What Would Apple-Yahoo Deal Spell?

Apple wants to rely less on Google's services on its iPhone, but it isn't ready to fully cut ties with the search and advertising company. Now Apple is holding discussions with Google's rival, Yahoo, about how to place more Yahoo-generated content on the iPhone.

Though talks are in progress, no deal is imminent, according to a new report in The Wall Street Journal. Citing unnamed sources familiar with both Apple and Yahoo's plans, the Journal says the two companies want to work closer together but are trying to surmount a sticky roadblock: search.

Yahoo already provides select content on the iPhone and iPad. For example, the native iOS weather app pulls data from Yahoo, as does the native stock/finance application. Yahoo also provides the sports-related content served up by Siri. Apple is looking for more news and other content.

The rift between Apple and Google has grown over the last 12 months. The late Apple CEO Steve Jobs accused Google's Android platform of being a "stolen" operating system. Apple has slowly been weaning itself from Google's services, with mixed results.

[ Google's Android still holds the smartphone lead, but Apple is gaining market share. Read iOS Gaining On Android In U.S., Says ComScore. ]

For example, Apple kicked Google's YouTube and Google Maps applications out of iOS. Apple did not offer a YouTube replacement but later approved a stand-alone YouTube app that is made by Google (the original iOS YouTube app was part of the OS). We all know how Apple's foray into maps worked out. Apple Maps, which appeared in iOS 6 last fall, was a disaster at launch, with faulty data, missing towns and warped imagery. The app was so bad that Apple apologized, recommended that customers use other map/navigation apps and eventually approved a standalone Google Maps app.

Search services are the crux of the problem facing Apple and Yahoo. The Journal's sources suggest that Apple isn't willing to compromise search results just so it can thumb its nose at Google, but that hasn't stopped Apple from speaking to numerous companies about ways to replace Google Search. Further, Yahoo struck a 10-year deal with Microsoft and its Bing search tool. Bing provides the engine underneath the Yahoo Search hood. Yahoo's relationship with Microsoft could prove problematic to Apple for obvious reasons.

Yahoo has plenty of its own reasons to seek stronger ties with Apple. Unlike Google and Microsoft, Yahoo doesn't have a mobile operating system to call its own. Without a platform, Yahoo needs to strike partnerships with the big mobile providers if it is to have any presence in the mobile space. Working more closely with Apple makes more sense for Yahoo than striking more bargains with competitors such as Microsoft and Facebook.

Yahoo CEO Marissa Meyer (formerly of Google) is working hard to fix Yahoo's mobile problem. It has already revamped important mobile tools such as email and Flickr. Yahoo is also canning under-performing products and focusing anew on creating higher-quality mobile services. Like Apple, Yahoo has met with mixed success in these efforts.

Based on the complicated relationships among Apple, Google, Microsoft and Yahoo, it appears as though all roads will lead to a compromise of sorts. Apple and Yahoo need to follow the path towards the compromise that doesn't rock the boat too much, while also providing some benefit to their respective customers.

It's not clear how they might accomplish that.

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