Google paid $18 Billion to Apple in 2021 to be iPhone’s default search engine, reports say. In whole, Google spent a whopping $26.3 billion to be the default search engine in smartphones in the same year.
Search-engine is the heart of Google, being the biggest value-creator for the firm. Of the $280 billion revenue of Google in 2022, more than half – $162 billion, came from search ads. The prime reason for its revenue is its monopoly in the search-engine business. Google has been accused of involving in unethical deals with other companies, to retain its monopoly status in the search-engine, and not allowing its competitors to emerge.
U.S Justice Department filed a civil antitrust suit against Google in 2020 for monopolizing search and search advertising. The case estimated about $8 billion to $12 billion was transferred by Google to Apple, to retain the default search engine in iPhones. But the actual cost it paid to Apple is way higher than that.
Though it’s easy to switch browsers or change the default search engine in mobiles, the one that appears when you open it matters a lot. Google understood this and was congenial to pay $18 billion, 10% of its search revenue, to Apple to be the default.
Google’s Business with Apple
Apple at first, had Microsoft Bing as its default search-engine for its Siri & Safari up until 2017. In 2017, Apple switched from Bing to Google as the default, and it benefitted both the companies lucratively. Apple’s 1.5 billion active devices worldwide in 2020, seemed to be an immense business opportunity for Google. The deal with Apple partially enables Google to be accountable for 90% general searches and 95% of mobile searches in U.S back in 2021. A perfect monopoly.
Google had illegally maintained its monopoly power in general search by leveraging its dominance to lock rivals out of key distribution channels, such as Apple’s Safari browser, as argued by U.S. Justice Department in 2020.
The deal is lucrative not in just one way. Apple too hugely profited by this deal with Google. According to reports, the deal accounts for nearly 15% to 20% of annual revenue of Apple Services. In general, though Apple & Google are corporate rivals, they benefit each other in their business; so called frenemies.
Thus, the lawsuit if turned against Google, not only will affect Google, but also Apple.
Google’s Business with others
Google is keen on diluting its rivals out of the search-engine bubble. For this, Google had multiple deals with many firms besides Apple. Google pays Mozilla for default placement in Firefox; it pays Samsung for the same on its devices. It also has deals with many device makers, wireless carriers, and other platforms to be the default as well.
“Google pays billions of dollars each year to distributors—including popular-device manufacturers such as Apple, LG, Motorola, and Samsung; major U.S. wireless carriers such as AT&T, T-Mobile, and Verizon; and browser developers such as Mozilla, Opera, and UCWeb—to secure default status for its general search engine and, in many cases, to specifically prohibit Google’s counterparties from dealing with Google’s competitors,” the DOJ complaint reads.
In 2021, Google’s search revenue was $146 billion, while the portion of traffic acquisition costs was more than $26.3 billion (including Apple), 18% of its revenue. This indeed accounts to 29% of its profit.
While hearing the case against Google, these pieces of information were rolled out, disclosing Google’s practices of sustaining its monopoly. And it’s yet to be decided if the deals were legally fit or not.
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