Apple to develop its own search engine?

Chicago (IL) – Apple has been mostly absent from online and search engine markets. The company is barely dipping its toes into Web 2.0 with MobileMe, but a rocky launch an ongoing problems issues still weigh on the service and shows Apple’s inexperience in this segment. But that might change: According to TechCrunch, Apple may either build its own search engine or will at least develop a search engine interface for its own applications.

Realistically, there is no information that would support the search engine claim. For example, Apple is not (publicly) hiring search engine engineers and it would be difficult to create a profitable business model for a product that is rather unlikely to be able to compete effectively with Google or Yahoo right off the bat.

However, we know that such a central component could also be a key piece in an online strategy that may connect future applications and support the firm’s vertical integration approach.

Despite its problems, MobileMe is a good example for an integrated software strategy. It integrates with the iPhone, iPod touch, Mac and PCs and synchronizes contacts, calendars, photos and email seamlessly between devices. If Apple had had to rely on third-party services, it would be hard to imagine that Apple would have enabled device syncing. Offering more such service in the future just makes sense.

But what about a search engine? We would not be too surprised if Apple, like many others, would want a slice of the online advertising pie estimated by the Kelsey Group at $45 billion globally in 2007, or 7.4% of the total $600 billion global advertising market. But would Apple build its own search engine from scratch in a project that could cost years and is likely to cost hundreds of millions of dollars? Both Microsoft and Yahoo tried to catch up with Google and have failed so far, despite engineering talent and substantial financial resources.

Conceivably, Google’s entrance into the cellphone market could be motivation enough for Apple to enter the search engine business. The G1 Android will not knock down the iPhone, but Android-powered devices slated for 2009 will increase the pressure on Apple through Android’s openness and Google branding. Sooner or later, it seems that Apple and Google will be more rivals than partners, as they are perceived to be today. Some readers may recall that Google CEO Eric Schmidt sits on Apple’s board, which already has become a delicate issue: Schmidt is apparently not present at meetings that deal with the iPhone. Rumors are now emerging that Schmidt may soon leave Apple’s board of directors, implying tensions between the two companies.

If that is in fact the case, Apple may actually be forced to think about a future search solution and if you ask us, the company would have plenty of opportunity to do so. It could even pick up Yahoo for a bargain these days, as the company’s market cap has tumbled from more than $30 billion to currently about $15 billion.  

We at TG Daily are not convinced that Apple will be able to develop a search engine from scratch and in time, but we do believe Apple has plenty of reasons to get into the search engine business and online market in a big way. That said, a Yahoo acquisition could be the likely outcome.