Google's 10 Toughest Rivals

The biggest tech industry news story of the decade was undoubtedly the dramatic rise of Google. But will the search and online advertising juggernaut continue its dominance over the Internet economy in 2010? Not if the tech companies on our list can help it.

The biggest tech industry news story of the decade was undoubtedly the dramatic rise of Google. But will the search and online advertising juggernaut continue its dominance over the Internet economy in 2010? Not if the tech companies on our list can help it.

Until now, Google's biggest frenemies were the traditional media: newspapers, magazines and TV stations that create online content Google searches and that buy online advertising from Google. But as its portfolio has grown to encompass more than 150 products -- including free, hosted versions of popular software applications -- Google has attracted an array of tech industry competitors.

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Google's rivalry with tech firms is likely to get more intense in 2010. In Google, tech firms are up against the Internet's most-trafficked Web site and a money-making machine. Google is poised to rack up more than $23 billion in revenues in 2009, with margins over 30%. With its huge cash reserves, Google has money to buy innovative start-ups -- including recent purchases of On2, ReCAPTCHA and AdMob -- to keep itself at the cutting edge.

Here's our list of 10 tech vendors that are likely to shape up as Google's biggest rivals in the year ahead and the areas in which they will compete hardest:


1. Amazon

On track to rack up $22 billion or more in sales this year, Amazon has the financial wherewithal to battle Google in e-books and cloud computing. Indeed, Amazon CEO Jeffrey Bezos is a true frenemy of Google's, having been one of the search firm's initial investors back in 1998.


Analysts agree that 2010 is shaping up to be the battle of the e-books.

Since 2002, Google has been scanning millions of out-of-print books and incorporating them into their online search service. Google's e-book efforts picked up momentum in 2009 as Google made 500,000 digital books available free to customers of the Sony Reader and Barnes & Noble Nook, which is due in January. In October, Google said it was opening up an e-book store called Google Editions that will allow customers to buy and read electronic books on any device with a browser.

With e-books, Google is taking on Amazon, whose Kindle e-book reader has a commanding lead in the market. The Kindle is the best-selling item at Amazon's Web site, which is now offering more than 360,000 e-books in its Kindle store. Amazon said in December that it would release a free Kindle book reading application for BlackBerry users, which will complement a similar application for PC users.

Cloud computing

The other main area where Google is taking on Amazon is in cloud computing, a market that is poised for significant growth in 2010.

Cloud Computing Definitions and Solutions

In April 2008, Google debuted its Google Apps Engine, which is a cloud computing platform that allows developers to create their own Web applications and run them on Google's infrastructure. Users pay for the amount of compute, storage and bandwidth resources that they use. In April 2009, Google added features to make its cloud computing platform more attractive to enterprises.

Amazon's Elastic Computing Cloud (EC2) pay-as-you-go compute service was released in 2006, and it has been upgraded several times, including the addition of load balancing, auto scaling and monitoring services. In December 2009, Amazon added Symantec's security and storage offerings. Usage of EC2 is on the rise with business customers , who find it a low-cost way of handling bursty network traffic although security concerns remain.

2. Apple

In 2009, Apple and Google went from being partners -- with common board members -- to rivals in the mobile phone and online music businesses. With $36 billion in sales and legendary engineering prowess, Apple is more than up to the task of battling Google in these areas as well as browsers, where Google Chrome competes against Apple Safari.

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Headlines about a looming Google vs. Apple war center around the smartphone market.

In July, Apple rejected Google Voice, which allows users to share a single number across multiple phones, as an application for the iPhone. In August, Google CEO Eric Schmidt resigned from Apple's board, citing conflict of interest. By October, Google and Apple eliminated all overlapping board members amidst a federal antitrust investigation. Meanwhile, Google's Android mobile device platform -- with more than 1 million units sold as of April through T-Mobile -- is gaining ground against the popular Apple iPhone.

The iPhone continued to be one of Apple's bestsellers in 2009, with more than 20 million units sold in the last four quarters. IPhones are not only hot in the United States, but in Asia, where more than 100,000 units were sold in China this fall.

Online music

The digital music market is poised for strong growth in 2010, with Google and Apple both in hot pursuit.

In October, Google launched a music search service that lets a user preview a song when making a music-related query. Google's music search partners include MySpace and La La Media, a streaming music Web site that was purchased by Apple in December. Another music partner of Google's is Pandora, a streaming music service that's available on Android-based mobile phones.

All of these online music upstarts like Pandora and La La Media are out to unseat Apple's iTunes, which became the No. 1 music retailer in the United States in 2009. Although sales of its popular iPod device are slowing, Apple still reported sales of more than 54 million iPods in the last four quarters.

3. AT&T

AT&T is a rival of Google's politically -- they are on opposite ends of the network neutrality debate -- and in the smartphone market, where AT&T is the exclusive carrier of the iPhone in the United States until June 2010. With more than $123 billion in sales in the last four quarters, AT&T dwarfs Google and isn't afraid to flex its regulatory muscle as in its complaints about Google Voice to the Federal Communications Commission.


In its battles with Google, AT&T is out to protect its iPhone-related revenue, which averages out to $1,000 per iPhone customer per year, experts say.

In the last four quarters, AT&T has activated 11.5 million iPhones, producing a significant stream of wireless data revenue for the carrier. That's why AT&T is pushing Apple to extend its exclusive contract for another year. In the meantime, AT&T is hedging its bets and could partner with Google in 2010. Rumor has it that AT&T will offer its first Android phone from Dell  in 2010.

During 2009, AT&T and Google lobbyists argued strenuously before the FCC about Google Voice. AT&T wants Google Voice to be required to connect expensive calls through rural telephone companies like AT&T is required to do under "fair access" rules. Google argues that it isn't a carrier, can't offer a free application if it is required to meet carrier regulations, and shouldn't be required to connect expensive porn and conference calling services through rural carriers. For now, Google Voice is still in beta mode and isn't available on the iPhone.

4. Facebook

Google has been eyeing the rapid rise of Facebook -- which has attracted 350 million active users in just six years -- with concern. Although venture-funded Facebook's financials are not publicly available, analysts estimate that its 2009 revenues will top $500 million, much of it from an advertising deal with part-owner Microsoft, another Google rival.

Facebook Bible: Everything You Need to Know About Facebook

Social networks

The Google/Facebook rivalry is based on the question of where users will get their information in the future: in search or in social networks?

Google is worried enough about users turning to their social networks for information and advertising that its sidled up Facebook rivals MySpace, LinkedIn and Twitter for various applications. Indeed, rumors of Google buying Twitter were rampant this year. Google also has its own social networking application called Orkut, which was upgraded in December. And it offers Google Friend Connect, a tool for Web publishers to add social networking content to their sites, in direct competition with similarly named Facebook Connect.

Meanwhile, Facebook has sought out relationships with several arch-enemies of Google, including Microsoft and Yahoo. Back in 2007, Facebook sold a 1.6% stake to Microsoft rather than Google and chose Microsoft's search engine for its site. Facebook also has added features this year such as Open Stream API, which allows developers to export Facebook data to other applications. Two outstanding issues facing Facebook in 2010: protecting the privacy of users' information and keeping hackers at bay.

5. Hulu

Google has owned YouTube for four years, but it hasn't figured out a way to turn a profit from the fast-growing video streaming site. YouTube's closest competitor in this segment is Hulu, which has the benefit of deep-pocketed media ownership.

Video streaming

Online video usage exploded in 2009, breaking records in September with more than 168 million users in the United States. The question for 2010 is whether YouTube will continue to dominate this market.

YouTube is best known for featuring video clips and user-generated content. The Web site attracted more than 126 million viewers and served up 10.3 billion videos in September, according to Comscore. YouTube's weakness: it doesn't make enough money to cover its massive network bandwidth costs. Credit Suisse estimates YouTube will lose $470 million in 2009.

Hulu is second to YouTube, with 39 million viewers and 583 million videos viewed in September, Comscore reported. But Hulu only provides professionally created content from its owners, which include Fox, NBC and Disney. Though not profitable, Hulu may start charging for its content in 2010, which would shake up this market.

6. IBM

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