Apple stands to lose up to $15 billion a year if the Justice Department forces Google to stop paying the company to be the default search engine on all iPhones – as regulators question the legality of the longtime arrangement.
Anytime iPhone users open a web browser to enter a search query, it always defaults to Google. Even though anyone can change this setting, almost no one does, resulting in a huge amount of traffic (and ad revenue) to Google from over a billion iPhone users worldwide.
Analysts from Bernstein estimated that Google’s payment to Apple would increase to $15 billion in 2021 and as high as $18-$20 billion this year, reports 9to5Mac.
Apple stands to lose up to $15 billion a year if the Justice Department forces Google to stop paying the company to be the default search engine on all iPhones
The contracts are the basis of the DOJ’s antitrust against the California-based company, which began in the closing days of the Trump administration and won’t head to trial until sometime in 2023
Last year, Apple’s total gross profit was over $152 billion – so losing the Google payments would shave at least 10% off.
This arrangement between the two tech behemoths that dates to the early 2000s is under threat – with regulators accusing Google of anti-competitive practices to maintain its dominance in the search business.
‘Google invests billions in defaults, knowing people won’t change them,’ Department of Justice attorney Kenneth Dintzer said during a Thursday hearing in the antitrust case. ‘They are buying default exclusivity because defaults matter a lot.’
The contracts are the basis of the DOJ’s antitrust suit against the California-based company, which began in the closing days of the Trump administration. States are also pursuing a parallel antitrust suit against Google.
‘Google invests billions in defaults, knowing people won’t change them,’ Department of Justice attorney Kenneth Dintzer said during a Thursday hearing in the antitrust case. ‘They are buying default exclusivity because defaults matter a lot’
According to Bloomberg, Google’s attorney John Schmidtlein said that regulators misunderstand the marketplace and should focus less on search rivals like Microsoft’s Bing and more platforms like TikTok, Amazon, Meta and Grubhub – where countless users being their searches these days.
‘You don’t have to go to Google to shop on Amazon. You don’t have to go to Google to buy plane tickets on Expedia,’ he said. ‘The fact that Google doesn’t face the same competition on every query doesn’t mean the company doesn’t face tough competition.’
Analysts from Bernstein estimated that Google’s payment to Apple, led by CEO Tim Cook (above), would increase to $15 billion in 2021 and as high as $18-$20 billion this year, reports 9to5Mac .
Even so, all the user data that Google gains from Apple’s massive following certainly helps grow its search engine profitability. It already has the most popular browser, Chrome, with a 69% market share, and the second-most popular smartphone operating system, Android.
Dintzer said Google’s contracts with Apple, along with smartphone makers like Samsung and Motorola, plus Verizon, T-Mobile and AT&T, make it the default search engine and ensure it’s preinstalled on phones, so that it’s becomes the ‘gateway’ to the internet for most people.
‘Default exclusivity allows Google to systemically deny rivals’ data,’ he said, per Bloomberg.
Lawmakers and consumer advocates have long accused Google of abusing its dominance in online search and advertising. The ongoing case says that Google uses billions of dollars collected from advertisers to pay phone manufacturers to ensure Google is the default search engine on browsers.
That arrangement kills competition and innovation from smaller upstart rivals to Google and harms consumers by reducing the quality of search and limiting privacy protections and alternative search options, the government alleges.
At the time the lawsuit was filed in October 2020, Google vowed to defend itself and said: ‘Today’s lawsuit by the Department of Justice is deeply flawed. People use Google because they choose to — not because they’re forced to or because they can’t find alternatives.’
The Justice Department’s case against Google won’t head to trial until sometime in 2023 and even if it loses, Google will appeal.
Last year, Apple’s total gross profit was over $152 billion – so losing the Google payments would shave at least 10% off
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