Dogfight: How Apple and Google Went to War and Started a Revolution (16 page)

What made Gundotra’s strategy so brilliant was that Google couldn’t lose. By then the Apple app store was a year old and an enormous hit. It not only was generating billions of dollars in new revenue, it was creating platform lock-in similar to the way Microsoft had done with Windows in the 1990s. The more software you bought for your iPhone, the more costly it became to replace those apps on another platform, and the more locked into buying another iPhone you would be. But Gundotra also understood that all that power came with an enormous responsibility: How would Apple decide which applications were allowed into the app store and which would be rejected? Deciding what music, movies, and TV shows to sell on iTunes was easy. If consumers didn’t like Apple’s selection, they could typically get that content in many other ways. But the app store was the only outlet for the new industry of software developers the iPhone created. Developers who spent money and time developing an application for the iPhone had little recourse if Apple rejected it. Apps that were obviously political, pornographic, or violent were easy calls. But dozens fell in gray areas and had already become an nettlesome public relations problem for Jobs and Apple. An app that allowed users to read classic books was rejected because it included the
Kama Sutra
. The political cartoonist Mark Fiore won the 2010 Pulitzer Prize for his work, but his app of cartoons was rejected because it made fun of political figures. If Apple rejected Google Voice—if it felt that it could reject the app of a big company and business partner—it would confirm Silicon Valley’s worst fears about Apple’s growing power in the mobile-phone business.

Nothing goes exactly as planned in business, but Gundotra’s Google Voice gambit worked pretty close to the way he hoped. On July 28, 2009, two weeks after announcing Google Voice for all mobile phones
excluding
the iPhone, but assuring the world that the iPhone app would soon be available, Google announced that Apple had completely rejected Google Voice. Days later, Apple announced that Schmidt was leaving its board of directors because of his conflicts of interest, and the FCC leaked word that it was looking into the whole affair.

Almost all the media coverage focused on Apple’s unreasonable and possibly unlawful control over its app store, portraying Jobs as a power-mad despot. In an effort
not
to look despotic, Apple tried to lead journalists into concluding that AT&T, not Apple, was behind all the rejections. But that made things even worse. It made the FCC wonder if Apple and AT&T were in some kind of improper collusion.

Two months later, in response to Freedom of Information Act requests by the media, the FCC released its correspondence with the three companies. It did not make Apple look good. Google’s letter said, “Apple representatives informed Google that Google Voice was rejected because Apple believed the application duplicated the core dialer functionality of the iPhone. The Apple representatives indicated that the company did not want applications that could potentially replace such functionality.” Meanwhile, Apple’s letter stated, “Contrary to published reports, Apple has not rejected the Google Voice application, and continues to study it. The application has not been approved because, as submitted for review, it appears to alter the iPhone’s distinctive user experience by replacing the iPhone’s core mobile telephone functionality and Apple user interface with its own user interface for telephone calls, text messaging and voicemail.”

Apple later allowed Google Voice and other voice applications into the app store. But executives at both Apple and Google said that everyone at the top of the two companies knew that Jobs himself had demanded Google Voice be rejected. “By 2009 people were already screaming that we were being censors,” one Apple executive said. “So [which apps we approved] was important for Apple’s image to get right. No one wanted to make these tough calls, so it wound up being up to Steve to do it.”

*   *   *

The Google Voice skirmish generated a lot of media coverage and gave Silicon Valley its first true glimpse into something it had been speculating about for more than a year: that the Apple-Google partnership to protect the world from Microsoft was unraveling—that they were a lot more angry at and scared of each other than either of them were of Microsoft. But the Google Voice fight would quickly have become insignificant if Android didn’t prove to be the threat that Jobs and Apple feared—if Rubin and the Android team didn’t produce a phone consumers wanted to buy. That threat seemed far-fetched by year-end 2008 after the G1 had been out three months. The G1 was such a flop with consumers that it seemed that it would make building the next phone
harder
, not easier.

But the opposite happened. Instead, the stumbling start of the G1 galvanized manufacturers and carriers to help Android succeed. The iPhone revolution didn’t just have Google and Android scrambling, it had the entire mobile industry figuring out how to compete with Apple. Motorola and Verizon, two partners that had been unavailable or uninterested in Android the year before, were suddenly and particularly intrigued.

Sanjay Jha had just taken over as Motorola CEO in August 2008. The company had made so many mistakes before and after the iPhone was released that many believed it was headed for bankruptcy protection without a Hail Mary pass. So Jha, who had a long relationship with Rubin dating from Jha’s days as a top executive at chip maker Qualcomm, took the immediate and controversial step of declaring that Android would be the only operating system to ship with Motorola phones. Before that Motorola had roughly half a dozen operating-system teams. Thousands lost their jobs.

Meanwhile, Verizon, which at the end of 2007 had made clear that it hated Google, was now beginning to realize that maybe it needed Google more than it hated it. Verizon executives had wanted to believe that AT&T’s deal with Apple—which gave Apple all design, manufacturing, and marketing rights—was an aberration. They spent $65 million marketing the LG Voyager in 2007 and another roughly $75 million marketing the BlackBerry Storm in 2008 in hopes of proving that point. But both were critical and commercial disappointments, and by the end of 2008, Verizon COO John Stratton was starting to worry about AT&T and the iPhone’s taking his best customers. “We needed to get in the game,” Stratton said. “And we realized that if we were going to compete with the iPhone, we couldn’t do it ourselves.”

The shared need—even desperation—of all three companies to come up with a response to the iPhone allowed all manner of fresh thinking by their top executives and engineers. Schmidt, who had viewed carriers as evil incarnate, was taken by Verizon’s seemingly sincere commitment to opening up its network so that others besides Verizon could use its bandwidth to fuel new ideas. Stratton was impressed by Schmidt’s reasonable attitude in person; he was nothing like the bomb thrower he seemed to be in his public statements. Jha was desperate to work with both companies to save his own.

Meanwhile, it wasn’t just Jha’s engineers who had come to understand and respect Android, Verizon’s engineers had come to the same conclusion. They had been poring over every smartphone operating system on the market—and even tried building their own—and had concluded that Android was one of the best. This was a big statement from a carrier such as Verizon, notorious for wanting to control everything on its phones. In 2005 Verizon had been so convinced of its dominance in the wireless business that it had turned down Jobs’s offer of a partnership to build the iPhone. AT&T had been Apple’s second choice. What Verizon engineers liked was that Android was written with the future in mind. Most smartphone software—including the iPhone’s—was designed to require regular connections to a PC. But from the beginning, Android was written with the assumption that one day this would not be necessary—that everyone would use their smartphone as their primary Internet and computing device.

And Rubin had designed a partnership that was much more carrier-friendly than anything Apple had come up with. On both Apple and Android platforms, app makers get about 70 percent of the revenue from selling their software. But Apple takes the remaining 30 percent, whereas Rubin decided to give what might have been Android’s share to the carriers. Some thought he was crazy to leave that kind of money on the table. Rubin thought it was a small price to pay to give the Droid every possible chance of succeeding. A carrier’s commitment to a device could mean the difference between its success and failure, and Rubin wanted to give carriers every incentive to strongly back the Droid. If the Droid succeeded, Android and Google would benefit in so many other ways—higher search traffic, improved advertising revenue, increased customer loyalty—that it would be worth it in the end.

The potential of the Droid partnership was exciting. But Rubin said the work to produce an actual phone made the stress levels of the G1 seem tame by comparison. At the end of 2008, Jha had promised Rubin a device far faster than any other smartphone. He’d said its touchscreen would have a higher resolution than the iPhone’s; that it would come with a full keyboard for customers who didn’t like the iPhone’s virtual keys. And he promised a phone that was thin and sleek, one that could compete with the iPhone on pure aesthetics. But when the first prototypes started showing up at Google in the spring of 2009, they looked nothing like the designs Jha had presented. Indeed, they were hideous. There was no way to sugarcoat what had happened: Rubin and his team had had so much faith in Jha that they hadn’t questioned him closely enough. Now it appeared that faith was going to cost them enormously.

Despair set in. “It looked like a weapon. It was so sharp and jagged and full of hard lines. It looked like you could cut yourself on the edges,” says Tom Moss, who was Rubin’s head of business development. “We were really concerned. There were a lot of conversations where we asked, ‘Is this really the device we want to do? Should we try to talk Motorola out of it?’” The implications of canceling the project were huge. Another dud, right on the heels of the disappointing G1, might cement the public’s perception of Android as a flop. Executives at Verizon would look inept. They were still taking heat for passing on the iPhone. And a failure would likely mean the end of Motorola, the company that had invented the cell phone. “There was a lot riding on it,” Rubin said to me in 2011. “I was betting my career on it.”

A sense of doom—and panic—hung over the project all summer. The phone needed to be delivered to stores by Thanksgiving, but that now felt more like an execution date than anything to look forward to. Android engineers worried the phone wouldn’t sell, but still needed to work weekends and holidays to develop the software. Meanwhile, Jha, Rubin, and Stratton spoke almost every day trying to figure out a way to tweak the design without having to reengineer all the electronic components. And the phone still didn’t have a name. McCann, Verizon’s longtime ad agency, had come up with a list of possibilities—including Dynamite—that few liked. As late as Labor Day, the phone still went by its code name, Sholes—the last name of the man, Christopher Latham Sholes, who invented the first commercially successful typewriter in 1874. Feeling cornered, Stratton reached out to McGarryBowen, a young ad agency known for its unconventional thinking. “We told them they had a week,” said Joe Saracino, who was Verizon’s executive in charge of the new phone’s marketing. “A few days later, cofounder Gordon Bowen comes back and says, ‘What do you think when I say
Droid
?’”

In retrospect, what the agency had done was simple: it turned the phone’s menacing looks into its biggest asset by marketing it as an anti-iPhone. The iPhone was smooth and refined, so they would pitch the Droid as rough and ready for work. The iPhone’s electronics and software were inaccessible, so they’d market this phone’s hackability. “If there had been a phone in the movie
Black Hawk Down
, it would have looked like the Droid,” Bowen told the executives. A few weeks later, in early October 2009, Verizon and its new agency presented the Droid campaign to a group of two hundred Android staffers. One ad featured stealth bombers dropping phones on a farm, in the woods, and by the side of a road. Another attacked the iPhone as a “digitally clueless beauty pageant queen.” A third listed all the things the Droid could do that the iPhone couldn’t. When the ads were over, the room erupted in applause. The Android team had been demoralized, but “when they decided they were going to do this full-on attack on the iPhone—that we were going to war—we got really excited,” Tom Moss said.

When the Droid launched, on schedule, it was a tremendous hit, outpacing sales of the original iPhone in its first three months. In January 2010, Google launched another salvo at Apple with a phone it had developed itself called the Nexus One, which was a commercial failure because Google tried to market and sell the phone itself, instead of through a carrier. But it was a technical triumph. It had a bigger touchscreen than the iPhone. It had a noise-canceling microphone so that users could talk in a busy street without annoying their callers with background noise. It used a phone chip that worked on every carrier frequency so users could switch carriers without buying a new phone. It had a better camera, and it allowed users to talk longer on a single charge. Most significant, it had all the multitouch features Jobs had demanded Google remove from the G1 roughly eighteen months before. Motorola had released the Droid without those features. But a week after launching the Nexus One, Google released a software update for the Droid that added multitouch there too.

*   *   *

For Jobs, it was the final straw. He had told Google that if it included multitouch on its phones, he would sue, and true to his word he sued the Nexus One maker, HTC, a month later in Delaware Federal District Court. More noticeably, he began seeking out public opportunities to attack Google and Android. A month after the Nexus One was released—and days after Jobs announced the first iPad—he tore into Google at an Apple employee meeting. “Apple did not enter the search business. So why did Google enter the phone business? Google wants to kill the iPhone. We won’t let them. Their Don’t Be Evil mantra? It’s
bullshit
.”