Alphabet Hits Apple, Inc.'s iPhone 7 Where It Hurts

Apple puts a lot of emphasis on the iPhone's camera. Image source: Apple.

One of the more notable announcements from Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) event to show off the new Google Pixel was the claim that the new phone has the best smartphone camera ever made. Google attributes this feat to a DxOMark Mobile score of 89. DxOMark is a third-party entity that rates and scores cameras and lenses for both high-end DSLRs and smartphones using industrial labs and analysis software.

Apple (NASDAQ: AAPL) cares deeply about the iPhone's camera performance. At every unveiling event, discussion of new cameras inevitably dominates a large chunk of the presentation. The Mac maker's camera team has ballooned to 800 engineers that work on over 200 distinct components within the camera modules. The camera is one of the areas where Apple allocates tremendous resources in annual improvements, and this year the headliner is the new dual-camera system found in the iPhone 7 Plus.

The Pixel's camera chops are a direct shot across Apple's bow.

Shots fired

For those that are so inclined, here are the full DxOMark reviews for the Pixel and the iPhone 7(note that DxOMark has not had a chance to review the iPhone 7 Plus quite yet). It's also worth acknowledging that the Pixel is not the only phone camera to score higher than Apple;Sony, Motorola, Samsung, and HTC all have phones that squeezed ahead in the ratings.

If we break down the scores into the different categories, you can see precisely where the Pixel outperforms the iPhone 7.

Data source: DxOMark.

The Pixel does modestly better in areas like autofocus and texture, but dramatically outscores the iPhone 7 for things like noise and stabilization (for videos). That's even after the iPhone 7's own massive improvement in video stabilization, since Apple added optical image stabilization (OIS) to the 4.7-inch model this year; OIS was only available on the 5.5-inch 6 Plus last year. Last year's iPhone 6S scored just 60 in video stabilization.

The real kicker

Google has another ace up its sleeve, though. For Pixel owners, Google Photos will now offer unlimited cloud storage at full 4K resolutions, even for 4K videos. That's an extremely generous and aggressive offer as the search giant hopes to woo shutterbugs. Google Photos already offers unlimited cloud storage for downscaled photos, which is likely sufficient for average consumers, so this is very much targeting the pros.

Importantly, this is an area where Apple is unlikely to follow. Apple has decided to use iCloud photo storage as a way to upsell iCloud storage tiers.

Data source: Apple.

A photo professional's photo library of original quality files will undoubtedly be over 50 GB, so they can safely disregard the first paid tier. Apple's play here is to increase its services revenue, which is part of its broader effort to focus investors on recurring revenue sources instead of quarterly unit sales, even if that means letting Google keep an important point of differentiation.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A and C shares) and Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. 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.