever hasn't been done yet https://en.wikipedia.org/wiki/AI_effect#AI_is_whatever_hasn.27t_been_done_yet https://en.wikipedia.org/wiki/AI_effect#AI_is_whatever_hasn....
  - taneq 11y ago
    Precisely. The image recognition and natural language processing that's "just a deep learning algorithm" today would have blown the socks off anyone ten years ago. Chess playing programs were AI until they could decisively beat all humans, and then we decided that chess doesn't require intelligence. Self-driving cars were AI until they got close to market and now apparently driving a car doesn't require intelligence. It would seem that only True Scotsmen are intelligent.
    - dhimes 11y ago
      Don't forget that Facebook is going to be a big player in this game as well- especially facial recognition, where everybody is helping them by tagging people in their photos.
      - tajen 11y ago
        If we characterize companies as strongly as "Apple, a consumer product company" and "Google an AI company", then Facebook is a worldwide identity tracking agency. They could pivot and be in charge of delivering birth certificates, DNA groups, ethnicity mapping, insurance-bank-police profiling... In fact I expect it to play a very major role in wars to determine targets.
abraham6464 11y ago
“Larry, I still don’t get it. There are so many search companies. Web search, for free? Where does that get you?” “Oh, we’re really making an AI.” -Larry Page [0] [0] http://www.wired.com/2014/10/future-of-artificial-intelligence/ http://www.wired.com/2014/10/future-of-artificial-intelligen...
deciplex 11y ago
They mostly use the AI to try to convince you to buy shit. It may be an uninspired use of artificial intelligence, but it's still artificial intelligence.
osoti 11y ago
Cutest Exotic Animals you can Legally have as Pets http://goo.gl/tlx5LD http://goo.gl/tlx5LD
turingbook 11y ago
Actually, Larry Page himself thought from very early beginning that Google is an AI company: AROUND 2002 I attended a small party for Google—before its IPO, when it only focused on search. I struck up a conversation with Larry Page, Google’s brilliant cofounder, who became the company’s CEO in 2011. “Larry, I still don’t get it. There are so many search companies. Web search, for free? Where does that get you?”… But Page’s reply has always stuck with me: “Oh, we’re really making an AI.” http://www.wired.com/2014/10/future-of-artificial-intelligence/ http://www.wired.com/2014/10/future-of-artificial-intelligen...

whitegrape 11y ago

Nerds have known for years that Google is really an AI company, but do investors really see things that way yet? The stock didn't go up with the announcement of AlphaGo, though that could just be because they think that particular AI work won't give Google any competitive advantage in future revenue...

azinman2 11y ago
It's been a machine learning company. We'll see what the shift to AI looks like, but those are two very different things.

Steko 11y ago

> investors think more money will be in the future of AI instead of consumer hardware and software No, first you are mistaking a bet on a single company for a bet on an industry. The obvious counterexamples being that there are no shortage of wannabe AI companies valued orders of magnitude lower than Apple, that doesn't mean wall street thinks devices beat ai as an industry gold mine. Google is valued highly today because they print money today. They print money because of search and advertising. They are really good at this and that's why their market cap exceed's Apple's today. These prices are not remotely rational. There's no serious investor that thinks Apple is going to shut the lights off inside 7 years which is what the current 'market cap' would tell you.

bradshaw1965 11y ago
... Google is valued highly today because they print money today. They print money because of search and advertising. They are really good at this and that's why their market cap exceed's Apple's today. ... That would be correct if they were value companies throwing off discounted cash flow but both Google and Apple are priced as growth companies. The market believes Apple has peaked in growth and that Google has a bit more potential. It's not clear why exactly from the earnings report of the holding company. Revenue for Google is 99% ad sales so it's not clear exactly where that bottom line revenue is going to come from. All revenue from the rest of the holding company was less then $500 million.
- CydeWeys 11y ago
  > That would be correct if they were value companies throwing off discounted cash flow but both Google and Apple are priced as growth companies. AAPL's P/E ratio as I write this is 10.26. I would strongly make the argument that Apple is thus NOT priced as a growth company.
  - simonh 11y ago
    Which shows you how much the market knows. Apple's PE ratio was 11 back in 2009. In fact the first years of the iPhone corresponded with a precipitous plunge in their PE ratio as their revenues rose rapidly, but their share price was dragged kicking and screaming along behind them.

jdoliner 11y ago

I feel like this comparison of the two started during the handset wars. If you'll recall they were very chummy companies before that with Eric Schmidt sitting on both boards. With the handset wars cooling down a bit I think the comparisons are becoming a lot less apt.

bradshaw1965 11y ago

Both companies will struggle for the kind of revenue growth Wall Street is looking for. Ad sales account for 99% of Google revenue, with speculative ventures generating less then $500 million. It's all about finding products and services that people are willing to part with cash.

imaginenore 11y ago
Self-driving cars market can probably double Google's value when it takes off.

tn13 11y ago

I agree that they aren't same but I doubt if Apple is even in the same league as Google when it comes to AI. Apple is a product company that makes iOS+Hardware for profit and also seeks rent to access this platform. Google is synonymous with search/advertising which is fancy word for media. For google that media comes first and platform monopoly comes second. That is why Google continues to offer all its services on iOS despite virtually owning Android. For every product that Apple builds in future its success will be like a toss of a coin (of course biased). Google succeeds no matter which platform succeeds.

peter303 11y ago

AI had big VC run in the 1980s. At that time it focused on expert stems and logic computing. Now the emphasis is on big data and deep learning neural nets. Google can afford to nuture a technology for a decade while VCs wont.

petke 11y ago

Also apple only spends about 3% of revenue on R&D. Google spends about 15% (and so does ms) if i remember correctly. I think at some point this is going to show. If apple isn't careful they might end up making the pretty but dumb phones of tomorrow.

aroman 11y ago
If you consider the fact that Apple's revenue is almost four times that of Google's, the actual difference in spending is not very substantial. Presumably there's some point of diminishing returns on R&D for one company in the billions of dollars range...
- simonh 11y ago
  Indeed. Apple has been ramping up R&D spending by about 40% per year for many years, which is a phenomenal ramp up, it's just that its revenues have grown even more dramatically.

Dolores12 11y ago

Apple is an Iphone company, not consumer electronic one.

partiallypro 11y ago

Both are at "peak margin," but Google's margins will fall slower than Apple's. Hardware margins are notoriously hard to maintain, Apple is the outlier, and it can't last forever.

apsec112 11y ago

"Google is an artificial intelligence company." Google has great AI people - arguably more than anywhere else - but the bulk of the company is not based on AI. I'm a former Google employee, and up until a few years ago, most of the company was very skeptical of machine learning. Many people still are. I left because my machine learning project was canceled - a manager had an older solution that didn't use machine learning, and he didn't want his pet project to be replaced (even though it had worse performance and was much harder to use), so we were canceled while about fifty lines of code away from launching. Other parts of the company may be different, but in our product area AI was a minus, not a plus.

HeavyStorm 11y ago

Google is not an AI company. Google is a "knowledge" company. (Most of AI-like stuff from Google is actually a software that extracts relevant knowledge from a big database.) Google makes money from that crazy amount of information they have available, albeit we must admit that thus far, they haven't been able to turn a real business from most of it: the real profitable way they use that knowledge is to serve us ads.

HSO 11y ago

No need to make it about Apple vs Google or some newspaper narrative. In a world with negative short rates, money essentially becomes a "bad" (or negative good). Ceteris paribus, companies who deliver a lot of it today or in the immediate future will be valued less than those with cash flows farther out. I still think the market is making a mistake here, in that the real difference between Google's and Apple's investment projects is not in their nature ("moonshot" vs "mundane") but in their PR. Google just talks more about them. Given that investors think that Google's stream of cash flows is weighted towards the future and Apple's to the present, though, it makes sense that in the current rate environment valuations are as they are. See also Facebook, Amazon, or Netflix. No need for grand narratives about the relative merits, product and management philosophies, or management personalities. That said, I disagree with the market and am betting this is a bubble that will pop soon.

6stringmerc 11y ago

>Google is an artificial intelligence company. That's an interesting take, because for many years I'm pretty sure the largest portion of their income was from advertising revenue. That makes them an ad firm. Yeah they've diversified, but let's be honest, they're in sales straight up first and foremost.