Why Apple needs to retake the core of the iPhone in 2013

As problems go, Apple’s (s aapl) are the kind most companies would kill for. One of them is particularly fascinating: Having established the most vibrant computing platform of the 21st century, Apple’s own iOS app developers are finding themselves in serious competition with strategic opponents who are duplicating some of the most essential parts of the iPhone. It’s something Apple once tried to prohibit before the federal government forced it to back down.
Last week Facebook(s FB) and Amazon(s AMZN) each revealed new apps and features for iOS: free voice calls from Facebook Messenger (U.S. only), and Amazon’s MP3 store for songs and videos.
On one hand, these apps are a ringing validation for Apple: these companies need iOS and the reach of the iPhone or iPad to reach millions of their own customers. But Messenger isn’t Angry Birds or Snapchat or Evernote; these aren’t just one-off apps from small teams of developers. These apps, along with Google’s trove of well-received productivity, navigation, search and browser apps for iOS show that Apple’s competitors are getting really good at finding ways to systematically insert themselves between Apple and its customers.
Facebook audio messenger appFacebook is not making its own phone (for now). And why should it, when Apple’s phone, already in millions of hands, will do just fine? With the Facebook app for iOS and its cousin apps like Instagram and Messenger, Mark Zuckerberg and Co. clearly want to be the communication and social layer on the iPhone. And Facebook has a decent chance of doing this because they offer iPhone users more than Apple’s stock Messages, Phone and Camera apps.
Google, on the other hand, has its own devices. Yet the company looks to be aiming to own productivity and search on the iPhone with Mail, Drive, Chrome, Search and more. Google has had iOS versions of these apps for a while, but only recently has it buckled down and drastically improved its design and user interfaces.
Meanwhile, Amazon is coming after Apple on hardware with its own tablets and potentially a phone, but it also wants to bring its digital content empire directly to Apple’s iTunes customers via the iPhone, iPod and iPad.
It is good business sense for Apple to encourage and cultivate an App Store with these kinds of offerings — it’s been Apple’s style since the days of the early Macintosh. Plus, the App Store model allows Apple to act as gatekeeper, and it lets it take 30 percent from any sales of or within paid apps.
But in at least one case, we know Apple is uncomfortable with this: it was reported late last year that Apple executives were “seething” over iOS users’ delirious response to the revamped and re-released Google Maps for iOS while Apple’s Maps app was widely mocked. So it’s easy to imagine that what Facebook, Google and Amazon are up to makes Apple CEO Tim Cook squirm a bit too: Apple may still make the best product, but strategic competitors are starting to form deep relationships with iPhone users on the iPhone itself.

The problem

Unfortunately, there’s probably little Apple can do about it. One of the most formative periods in the App Store’s history was the summer of 2009. Apple had been enforcing a policy in which third-party apps that mimicked the “core functionality” of its massively successful iPhone wouldn’t make it past the App Store gatekeepers. That was working for them until a really big fish got caught in this net: Google Voice.
The aftermath of that situation — an FCC inquiry led to Apple (and its partner AT&T(s T)) backing down, letting Google Voice(s GOOG) onto iOS and being way more clear about App Store rules — is a good way to understand why Apple pretty much has to allow its biggest and most avid competitors onto its platform: if they don’t, they risk inviting more federal scrutiny.

What has to happen next

Facebook calling, Amazon music sales and Google Maps wouldn’t be much of a concern for Apple if its own core iPhone apps for talking, texting, calling, taking photos, mapping, addresses, calendaring, purchasing music and more were better than what its competitors are offering. But as the iOS platform matures, it’s becoming more evident that Apple is beginning to slip behind.
Google Maps iOS 6
That wasn’t always the case: In the early days of the iPhone, Apple set the tone for the best design and best user interfaces and pushed the envelope for what the iPhone could do: Safari, Photos, Siri, iTunes, and more were examples of what the best mobile developers should hope to accomplish. Did Apple simply take its eye off the ball — did the iOS team get distracted and let the competition catch up? Will Scott Forstall’s absence make way for better core iOS apps to emerge, or reemerge?
Apple is a mobile hardware and software company, and this dual strategy is what helps it reap the most profits in the mobile industry. But without keeping others from making gains into core parts of that hardware-and-software mix, it faces a near-term future in which the most important apps on the iPhone are not made by Apple.
It’s pretty difficult to imagine that’s what Apple had in mind during the creation of the iPhone and App Store strategy: that the iPhone would eventually become a host piece of hardware for Google’s apps or Facebook’s social tools.
One of the things to watch for this year as Jony Ive takes over the Human Interface department and future versions of iOS is whether he is able to compete head-on with world-class mobile development teams — especially at its biggest rivals — and bring Apple’s ability to make the best core iPhone apps back into balance.
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