Google's Acquisitions a Prime Example of Why It Will Crush Apple

When Google (GOOGL -1.97%) plopped down a reported $1 billion on Waze, much was made of what the social media-driven maps tool would add to Google's bevy of solutions, and rightfully so. Unlike some past acquisitions -- think Motorola Mobility -- the feedback following its recent purchase has been mostly positive. But the acquisitions themselves aren't the story; it's what they say about Google as a company and its culture, and why it's largely viewed as an aggressive innovator willing to try things others haven't even considered. If Google's experiments with self-driving cars don't persuade you, one glance at the bizarre-looking Internet balloons floating over New Zealand should.

By contrast, Apple (AAPL 0.52%) has made no secret of its strategy over the years for acquisitions: Keep them small and don't say anything unless absolutely necessary. Is it a coincidence that much of Apple's poor stock performance the past several months is due to a perceived lack of innovation? The Waze deal, one in which CEO Tim Cook -- the ex-supply chain guy -- made it clear Apple had no interest in, is a glaring example of what separates Google from Apple. And for iFans, the differences should be alarming.

A few Google acquisitions
Unlike Apple, which seems unwilling or unable to admit "needing" anything from anybody, Google has no qualms going after what it deems future opportunities. The $1.65 billion deal to buy what was then a small online video site called YouTube is a prime example. Google didn't let its ego get in the way of what it wanted; it just went out and got it.

Seven years ago, YouTube was a tiny concern just beginning to make some noise. But even then, Google CEO Larry Page called it "the next step in the evolution of the Internet." So what does Page do? Outbids the likes of Microsoft and Yahoo! (NASDAQ: YHOO) because he recognized it was a great opportunity. Though Google doesn't report YouTube results separately from its gross figures, a Morgan Stanley analyst suggests it will generate about $4 billion in revenue this year, and as much as $20 billion by 2020.

I can see Apple in that same YouTube bidding scenario simply walking away, just as it did with Waze, mumbling, "Don't you know who we are?" Apple's acquisition reluctance goes back years to Mr. Apple himself, Steve Jobs. According to a banker colleague, Jobs thought, "acquiring a company was a sign of defeat, an admission of failure to innovate." That, in a nutshell, is why Google will continue to blow the doors off Apple.

Most everyone with a smartphone has heard of Google's Android OS, easily the world's leading operating system. What some may not know is that Google didn't develop Android in-house. Google recognized its potential and went and bought it in 2005. Was that a "sign of defeat"? Safe to say Google couldn't care less.

Google fans are probably familiar with AdSense, the primary source of the company's enormous revenue. When Google acquired little-known Applied Semantics, it was as much for its talent as its technology. Turns out the Applied team developed AdSense, and the rest, as they say, is history.

A prime example of what acquisitions say about a company is Yahoo! There are reasons Yahoo!'s up about 32% for the year, and one of them is its aggressive acquisition strategy and CEO Marissa Mayer's plans for the future. The $1.1 billion spent on Tumblr made the biggest splash, but by no means was it Yahoo!'s only move this year, nor is it the last. Yahoo! is in a fast-moving industry that requires constantly upgraded offerings, and investors recognize that Mayer understands that and is doing something about it.

Apple has certainly had its share of acquisitions over the years, too, but outside of Siri, with its voice recognition capabilities and it's positive impact on iPhone sales, few have been real game changers. Whether Apple's lack of aggressiveness is left over from Jobs' abhorrence of all things M&A, an ego that won't allow it to admit "defeat," or a combination of both, doesn't really matter at this point. What should matter for investors is if Apple can change its tune. If not, Google and others willing to check their egos at the door will leave Apple in the dust.

Dropping $12.5 billion for Motorola Mobility and a reported $1 billion for Waze, along with all the other items on Google's long list of acquisitions, says as much about Google as it does about the companies it's purchased. Google is quickly becoming what Apple once was: a dynamic innovator in an industry that demands it.