Google pays $20 billion a year, or roughly 36% of its search advertising revenue, to the iPhone maker to make the company its default search engine on Safari.
This might be shocking news for Google, whose lucrative advertising business depended heavily on iPhone users using its search engine, since Apple plans to add AI-powered search options in its Safari browser.
Google’s parent, Alphabet, shares slammed after hearing the news and fell by 7.3%, depleting its market worth by about $150 billion.
A source familiar with the situation stated Apple was actively looking to reshape Safari. The source cited that Apple executive Eddy Cue was testifying about an antitrust case concerning Google’s dominance in online search.
Cue claimed that users were relying more and more on artificial intelligence, which reduced Safari searchers for the first time last month, and Apple shares also closed 1.1%.
According to the company’s blog, Google was still seeing an increase in the total number of search queries and “total queries coming from Apple devices and platforms.”
The company wrote that people find it easier to use Google Search since they get answers to their queries easily and quickly. The users are accessing new things in new ways. The company attributed the increase to its increased search volume for voice and visual search features.
However, the Apple executive’s remarks imply that they are still in the process of making a radical change in search. They want to break the pattern of Google’s dominance in search, which is a target for almost all companies to put their ads.
It has been a target for US antitrust authorities, who have brought two significant lawsuits against the company.
Google pays $20 billion a year, or roughly 36% of its search advertising revenue, for the internet browser to iPhone maker to make the company its default search engine on Safari.
The US Justice Department has suggested measures to break up Google’s dominance in online search engines, including banning the company from paying companies to become the default search engine.
Gil Luria, an analyst at D.A. Davidson, states that even if Google does not take any steps, it will still suffer greatly from losing exclusivity at Apple’s browser.
Many companies spend their search advertising business with California-based company because they are practically a monopoly with nearly 90% market share. According to Luria, many marketers could shift a significant portion of their ad budgets away from the company if they find other strong search engine competitors.
Google has tapped into its deep coffers to fund its AI research and utilize its vast data trove, despite being written off by critics as an also-ran in the AI race following ChatGPT‘s sensational launch in late 2022.
The company has launched “AI mode” on its search page to enhance users’ experience since it usually takes time to search every blog, but with the feature, it will become easier for users to get answers.
It recently opened up search ad revenues by adding ads to its AI Overviews feature, which are summaries above the conventional hyperlinks to relevant webpages on a search query, for users in more than 100 countries.
Google CEO Sundar Pichai stated the company hopes to reach a deal with Apple by mid-year to integrate its Gemini AI technology into future phones.
Apple’s Cue also stated that the company would eventually include AI search providers like OpenAI and Perplexity AI as search alternatives.
He believes that AI search providers like OpenAI and Perplexity AI would someday take the crown from conventional search engines like Google, and that Apple will soon include those players as alternatives in Safari.
Yory Wurmser, chief analyst for advertising, media, and technology at eMarketer, states that Apple’s strategy also shows how advanced generative search engines like ChatGPT and Perplexity have come.
Wurmser assures that Google is ready to spend tens of millions of dollars to continue being the default search engine.
