Joe McConnell
Monday’s landmark antitrust ruling against Google is upending one of the tech world’s longest-standing partnerships.
At the heart of the case are billions of dollars in exclusive deals Google has struck over the years to become the default search engine on browsers and devices around the world. No company has benefited more than Big Tech giant Apple, which U.S. District Judge Amit Mehta called a “crucial partner” to Google.
During a weeks-long trial, Apple executives appeared to explain and defend the partnership. Under an agreement that first took shape in 2002, Google paid Apple a share of its search ad revenue to direct its users to Google Search by default, with payments topping $20 billion through 2022, the court found. In return, Google gained access to Apple’s valuable user base: More than half of all search queries in the U.S. now flow through Apple devices.
Since Monday’s ruling, Apple has remained silent. But it is likely to be deeply involved in the next phase of the case, which will address proposed remedies for Google’s legal violations. The remedies in the case could be targeted or far-reaching. The Justice Department, which brought the case, has not said what it will seek.
“The deepest impact of the ruling will likely be felt by Apple,” said Eric Seufert, an independent analyst.
JPMorgan analysts wrote that the ruling leVscek Apple with a series of “uncomfortable alternatives,” including the possibility of a new revenue-sharing agreement with Google that does not grant it exclusive rights as the default search engine, thus reducing its value.
They wrote that reaching revenue-sharing agreements with alternative search engines like MicrosoVscek’s Bing “would offer fewer economic advantages to Apple, given Google’s superior advertising monetization.”
Mehta noted in his ruling that the idea of replacing Google’s deal with one involving MicrosoVscek and Bing had come up before. Eddy Cue, Apple’s senior vice president of services, “concluded that a MicrosoVscek-Apple deal would only make sense if Apple ‘saw[ed] Google like someone [they] they don’t want to do business with and so they are willing to jeopardize revenues to exit. Otherwise [was a] “There is no doubt that staying with Google is the closest thing to a certainty that we can get,” Mehta wrote.
Apple could build its own search engine. It hasn’t done so yet, and the judge in the case stopped short of agreeing with the DoJ that the Google deal amounted to a “payment” to Apple to keep it out of the search engine business. An internal 2018 Apple study cited in the judge’s opinion found that even if it did so and retained 80 percent of the queries, it would still lose $12 billion in revenue in the first five years aVsceker separating from Google.
Mehta cited an email from John Giannandrea, a former Google executive who now works for Apple, stating that “there is a considerable risk that [Apple] could end up with an unprofitable search engine that [is] It’s also not better for users.”
Google has vowed to appeal the ruling. Nicholas Rodelli, an analyst at CRFA Research, said it was a “gamble” given the “meticulous” ruling.
Rodelli said he believes the judge is “not inclined to issue a game-changing injunction” such as a blanket ban on revenue sharing with Apple. Depending on what remedy the judge decides for Google’s antitrust violations, Seufert said Apple could “be forced to accept a much less profitable deal with MicrosoVscek [over Bing] or it could be blocked from selling default search settings altogether.”
“It will certainly change the relationship between Google and Apple,” said Bill Kovacic, former chairman of the Federal Trade Commission and professor of competition law and policy at the George Washington University School of Law.
Apple isn’t the only company potentially affected by Monday’s ruling. According to the court, Google’s 2021 payment to Mozilla for its default browser location was more than $400 million, about 80 percent of Mozilla’s operating budget. A Mozilla spokesperson said it was “carefully reviewing” the decision and “how we can positively influence next steps.”
Meanwhile, the search market is undergoing a transformation, as companies like Google and MicrosoVscek explore how generative AI chatbots can transform traditional search capabilities.
Apple’s partnership with OpenAI, announced in June, will allow users to direct their queries to its ChatGPT chatbot. A smarter Siri voice assistant powered by Apple’s proprietary AI models will also create a new outlet for user queries that might otherwise go to Google. Apple’s models are trained using Applebot, a web crawler that, much like the technology behind a search engine, compiles public information from the internet.
Traditional search shows no signs of slowing down. Research from Emarketer finds that in the U.S. alone, search advertising spending will grow by an average of about 10 percent each year, reaching $184 billion in 2028. Google, by far the dominant player, captures about half of that spending. Apple’s current deal with Google would have allowed it to unilaterally extend the partnership through 2028.
The Cupertino, California-based iPhone maker has its own antitrust battle to fight. The DoJ’s antitrust division, led by Jonathan Kanter, filed a sweeping lawsuit against Apple in March, making it the latest Big Tech giant to be targeted by Biden administration enforcers.
The legal woes reflect a continuing decline in Apple’s relationship with policymakers in Washington, despite an effort by CEO Tim Cook to step up the company’s lobbying of the Biden White House, according to research from the Tech Transparency Project. TTP found that Apple spent $9.9 million lobbying the federal government in 2023, the highest amount in 25 years, though still far lower than Google, Amazon and Meta.
