Dogfight: How Apple and Google Went to War and Started a Revolution (13 page)

It wasn’t just dull. The rollout of Android and the Open Handset Alliance seemed half-baked too. The most important players in the mobile-phone world were
not
part of the consortium: Apple, Nokia (the largest phone maker), RIM (the biggest smartphone maker), Microsoft, Palm, and the two largest U.S. carriers—AT&T and Verizon—had all turned Google down. Those
on
the list did not seem super-enthusiastic to be there, either. Most just issued press releases with boilerplate language of support. Most hadn’t joined because they thought Google was doing something groundbreaking and revolutionary. They joined because Google paid them to join. Google paid HTC millions to be part of the OHA and to make the first phone.

Up until then HTC had a long and deep partnership with Microsoft, making phones for its Windows mobile operating system. For HTC to join, Google needed to insulate it from all the Microsoft business it was going to lose by partnering with Google, Microsoft’s enemy. There wasn’t anything nefarious about these transactions, but they were an indication of just how big a hill Google was going to have to climb to make Android and the OHA successful.

Google got more attention a week later when it released a video of cofounder Brin and Android engineering director Steve Horowitz showing off and talking about actual phones, including one that looked iPhone-like. That device had a touchscreen, a fast 3G cell connection, and graphics capabilities that would allow it to run games such as Quake, in which you shoot your way out of a medieval maze; Google Maps, including Street View, worked just as it did on a desktop computer. Most of these were things the first iPhone did not have. Horowitz, who did the demo for that phone, even showed off a little iPhone magic, double-tapping a street-view shot to zoom in. Google was obviously working on some cool things, but strangely, it was going to take another year before the company actually had a product to sell. And it was odd that Google had released a video rather than drummed up excitement with a big press announcement. The Open Handset Alliance had been unveiled on a conference call, but here at least the world had something to look at.

The weirdest part about the Open Handset Alliance announcement was that while the public yawned, it only escalated the tensions inside Google and between Google and Apple. Was Google going to back Android or iPhone? Could it do both? One of the many reasons Rubin had tried to keep Android a secret for so long was so that he could pursue his project without forcing Google to face these questions publicly. At Android’s still early stage of development, they would not likely be answered in his favor. Gundotra was already in charge of a negotiated deal with Apple, one that seemed to grow more attractive to both companies by the day. Android was still an experiment without even a finished piece of software someone could get behind.

And Gundotra
was
putting the Android team on the spot. “I said, ‘Convince me that this [Android] is something we [Google] should believe in,’ and I know they had never had anyone ask those questions, and it was tough for them. ‘Who are you to ask these questions again?’ they wondered.” A former senior member of the Android team echoed this feeling: “In the early days, Google Mobile [the team working with Apple on the iPhone] hated us. I mean, they thought we were the biggest pain in the ass in the world. I know Vic Gundotra [who now run’s Google’s competitor to Facebook, Google Plus] has come around and been a great advocate of Android, but he really hated it at first. He thought [Android] would be a distraction that would upset his relationship with Steve Jobs. There was a lot of butting of heads and arguments internally about strategy and things like that.”

The tension between the two Google divisions got bad enough that Rubin sometimes wondered if he had his bosses’ complete support. “We were innovating like crazy [coming up with new features for the iPhone and other platforms]. And Andy said, ‘Why are we giving these features away?,’” Gundotra explained. “He wanted to reserve them for Android. And that was a good question.” Another executive added, “I remember a hallway conversation at the end of 2007 about Google Maps and whether Google should give Apple a feature it wanted but didn’t have, where Andy had to flatly say to Sergey, ‘We have to stop giving our best stuff away to Apple if we want Android to succeed.’”

But the conflicts inside Google paled next to the conflict the OHA created between Google and Apple. Steve Jobs felt completely blindsided by the Android announcements, and he was furious. He had known about Android for a while. But he hadn’t taken it seriously, according to those who’d talked with him about it. When he saw Horowitz show off the Dream phone in the Google video, however, he exploded with rage. Now he wondered if his partner was building something to challenge the iPhone. “I’m in my car driving somewhere and the phone rings. It’s Steve. He was screaming so loud I had to pull off to the side of the road,” said someone who talked to him that day. “‘Did you see the video?’ Steve says. ‘Everything is a fucking rip-off of what we are doing.’”

*   *   *

As angry as Jobs was, he didn’t want to believe that Schmidt, Brin, or Page were doing anything nefarious, friends and colleagues say. And Google’s triumvirate went to great lengths to reassure him of this: Android was exactly what they always had said it was going to be—an open-source phone-operating system that any manufacturer could use. Google was not making a phone to compete with the iPhone. And Jobs should infer nothing from the prototypes he saw in the video. Google needed phones to test Android on, but it was not getting in the business of making phones. Whatever Google did, it certainly had no intention of copying anything on the iPhone, they said.

Indeed, Schmidt says today that not only had he and Jobs talked about Android, he’d made it clear to Jobs that in terms of Google priorities, iPhone came first. “I think maybe Andy understood the importance of Android back then, but certainly the rest of Google did not. We were busy doing other things,” Schmidt said to me in 2011. “When I joined the Apple board [in 2006], Steve and I spoke about this [Android], and I said this thing is coming, and we agreed that we would monitor the situation.”

Certainly, Google’s other initiatives support Schmidt’s recollection. Android’s success was dependent on its getting the big U.S. carriers to cooperate, but at the end of 2007 Google was, if anything, going out of its way to make them angry. A giant slice of wireless spectrum was up for auction by the government, and Google, with a $4.71 billion bid of its own, tried to drive the price up for wireless carriers. Google didn’t want the spectrum. It just wanted to make sure the government required the winner to play by new, Google-friendly rules. The sanctimoniousness of using money, not to buy spectrum, but to acquire a pulpit from which to lecture carriers on table manners, infuriated them, especially Verizon, the eventual auction winner. When then Verizon CEO Ivan Seidenberg talked to Ken Auletta in early 2008, Seidenberg did not sound like a man rushing to do a deal with anyone with a Google business card. He said Google was in danger of “waking up the bears”—powerful mobile-phone carriers—who would “come out of the woods and start beating the shit out of” the company.

Jobs had a convincing list of reasons to believe Google’s explanations too. The two companies’ boards of directors and outside advisers were so intertwined they were nearly the same company. Bill Campbell, a longtime Apple board member and one of Jobs’s best friends, was one of Schmidt’s, Brin’s, and Page’s closest advisers. Al Gore, the former vice president of the United States, was an adviser to Google and an Apple board member. Paul Otellini, then the CEO of Intel, was a Google board member but counted Apple as one of Intel’s newest large customers. And Arthur Levinson, the then head of Genentech, was a board member of both companies. A fight with Google would force all of these advisers to choose sides. It would cause unwanted media scrutiny. It might spook investors. It might prompt an SEC investigation into the independence of both companies’ boards. No one wanted that, especially at Apple, which had just settled a five-year dispute with the SEC over the backdating of Jobs’s 2001 options.

While Jobs would never admit this publicly back then, Apple needed Google more than Google needed Apple. When Jobs died, he was arguably the most powerful businessman in the world. But at the end of 2007 that wasn’t close to being true. The iPhone was doing well. Apple’s stock price had doubled that year. But it was far too soon to call the iPhone a successful product. Jobs had just cut the price of the entry-level iPhone by $100—from $499 to $399—to boost sales, making his most loyal and early iPhone customers angry and feeling duped into paying too much. He was renegotiating his deal with AT&T to drop the price
another
$200 to $199. Meanwhile, Google was paying Apple close to $70 million a year to have its software on the iPhone. That was a lot of money for Apple back then.

Perhaps the most powerful reason that kept Jobs from starting a fight with Google was personal, however: Jobs thought Brin and Page were his friends. Jobs had been their mentor for years, and the three of them were often seen on walks around Palo Alto on weekends or on Apple’s campus during the week. Their friendship had started all the way back in 2000, when Google was still a start-up and its financial backers were pressuring Page and Brin to find a CEO with more seasoning than they had. Brin and Page had said the only person they would consider was Jobs. This was a preposterous statement. Everyone knew Jobs would never leave Apple after having just rejoined, and it infuriated Google’s venture capitalists. But it was also a genuine expression of admiration from Page and Brin. They had idolized Jobs for a long time, and it helped set their relationship in motion. They thought Jobs typified the kind of leader they wanted to be. Jobs was impressed with what was clearly the next generation of the Silicon Valley elite and was flattered to advise them. “Jobs told me that when he called them [Brin and Page], they just kept downplaying Android,” one of his executives said to him. “He basically said to me, ‘I believe in my relationships with these guys that they’re telling me the truth about what is going on.’”

For a few months it appeared that Jobs’s gut feeling about Google might have been right. His relationship with Gundotra blossomed to the point where they were talking weekly. In a blog post a month before Jobs died in 2011, Gundotra recalled this period wistfully:

One Sunday morning, January 6th, 2008 I was attending religious services when my cell phone vibrated. As discreetly as possible, I checked the phone and noticed that my phone said “Caller ID unknown.” I choose to ignore. After services, as I was walking to my car with my family, I checked my cell phone messages. The message left was from Steve Jobs.

“Vic, can you call me at home? I have something urgent to discuss,” it said.

Before I even reached my car, I called Steve Jobs back. I was responsible for all mobile applications at Google, and in that role, had regular dealings with Steve. It was one of the perks of the job. “Hey Steve—this is Vic,” I said. “I’m sorry I didn’t answer your call earlier. I was in religious services, and the caller ID said unknown, so I didn’t pick up.”

Steve laughed. He said, “Vic, unless the Caller ID said ‘GOD,’ you should never pick up during services.”

I laughed nervously. After all, while it was customary for Steve to call during the week upset about something, it was unusual for him to call me on Sunday and ask me to call his home. I wondered what was so important.

“So Vic, we have an urgent issue, one that I need addressed right away. I’ve already assigned someone from my team to help you, and I hope you can fix this tomorrow,” said Steve. “I’ve been looking at the Google logo on the iPhone and I’m not happy with the icon. The second O in Google doesn’t have the right yellow gradient. It’s just wrong and I’m going to have Greg fix it tomorrow. Is that okay with you?”

Of course this was okay with me. A few minutes later on that Sunday I received an email from Steve with the subject “Icon Ambulance.” The email directed me to work with Greg Christie to fix the icon.

Since I was 11 years old and fell in love with an Apple II, I have dozens of stories to tell about Apple products. They have been a part of my life for decades. Even when I worked for 15 years for Bill Gates at Microsoft, I had a huge admiration for Steve and what Apple had produced.

But in the end, when I think about leadership, passion and attention to detail, I think back to the call I received from Steve Jobs on a Sunday morning in January. It was a lesson I’ll never forget. CEOs should care about details. Even shades of yellow. On a Sunday.

To one of the greatest leaders I’ve ever met, my prayers and hopes are with you Steve.

But by spring 2008, it was clear that the warm feeling between the companies was not going to last. The signs were everywhere that Schmidt, Page, and Brin were not going to let their relationships with Jobs get in the way of their ambitions. Google tried to poach a handful of key Apple engineers to work on Google’s new Chrome Internet browser. Then talks to renegotiate the Google search and Google Maps agreements between the companies collapsed in acrimony. Google wanted to pay Apple less to be the exclusive search engine on the iPhone and on Macs, and said it wanted more than just basic location data from users’ iPhones. In a number of meetings on Apple’s campus in Cupertino, Gundotra and Apple marketing boss Phil Schiller actually ended up screaming at each other. Jobs and Schmidt had to step in and resolve the dispute.

Apple was particularly suspicious about the new maps data Google wanted from the iPhone. Google was getting latitude and longitude back from iPhone users. Now it said it also wanted the raw data that went into calculating that position. Was the user on a cell connection or a Wi-Fi connection? What was the location and information about the cell phone tower the iPhone was connected to? “We thought they wanted to use the data to backwards calculate other things the iPhone was doing,” an Apple executive said. “Phil’s big thing was that that information was proprietary to Apple and a violation of users’ privacy because we would be sharing more about our users than our users had agreed to share.”