Why's Apple's avoiding a tussle over Google search
An awkward admission last September reveals what’s really going on behind the scenes, and hints to Apple's longer-term plans...
Those still paying attention through the blur of eggnog and gifting this past fortnight might have caught wind of a fishy and carefully-timed announcement from Apple.
Product chief Eddy Cue chose the quietest possible moment to make it official that Apple has zero interest in building a search engine to rival Google.
The decision, which affects 3.2 billion Apple users, was buried in a court document quietly signed on December 19 and filed on December 23.
The filing was sent to the judge who just ruled that Google’s an illegal monopolist and will soon decide whether to break it up.
Cue’s statement was a signal that Apple would rather take a pay off from an illegal monopoly than compete to make search better.
Only there’s far more to it than that, so for newsletter #1 of 2025, let’s time warp back to September 27 last year to reveal what’s really going on behind the scenes.
But first, let’s welcome new subs over the festive period from Time, NASA, Mail Online, trade group the News/Media Alliance, Stanford University (alumni include Zuck, Musk, Page et al) and the University of Miami, Japanese-founded now global news aggregator SmartNews with 50 million downloads (loved meeting you in Tokyo fellas), Aussie lifestyle and entertainment platform Urban List, and many many more.
OK, let’s go…
Gosh, 2024 was a busy year, so here’s a quick recap.
At Google’s search antitrust case, the US Justice Department peeled back decades of secrecy to expose how Google paid off rival Apple to win its search dominance.
The terms were not trivial. Not trivial at all.
Apple made Google the default search engine on the iPhone and Safari, handing it the keys to $160 billion in ad revenue.
In return, Apple bags $20 billion a year from Google, which represents 22 per cent of its profit, props up its $3.7 billion valuation, and delights its shareholders.
For context, $20 billion is the entire value of fashion label Prada, Southwest Airlines, and pharma giant Bayer, and 2.5x the value of the New York Times.
When the handshake was revealed, Motley Fool reported: “The DOJ lawsuit may shake up Big Tech. Just not the way you think. Apple is at more risk than Alphabet.”
So why is that? And why is Cue so keen to say Apple’s not getting into search?
Let’s rewind. It’s September 27 last year and Eddy Cue is testifying at the antitrust trial. He’s a key witness because he brokered the $20 billion Google partnership.
It was the deal of the century because it rewrote the web’s economics by guaranteeing Google 90 per cent of the global search market.
Google already controlled half of mobile search through Android, but the iPhone deal gave it the rest.
With Google now the default on Safari too, Cue’s signature gave Google the keys to $160 billion in annual cashflow from search ads.
It guaranteed that “Apple devices generated about half of Google’s revenue”, the Department of Justice told the judge.
The side effects for the rest of the market were devastating. Rival search engines withered and died, and publishers reliant on advertising saw sell through and CPMs collapse.
Cue cut the deal with his counterpart at Google, a guy called John Giannandrea.
You may recall the name. He was then Google’s head of search but later made a high-profile defection to… Apple, where he now has a critical role in its AI efforts.
Silicon Valley comes across as super-incestuous, doesn’t it?
So that’s how Apple gave Google a leg-up to the top, and how Apple maintains its market leading margins to justify its position as the most valuable company in history.
But...
We very nearly didn’t know all this.
During the trial, Google and Apple joined forces to fight tooth and nail to pressure the judge Amit Mehta to keep it all secret, especially Cue’s evidence.
They didn’t want their secret backroom deal to carve up the internet to be known. Judge Mehta admitted it put him “in a pickle”.
He deliberated for two days before ruling it public, and his decision was the turning point for the trial.
Cue’s testimony then began with a bombshell.
He revealed that his 2016 deal contained a clause that required Apple to “support and defend” Google if the US Government ever prosecuted it for antitrust.
The revelation showed that Google knew it was navigating a knife-edge, and it wanted a friend in high places as an insurance policy if the deal terms ever came out.
And come out they did. Cue confirmed:
Google paid Apple tens of billions plus a 40 per cent share of the search ad revenue it delivered.
Apple diverted half the world’s search traffic Google’s way, cementing its search dominance and suffocating all rivals.
With it went 41 per cent of the world’s total digital ad spend.
Google banked $160 billion in ads.
Apple pocketed $20 billion.
And the rest of the ad-funded web waned.
OK, now you know the backstory on why Apple is vigorously defending its rival. It’s in a contract. Merry Xmas.
But it doesn’t quite end there, because…
Under probing from lawyers in court, Cue confirmed that without the Google deal, Apple might well have created its own search engine.
Continuing my experimental work with AI, I uploaded the latest court statements to Google’s Notebook LM to create a podcast on possible outcomes.
Could we about to see an explosion on specialist search engines, including a paid one dedicated to premium news? It’s fascinating. Enjoy…
Happy 2025 everyone.