In search advertising Google is so entrenched (70+% of the market) that no acquisition can really change the equation. The problem here for MS is growth. Their operating system and Office applications are where the money is, nearly all the money. Google’s Apps will threaten their cash cow Office franchise but the days of corporate acceptance of hosted applications for day to day business are still a ways off. It’s the operating system that is a problem, a big problem.

Apple is starting to make little inroads into acceptance in the corporate IT mindset, in part because Vista is a major failure and, in part, because it works great, is solid and quite resistant to malware, all critical issues for those IT people. Every time Apple takes a point of marketshare from Windows they not only add  users for their software, they add a user for their hardware ecosystem (Macs, Exchange-compatible iPhone, Air), users MS will not regain. They are predicted to go from a 2% share of business users to 6% in the next few years. This is pure growth while MS is left trying to plug the leaks in a dam that could burst.

MS has always had a huge wad of cash on hand, in part because they have a poor record of profiting by acquisition- the Yahoo buy always looked like a desperate  attempt to buy market share to me. But take a look at Apple- they have $19.5 billion in cash sitting around and that is growing each quarter. This would make a great warchest for a campaign to enter the corporate markets.

Finally, regarding advertising, which is what the search world is really about. There are no synergies between Microsoft’s desktop software business and their search business. Should they develop true hosted productivity applications like Google Apps they would be competing directly with Office. In both situations there is no growth model, the primary reason Ballmer should be shown the door- he has utterly failed to develop a strategy for growth which is his number one job description. Acquiring Yahoo was a last-ditch attempt to cobble together such a strategy. Net result:

• Google continues to grow in advertising and starts killing the Office business
•  Apple continues to take market share with the combo of software and hardware
• Yahoo does ? (honestly I don’t know- their long term business model is equally blurry)
• Microsoft shrinks, possibly much faster than expected

The interesting thing about this is the way it integrates their software and hardware into their users’ lives. It is a natural extension of the current iPod/iPhone model where these devices become indispensable  to the user. As the tobacco and alcohol companies know, addiction is a very effective marketing tool. While I do not in any way want to imply any similarity between Apple and those companies, they do recognize the power of creating products that once a user gets used to having them, they become a necessary part of their life. This is ecosystem marketing- once you are hooked into the ecosystem of their products and services, you’re there for life and will continue to buy improvements and new services that work within that ecosystem.

So what does all this mean to a non-techie? It means that Apple just reinvented the way we use the web and devices. Completely reinvented it. They’ve set up a system, with huge incentives (70% revenue share, $100 million VC fund for developers), easy as pie software distribution model, and a very complete kit for building applications fast. That means that the users of iPhones are going to see a flood of cool stuff you can do with the phone including business tools like CRM access, games, VOIP calling capability (free calls on your mobile phone anyone?) and a lot of stuff we can’t even imagine.

The Safari mobile browser has an incredible 70% of all mobile browsing after less than a year of existence and with a fraction of the installed market for mobile browsers. They just blew by the competition because the competition was awful crap. As others have noted, this should kill off .mobi. You simply don’t need it with Safari.

There are a couple of cool new technologies in iPhone that have been underutilized because developers could not access their capabilities without an SDK. These include multi-touch and the accelerator that ‘knows’ which way your phone is oriented. It turns out that this accelerator is a 3D sensor so it can be used as a controller for games and other applications. We’re going to see some wild stuff being developed that uses this. I’m imagining people walking down the street making Wii-like moves with their iPhones or being able to ‘aim’ their iPhone at an ad or building and receive info wirelessly based on geotargeting and motion detection. Multi-touch is a new interface that developers have had a year to think about and now they can get in there and make stuff that uses this UI.

But the big news is Exchange compatibility and a leap past RIM/Blackberry’s server-based sync mode. Corporate IT types now have no reason to object to their people using iPhone in their corporate networks and they may, in fact, have good new reasons for wanting them to. As any Crackberry user knows, you are dependent on RIM’s server farms in Canada to be up and running. If they go down, you go down. Microsoft and Apple worked together (!) to create a system that doesn’t require messaging to go through a dedicated central server which should greatly cut down on downtime while increasing speed.

The other corporate plus with the iPhone is that this thing is a major productivity tool that is just going to get cooler and cooler and more and more powerful as new apps start appearing almost daily.

Finally, anyone with programming skills, an idea and $99 can now start an iPhone software company. The 99 bucks gets you into the Apple AppsStore which automatically gives you a global distribution channel directly targeted at every iPhone user on the planet. And Apple deals with the money, takes a fair 30% cut and you get the rest which, because it’s software, is pure profit. You better believe that a lot of sixteen year-old geniuses are already writing code as I write these words.

Apple is amazingly adept at designing whole systems. The announcements today covered practically every concern the rumor mills were generating in the past few weeks. They will even allow developers of free applications to use the AppStore without incurring any charges. The brilliant thing about this is that there is no reason not to use their channel unless you are doing something underhanded or dirty (they won’t allow porn applications, however the porn business will simply optimise their websites for iPhone content delivery). Like iTunes, which will soon be the largest distributor of music in the US, AppStore will be the conduit that makes owning an iPhone as necessary as owning an iPod a few years ago.

One more thing, then I’ll stop. The same functionality is going to be available for the iPod Touch which is basically an iPhone without the cellular phone. Those who want to make calls without paying cell plan bills may have an option with a VOIP enabled Touch…

Cool stuff.

I was in an Apple store yesterday to check out the MacBook Air. They had a window display with one Air floating in the middle and slowly turning. While my girlfriend and I were admiring the thing (they are much cooler in person than any image shows) a group of teenagers surrounded us and were practically drooling over the machine. All pronounced that they must have one.

We went in and picked one up. They are unbelievably light and delicate. I would not underestimate the power of this approach to laptop design for Apple. They will iron out the kinks and own the ultra-lightweight full size laptop market, which will evolve into the laptop market. No one is going to want to lug the bricks around once they’ve picked these things up.

Like the iPhone and iPod, they are redefining a genre here.

This from Techcrunch too: A new build of Apple’s Safari browser is 2-6x faster than Firefox. They say it radically changes the surfing experience. Still in the developer stage.