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Thomas Claburn
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Apple Now Worth More Than Google

At the close of the stock market on Wednesday, Apple's value as a company surpassed Google's. Apple's market capitalization reached $158.84 billion; Google's settled at $157.23 billion.

At the close of the stock market on Wednesday, Apple's value as a company surpassed Google's. Apple's market capitalization reached $158.84 billion; Google's settled at $157.23 billion.Silicon Valley tech gossip blog Valleywag predicted as much back in November 2007 based on the strong performance of Apple's iPhone and the fact a Google phone was nowhere to be seen.

Nine months later, there's still no Google Android phone on the market and Apple's iPhone 3G remains in short supply. Not only that, but Google has nothing yet that can challenge Apple's iTunes tollbooth.

Google has demonstrated its might as online advertising's middleman; it has yet to show that it can win the loyalty of phone buyers. And it needs to do just that, soon, before Apple's iPhone achieves the kind of dominance that its iPod has in the music player market.

Google doesn't yet have a diversified revenue stream like Apple does. And it still depends on the forbearance of Microsoft and Apple for distribution. It has user loyalty, but not much leverage, particularly where Internet browsers aren't involved. If users of computers and phones start leaning toward Internet-enabled apps like iTunes rather than browsers, Google will find it much harder to keep its foot in the door.

And that's the way Google's competitors will erode Google's position. They won't beat Google as a search engine. That ship has sailed. But what they can do is change the nature of the playing field. That's what Apple is doing.

Google's brand-advantages on computers -- ease of use and speed -- aren't as important on phones. Touch-driven apps work better on phones than apps like search that require text input, and speed is a carrier issue rather than a function of Google's massive infrastructure. What's more, ads on phones remain unproven.

So if Google wants to remain relevant in the post-PC era, it needs to get serious about hardware. Google needs a phone, and possibly a PC. It needs to discover its inner gatekeeper and to rethink its role as a middleman. That path leads to hardware. Sure, Google has partners that make phones, but when you want something done in the tech industry, you don't leave it to partners.

If Google could make phone use free through advertising, then it would be a different story. But the mobile carriers aren't about to give up their monthly fees for a share of the pitiful mobile ad pie.

Wall Street is wise to what's happening, Google. Think different. Think hardware.

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