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We are only just into the new year and the battle to dominate the mobile internet is joined.

Google this week launched the Nexus One, its challenge to the Apple iPhone as the leading device in this vital growth area for consumer technology. Later this month, Apple will strike back with its new tablet device, a larger and more versatile cross between an iPhone and a MacBook.

Apple and Google used to co-exist in harmony, with two directors on both boards. But the rivalry between the fourth- and fifth-most valuable US companies – both are nearing $200bn in market capitalisation – is sharpening as they skirmish at the new internet frontier.

The contest appears to pit not only two companies but two approaches to business. On one side is Apple, a secretive endeavour that is seemingly wedded to old, closed ways of competing; on the other side is Google, a champion of open source software and open systems.

“A well-managed closed system can deliver well-designed products in the short-run – the iPod and iPhone being obvious examples – but eventually innovation in a closed system tends towards being incremental at best,” wrote Jonathan Rosenberg, a Google executive.

Yet Apple is not as closed as Google portrays it, and nor is Google as open. Instead, like the proverbial half-empty glass, Google is best regarded as half-open and Apple as half-closed. That is significant because it shows how such companies need to compete in a networked industry.

Google is fighting for its own interests as hard as Apple does. That is, at one level, obvious since they are both public companies that try to maximise revenues. Yet its insistence on not doing “evil” and its dismissive view of Apple and Microsoft obscures this.

The Android operating software that Google uses for the Nexus One and other “Google phones” is indeed, unlike Apple’s OS X or Microsoft’s Windows, open source. But the search advertising technology from which it makes money is as closely guarded as the recipe for Coca-Cola.

Mr Rosenberg came up with a laughable justification in his memo about openness (most of which is worth reading). He wrote that giving away Google’s proprietary search code would “not contribute” to openness and “would actually hurt users”. Oh, please.

I don’t think there is anything wrong with it keeping a few secrets – most businesses do and that hardly makes them “evil”. The point is that its openness is selective, being intended to expand the universe of fixed and mobile internet users, and thus its revenue pool.

Google is, as Chris Dixon, an internet entrepreneur, argues, using open source software to commoditise – and make cheaper for consumers – any technology that brings more people to its advertisement-serving algorithms, whether via a computer or a mobile phone.

The significance of Nexus One is not the phone, but its open source software and Google’s direct sales model. It wants to make mobile devices and software more accessible to raise demand for advertising, the segment it dominates.

“Our model is open because we have great confidence in applications such as Gmail and Google Maps. If a lot of consumers want to use the good stuff that our developers create, then our advertising model works,” says Andy Rubin, the executive in charge of Nexus One.

This is, of course, like Microsoft’s drive to commoditise hardware during the 1970s and 1980s – putting a computer on every desk – in order to charge for software. Some of Google’s tactics, such as bundling free navigation software with Android phones, are eerily familiar.

Apple lost to Microsoft in desktop computing in the 1980s because it did not grasp the true value of openness. Apple remained largely closed – an Apple computer mostly ran Apple software – while Microsoft entrenched itself by getting others to use the Windows platform.

This raises the question of whether the same thing – with Google taking the part of Microsoft and Apple reprising its role – will be repeated in mobile. Henry Blodget, the former analyst, thinks it may.

“Once again, Apple is insisting on selling a tightly controlled, fully integrated hardware and software device while its major competitor – Google – is spraying low-cost (free) software across dozens of hardware manufacturers, driving for platform ubiquity,” he wrote this week.

Mr Blodget, however, does not acknowledge the extent to which Steve Jobs, Apple’s founder, has learned from past mistakes. Apple has not pursued a fully closed strategy with the iPhone, but has been tactically pragmatic.

The clearest example is the App Store, which Apple has opened up to rival software developers with great success. Apple disclosed on Tuesday that iPhone and iPod users have now downloaded 3bn applications.

Apple’s iPod revival was achieved with a mixture of closed technology – proprietary software such as iTunes – and open content. Mr Jobs turned the iPod into a must-have device by signing deals with music labels, a tactic he is repeating for the tablet with publishers.

One thing both Apple and Google have learned is that a solely proprietary strategy has flaws, just as one of pure openness does. They compete by openly expanding their reach while staying partly closed.

So take with a pinch of salt all manifestos about complete openness. Any company that is as valuable as Google is wilier than that.
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