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Why Did Apple Buy Quattro Wireless?

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On Jan. 5, news broke that Apple (Nasdaq: AAPL  ) would acquire Quattro Wireless, a mobile advertising company. A few weeks earlier, Apple was rumored to be a bidder for AdMob, a competing mobile advertising company that Google announced it would acquire for $750M. What gives?

It's no surprise to see Google (Nasdaq: GOOG  ) snapping up mobile advertising assets. For Google, this is a natural extension of its core advertising business, from desktop to mobile. But what is Apple doing? Its core business is PC and mobile hardware and software, not advertising.

I believe the motivation behind Apple's acquisition of Quattro Wireless is a desire to maintain as much control over the iPhone and App Store as it can. Apple, after all, has a history of maintaining tight control. Unlike PC market rivals Microsoft (Nasdaq: MSFT  ) , Dell (Nasdaq: DELL  ) , and Hewlett-Packard (NYSE: HPQ  ) , Apple makes both the hardware and operating system for its Macs. Similarly, in the mobile market, it produces the iPhone hardware and software and has maintained tight control over its App Store. Unlike Google's approach to the Android market, Apple reviews every app before it's approved for inclusion. This tight control has created a seamless user experience that has bred ferocious consumer loyalty to Apple's products. Growth of in-app mobile advertising will make it increasingly difficult for Apple to maintain that degree of control, but it will certainly try.

By acquiring Quattro Wireless, Apple will have a horse in the mobile advertising race, and will exert influence over the advertising that will be an inevitable part of any iPhone (or tablet) user experience. It might even unleash its famous creativity on an industry heretofore known more for its annoyance. If the mobile ad market lives up to industry expectations, Quattro Wireless should provide Apple yet another growing revenue stream, but even if the acquisition is a veritable home run, Apple will never be an advertising company. Down to its core, it will continue to be all about consumer hardware and software experiences -- experiences that it controls. 

More on Apple and the mobile market:

Fool contributor April Taylor owns shares of both Apple and Google, and wrote this article on a MacBook. Microsoft is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers selection. Apple is a Motley Fool Stock Advisor recommendation. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy keeps you covered.

Read/Post Comments (2) | Recommend This Article (11)

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  • Report this Comment On January 26, 2010, at 1:15 PM, pk22901 wrote:

    "Apple will never be an advertising company. Down to its core, it will continue to be all about consumer hardware and software experiences that it controls."

    Great insight. Apple bought Quattro because they didn't want to risk Google's Admob screwing up the Apple mobile user experience.

    Apple is willing to give up some revenue, if it needs to, with the Quattro ads in order to ensure better user experience relative to Google's Admob ads.

  • Report this Comment On January 26, 2010, at 1:27 PM, xmmj wrote:

    Well - someone understands!

    While QW is in it for the money, I think you are right about Apple's motivation. They want to control.

    This is not the Kontrol of the tyrant (even if occasionally it does feel that way). No, this is control as the alternative to being "out of control" Apple does not want to cede key elements of its user experience to what is close to a monopolistic other player.

    In the conference call yesterday, they said that the iTunes/Apps store is running a bit above costs, that they have put a lot of investment in there. The point being that here is another area in which they see their interest in being support of the overall user experience for what are the real products - the hardware.

    This is a unique and an insightful business model.

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