Benner on Tech: Google and Square Won't Beat Apple
People are Talking About…
One of the more interesting bits of news to break through the noise this week was a report in the Information that says Google and Square are working together on an Android-based tablet that can somehow challenge Apple Pay.
Yes. I’m skeptical, too.
Apple Pay is not yet mainstream, not even close. But it’s the leader in the small but growing mobile-payments space. About $3.5 billion in mobile transactions were made in 2014, up from $1.6 billion in 2013, according to research firm eMarketer. Apple chief Tim Cook told analysts last month that Apple Pay now accounts for the majority of those payments. During his talk at the Goldman Sachs Internet Conference this week, Cook attributed Apple Pay’s early success to the fact that the company controls the hardware, software and services. By his estimation, that integration creates a seamless, elegant experience that’s as easy as using a credit card, and way more secure.
Google and Square each offer some piece of the hardware-software-services trinity that Cook claims makes Apple’s product popular with customers. It makes sense, on paper, that they’d combine forces to come up with a seamless, integrated experience, too.
Google needs better, more appealing payment software, and Square’s product has been a hit with small merchants. Square needs to wean itself from Apple’s hardware. Lots of the merchants use the Square credit-card reader and software with iPads and iPhones, and they’re being encouraged to use, you guessed it, Apple Pay.
But I doubt that this sort of partnership will work. Put aside talk of beautifully integrated hardware and software. That’s all great, but one of Apple’s main advantages is its relationship with card companies like Visa and banks like JPMorgan Chase, which give Apple a distribution advantage and the support of the financial-services community. It will be hard for Google to chip away at that advantage. While Square does process payments for the card companies, they’ve not shown the same enthusiasm for the company. This may be because the startup focuses on small business rather than big merchants that do huge volume.
What a Google-Square project will successfully do is fuel speculation that Google could someday buy Square. The search company is good at a lot of things, but I wouldn’t put making elegant, appealing devices and software on that list. If customers embrace Square’s nifty hardware and software, as thousands of merchants have already done, then Google might want the payments company for its rich data stream.
Square, which is valued at about $6 billion, will need to convince the market that it has a plan for profitability going forward if it wants to pull off another up round of private funding, much less an initial public offering. If it can’t do that, it may need a buyer.
** Weekend long reads:
* How a tweet blew up Justine Sacco’s career. The New York Times explores the culture of online gang-shaming.
* The New York Times also explores the legal battle between venture capitalist Joe Lonsdale and his former mentee Elise Clougherty, the biggest sexual assault case to come out of Silicon Valley in a long time
* Re/code’s Liz Gannes has a series on Detroit’s startup scene.
FitBit users are getting rashes (again) by doing the sorts of things you should be able to do while wearing a fitness tracker, reports Re/code. The company suggests that people take a break from the device if their skin gets irritated.
Lyft is trying to raise about $250 million, which would value the company at about $2 billion, the New York Times reports.
Pinterest has partnered with Apple to make it easier for people to find new apps without having to sift through the App store’s 1.4 million choices, the New York Times reports. Re/code says that it will likely introduce a “buy” button this year as part of a push into e-commerce.
Xiaomi, which says it has no plans to go public anytime soon, will sell fitness trackers and other accessories -- but no phones -- in the U.S., Bloomberg reports.
People and Personnel Moves
Marc Stolzman, the CFO of Zulily, has left the online retailer amid a slowdown in customer growth, the Wall Street Journal reports.
** Groupon fourth-quarter results beat analyst estimates, but the company said that numbers in the current quarter would be lower-than-expected, reports Re/code.
** New Relic’s loss of 28 cents a share beat analyst estimates, and the company issued an upbeat outlook for the coming year, reports Re/code.
** Zynga’s sales of $182 million missed Wall Street fourth-quarter sales forecasts, but more than half of the company’s revenue now comes from mobile, Re/code reports.
The company is offering two-step authentication for FaceTime and iMessage, reports the Guardian.
The online travel site is buying Orbitz for $1.3 billion in order to compete against Priceline and newer threats like Google, Bloomberg reports.
Now users can pick a “legacy contact” who can manage a user’s account after he or she dies. The company patched a security flaw that could let a hacker delete other people’s photos from the site, according to Naked Security.
The company could be taking aim at Pandora, Spotify and Apple with YouTube Radio.
The company’s developer program is shifting from an open API model to a partnership model beginning in May, VentureBeat reports.
The company plans to acquire its way to mobile-app dominance, reports Bloomberg.
Job cuts have begun, according to Business Insider.
President Obama is expected to announce an executive order today that companies and the government need to share threat information, according to Reuters.
Time Inc. magazine editors worked on an ad campaign for Google app last fall, AdAge reports. During this week’s earnings call, CEO Joe Ripp said, "Each editor had to come up with two to three questions per issue that were contextually relevant and would get our readers to open the Chrome app on their mobile device.” The company also said that sales missed expectations in the previous quarter and would fall more than expected in the future, according to Bloomberg.
News and Notes
A LinkedIn employee may have exposed San Francisco’s BART subway riders to measles, reports New York magazine.
A San Francisco condo is offering free Uber rides instead of parking, reports the San Francisco Chronicle.
Columbia University researchers made a device that can diagnose HIV and syphilis in just 15 minutes, the Los Angeles Times reports. The "dongle" plugs into an iPhone.
Laying down fiber and fixing infrastructure will do more than net neutrality to get Americans a fast broadband connection, argues former hedge-fund manager Andy Kessler.
Instead of arguing about broadband speeds or invented problems like “net neutrality,” we ought to be focused on the regulations and cronyism that impede running fiber on our poles and under our roads and lawns.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.