Nearly half of Google’s search traffic now comes from Apple devices, according to the Justice Department, and the prospect of losing the Apple deal has been described as a “code red” scenario inside the company. When iPhone users search on Google, they see the search ads that drive Google’s business. They can also find their way to other Google products, like YouTube.
Apple now receives an estimated $8 billion to $12 billion in annual payments — up from $1 billion a year in 2014 — in exchange for building Google’s search engine into its products. It is probably the single biggest payment that Google makes to anyone and accounts for 14 to 21 percent of Apple’s annual profits. That’s not money Apple would be eager to walk away from.
In fact, Mr. Cook and Mr. Pichai met again in 2018 to discuss how they could increase revenue from search. After the meeting, a senior Apple employee wrote to a Google counterpart that
Daisuke Wakabayashi & Jack Nicasour vision is that we work as if we are one company, according to the Justice Department’s complaint.
The first concrete results of the antitrust hearings earlier this year are becoming public, along with interesting revelations about the hidden deals between Silicon Valley companies. Even if the US Department of Justice loses this case against Google, I think raising public awareness about these deals could still have an impact on Apple’s and Google’s future business decisions. It also shines an unfavorable light on Apple’s constant virtue signaling around privacy: while it publicly claims to protect users’ interests, in private Apple allowed Google privileged access to vast amounts of data – for the right price!
And I admit, it’s a pretty impressive price! This has to be one of the best returns on investment of any business globally: a ten-fold revenue increase in five to six years represents an annual growth rate of about 47%, much higher than the growth rate of Apple’s services – and without any further cost to Apple. Many people pointed out on Twitter that this antitrust complaint should be aimed at Apple rather than Google, but they are both to blame. Just like in the earlier case involving book publishers, Apple and Google are colluding to keep a lucrative deal going to the detriment of their competition: Apple gets the benefit of Google’s services, preventing an Android smartphone from differentiating this way (Apple’s services are still sub-par in multiple areas, so without Google Maps, Search, Gmail, and others, it could lose substantial market share to competing manufacturers), Google continues to access data from the large (in the US at least) portion of the population in the Apple ecosystem. The larger the payout, the harder it is for any other search engine to gain this premium spot on the premium smartphone.
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