Data Apple collects about users from its vaunted iPhone is so valuable that the company must build a special search engine just to keep Google from gleaning insight from that data, analysts say.
Piper Jaffray analyst Gene Munster said there is a 70 percent chance Apple will roll out a mobile search engine tailored for its iPhone within the next five years.
Google is currently the default search engine on the iPhone, which has tens of millions of users. Pairing the leading search engine-65 percent in the United States, more share abroad-with one of the most popular smartphones on the planet made good business sense.
However, Google has increasingly encroached on Apple's mobile turf, offering the Android operating system and several mobile applications.
Google's Nexus One resembles the iPhone so much that Apple sued Nexus One maker HTC for patent infringement. Google took the battle up a notch last November by wooing AdMob, whose in-application ads proved successful on the iPhone, with a $750 million purchase bid.
While that deal has yet to receive regulatory approval, industry experts said it would give Google unprecedented access to the works of Apple's App Store, which Google could use to buoy the Nexus One and future Android devices.
As the search provider for the iPhone, Google also sees what iPhone users are searching for, which can help it tailor software and services for its own mobile smartphones. This competitive advantage has not gone unnoticed by Apple.
Building its own iPhone-centric search engine would help Apple shield Google from its App Store data, Munster said in a March 30 research note.
"We believe Apple could utilize data unavailable to Google, data generated by the company's App Store, to create a mobile centric search engine, which would be a unique offering to Google's search engine," Munster wrote.
Apple lacks the experience and engineering wherewithal to build a large, scalable search engine. There are alternatives to Google such as Microsoft Bing, which was rumored to replace Google on the iPhone. With Google the default search service on Apple's newly released iPad, it seems unlikely that Apple will in fact replace Google with Bing or anything else on the iPhone.
But Munster said Apple could buy a search startup with a Web index, such as Cuil, using its index as the seed for its own search engine. Mobile search startup Taptu would also be a good possibility for Apple because it focuses its index on touch-enabled Websites.
Apple would then have to stimulate enough advertiser interest to make a viable search product work for it.
While Apple excels at marketing new products, it is not a digital advertising provider. The company did buy AdMob rival Quattro Wireless, but the company has yet to reveal what its intentions are for those assets.
Still, Munster said protecting valuable consumer data and not profit would be the point for Apple's mobile search engine.
"The data generated on the iPhone OS platform must become an increasing priority for Apple and we believe the company has the resources to develop its own products in both maps and search in the next five years," Munster said.
He added that Apple could entice enough major advertisers and local resellers like ReachLocal to use the Apple search platform to make a meaningful market place and potentially operate a search product at break even.
IDC analyst Hadley Reynolds added that local search is the initial killer app for mobile, noting that the Quattro ad platform could make for an attractive environment for advertisers, particularly when paired with Taptu's touch-screen approach to search.
Meanwhile, iPhone apps from Google and Bing are still delivering long lists of links, which are hard to deal with in small screen real estate. Moreover, these apps do not have access to the data that Apple has piling up in its iTunes Store and on its devices, Reynolds told eWEEK.
"The next-generation services will be much more touch-enabled than what Google and Bing are offering, and they will take users to sites that offer the most attractive info consumption models to their audiences," Reynolds added.
"Apple is in an inside position to tap into the current pent-up demand for better mobile search, and add a new competitive differentiation from other search providers and device makers."