Apple Upsets the Google Search Cart

NEW YORK (TheStreet) -- Google(GOOG) has built a bridge from desktop empire to the mobile search frontier, but phone application developers are trying to detour the traffic.

pple(AAPL), the biggest mobile application operator, has issued a challenge to Google for control of the nascent mobile advertising industry. Last month during an Apple iPhone OS 4.0 speech, Apple chief Steve Jobs declared it was open season on search.
"People aren't searching on a mobile device like they do on desktops. What's happening is that they are spending all their time in apps," Jobs said during his speech on April 8. "They are using apps to get to data on the Internet rather than a generalized search."
While that may not even be true for Jobs or his company, the point was clear -- mobile search is a new arena and Apple intends to capitalize.
"Apps are very hyper-specialized search engines. It gives you hundreds of little tools versus one big tool," said Danny Sullivan of SearchEngineLand, a search industry journal.
Pick an interest, and there's probably an app for it. Gardening, nightlife, dining, birding, cooking; fans can download an app and get access to very specific information that can be further filtered to show what is near your location or within your favorite parameters.
In his speech to introduce iAds (ads that will run inside applications), Jobs sharpened his point against Google, adding that using apps like Yelp to find restaurants nearby "is where the opportunity is to deliver advertising."
And there it is, the holy grail of the Net search business: ad sales.

As noted in the chart above, Google controls the traditional search engine market by a wide berth. (comScore doesn't yet track mobile search data.) More than 97% of Google's revenue comes from search ads, and with computing and search going increasingly mobile, Google has been eager to make itself indispensible in the mobile market, also. Contrary to Job's assertion, for the vast majority of smartphone owners, Google search is by far the leading search service.
Mobile ads will bring in an estimated $500 million in revenue for Google this year, according to Caris and Co. analyst Sandeep Aggarwal. That is "perhaps the fastest growing revenue line" for Google, Aggarwal wrote in a research note Monday.
Aggarwal also adds that there are a couple challenges along the mobile road for Google. For one, Google's dominance of search means that each mobile search is -- cannibalistically-speaking -- one less desktop search. Second, apps on phones bypass Google search.