Microsoft Lends a Digital Assist to Apple and Google

By Markets Fool.com

If you're unhappy with the digital assistant on your smartphone, you may soon have another option to replace it. Microsoft is reportedly porting its Cortana assistant to Android and iOS. While it won't have the system-level access of Siri on the iPhone or Google Now on Android, Cortana has held its own as a digital assistant in head-to-head comparisons. That means some users may be inclined to switch to Cortana when it becomes available on their smartphones.

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Cortana is now part of Microsoft's cross-platform strategy. Source: Microsoft.

While Cortana may have started as a way to differentiate Windows Phone and the upcoming Windows 10, the reported move to extend the app to Apple and Google is an example of the new strategy at Microsoft. It's transforming into an applications and services company instead of an operating system and software company.

Cortana can strengthen Bing
Microsoft's efforts in the U.S. search market have been a mild success. The company controls more than 30% of the desktop search market. The area where it's struggling -- and struggling mightily -- is on mobile. Bing accounts for less than 6% of total search volume on mobile devices.

What's seemingly not included in that number, however, is the number of searches conducted through digital assistants. Bing displaced Google as the default search engine for Apple's Siri in 2013. While Microsoft can't place advertisements next to Siri's web results, it's able to gain a lot of data to make its search results better.

With Cortana, the efforts are similar: Microsoft is looking to glean some insights about its users in order to improve its search engine. But with Cortana, Microsoft will be able to connect those data to an account, so it has a better picture of the person searching. That can lead to an improvement in its search results as well as its cross-device functionality. That's particularly important as Microsoft is integrating Cortana into Windows 10 for desktop users.

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Of course, Microsoft has to spur adoption of Cortana before it can improve Bing. With a minuscule share of the mobile market, Microsoft's decision to extend Cortana to every device -- iOS, Android, or Windows (mobile and desktop) -- makes perfect sense.

Microsoft: the app company
Microsoft is rapidly moving away from the Windows-centric company of the previous 30-odd years to an applications and services company. Cortana is just the next step.

Microsoft makes more apps for iOS than both Apple and Google. While a lot of those are Xbox-branded games, Microsoft is indicating that it's willing to extend some of its most valuable applications across platforms. That includes Cortana as well as full versions of Office and Outlook, and it's less focused on selling more Windows licenses.

It's worth noting that Google doesn't extend the same courtesy to Windows Phone that Microsoft extends to Android. Google makes just one app for Windows Phone -- a toned-down version of its Search app without Google Now -- compared to more than 50 apps that Microsoft makes for Android. Microsoft apparently doesn't have enough market share to matter to Google, which maximizes revenue by extending its services to as many users as possible. Microsoft seems to agree, considering its efforts to increase its presence across other platforms.

Why Cortana should scare Google
With Cortana, Microsoft may be hoping that introducing the feature to users on Android and iOS is enough to convince PC users sporting Windows 7 and Windows 8 to upgrade to Windows 10 (for free). The company has pointed to Cortana as a key feature built into the OS.

That could lead to a lot of desktop users switching to Bing (through Cortana) from Google. Moreover, Microsoft may then be able to leverage those Windows 10 desktop users into Windows 10 tablet and smartphone users, largely cutting into the Android user base.

At the very least, it broadens the potential market for Cortana users, and more users will strengthen Microsoft's Bing search engine. Microsoft can offer more personal search results, which is key to gaining share from Google. With 30% of the desktop market already, Microsoft only needs to attract another 15% to 20% more before it's in parity with Google. Cortana on every mobile and on Windows desktops could help move it closer.

At parity, Google could see price pressure on its ad units from Bing, while Bing sees pricing increase closer to Google's levels as it receives more bids. That's a big opportunity for Microsoft, and a big threat to Google. Cortana's cross-platform release is still a ways away, but Google should have a contingency plan if it's more popular than expected.

The article Microsoft Lends a Digital Assist to Apple and Google originally appeared on Fool.com.

Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.