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Google's Favorite Mistake

Stocks in this article: GOOG AAPL AMZN

NEW YORK ( TheStreet) -- Everyone today seems to be talking about Apple (AAPL) and its "Big Mistake."

Instant analysis of Apple's WorldWide Developer Conference keynote is that iOS 7 has "#Fail" written all over it.

Andrew Orlowski of The Register thinks designer Jony Ive has taken the wheel and is steering the software into the nearest ditch, filling the presentation with nonsensical designer-talk instead of trying to amaze users.

Over at eWeek, Wayne Rash thinks the company is "buying time" by borrowing from rivals rather than innovating.

I quote these two because they're both veterans of the computer media wars. I've worked with Rash, and followed Orlowski for more than a decade. If people in the know are writing things like this, it's a danger signal.

But let's leave Apple a moment. The bigger worry should probably be Google (GOOG).

That's because Google has apparently forgotten how big it is. Its rumored acquisition of Waze, for $1.3 billion, does raise antitrust issues, as Forbes notes, which could, at minimum, significantly delay the deal's completion. Giants must be careful where they step.

Investors have also forgotten that Google does fail, often, and sometimes in spectacular fashion. Google Health is one example.

Google Wallet is another. Bloomberg reports that Google has spent $300 million buying developers for Wallet but has yet to achieve any real market penetration.

This is because, as with Health, Google doesn't know what its market is. Consumers don't control the payment market any more than they control the health market.

Health is controlled by insurers, by hospitals, by people who can spin masses of medical data into actionable intelligence, and who thus have a real incentive to hold tight to it.

Payments are controlled by merchants, and to a lesser extent by banks. Google has spent tons of money trying to convince people they should put their credit card data on their phones and wave those phones around as they spend money. But spend it where?

Merchants decide what form of payment to take. Companies such as Square focus on merchants, with a single deal on the back-end, attractive to millions of small merchants. It's the speed of setting up an account, and the simplicity of the deal being offered, that appeals here, in contrast to the complexity banks working for processors offer. This is true even though the bank deal may be a better deal.

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