You’ve probably asked the question before iPhone or Android? Apple Maps or Google Maps? Safari or Chrome? On the surface, Apple and Google represent the ultimate tech rivalry but behind the scenes, executives have maintained a multi-billion dollar partnership that benefits them both massively. Apple and Google as the classic example of frenemies. On the one hand, they’re fierce rivals, on the other hand, they benefit greatly from figuring out ways to work together.
Google pays Apple an estimated 8 to $12 billion a year or 1/3 of Alphabet’s annual profits to make sure it’s the default search engine on more than a billion Apple devices. That deal has helped Google dominate the search market. In recent years, it’s accounted for 90 to 95% of search engine queries in the US. The deal between the two tech giants is so powerful that it’s at the center of one of the biggest US government lawsuits against a public company since the ’90s. So how did two of Silicon Valley’s biggest rivals come to form one of tech’s most valuable partnerships?
History of Apple & Google
To understand Apple and Google’s frenemy relationship, you have to go back to the beginning. In the early days, they were quite close. At the time, the CEO of Google was on Apple’s board. In 2005, the two companies laid the groundwork for what would become one of the industry’s biggest deals. Google struck a deal with Apple to become the default search engine for Safari on Mac computers.
As Apple evolved sort of the relationship, in 2007 when the iPhone came out, Google was then the default search for the iPhone, Safari browser and has really just grown and grown from that point. Eric Schmidt former Google CEO – “So Steve, I’ve had the privilege of joining the board and there’s a lot of relationships between the boards and I thought if we just sort of merged the companies, we could call them Applegoo.”
Start of Rivalry between Apple & Google
As it became clear that Google was going to be more than just a search engine, that it wanted to grow and that Apple was going to be a rival, that became an issue. In 2008, Google directly challenged Apple’s business with the launch of its Android operating system. The next year, Google CEO Eric Schmidt resigned from Apple’s board. Since then, both companies have expanded into each other’s businesses with Google launching Android phones and Apple launching services like the App Store and Siri, which was originally powered by Microsoft’s Bing, not Google.
Friends are back for business
It wasn’t until 2017 that Apple switched from Bing to Google for its search results on Siri and Spotlight, the Mac search function. That renewed deal between Apple and Google came at a good time for both companies. Google was facing competition from Facebook’s fast-growing mobile ad revenue and it’s new deal with Apple put its search results and ads on more than a billion Apple devices.
Now up to half of Google searches come from Apple devices. For Apple, the deal has benefited its business twofold. First, it got more consistent search results across Safari, Siri and Spotlight. But perhaps more importantly, the money it gets from Google’s ad revenue makes up 15 to 20% of Apple’s annual profits. That’s helped fund Apple’s ambitions to grow its services unit, which has driven growth for the company over the past few years.
Apple is like a store. It’s selling its shelf space, that premo shelf space. And so when you go into a store and you see those candy bars right there at the register, that’s the place to be if you’re selling candy bars. And so for Google, they’re in that default spot.
Now all of that money and search traffic could be at risk because of this lawsuit. In October, the US Department of Justice sued Google over antitrust concerns. The government is alleging that Google is a monopoly gatekeeper for the internet and it says that harms customers, advertisers and competing tech companies.
One way the Justice Department says Google maintains its dominance is through exclusive business deals. Like through its partnership with Apple. According to the lawsuit, some people at Google called the prospect of losing its default status on Apple devices code red. Google representatives said they weren’t aware of the code red language used in the lawsuit. And neither Apple or Google have officially disclosed the exact value of the deal. Or commented on the Justice Department’s eight to $12 billion projection.
Google has denied the Justice Department’s allegations and said it plans to challenge the lawsuit. Its chief legal officer said the lawsuit wouldn’t help consumers and that its relationship with Apple is customary. Apple hasn’t officially commented on the lawsuit. So what happens if the Justice Department is successful in its case?
Future of Apple & Google
Of course, there are other search engines out there, like Bing, DuckDuckGo, Baidu and Yandex. But none of them even come close to Google’s dominance. Some financial analysts say that if anyone can give Google a run for its money, it’s Apple. And the antitrust lawsuit might just be the push Apple needs to divorce itself from Google.
Apple hasn’t responded to requests for comment on plans to create or purchase its own search engine. Still, a breakup of this multi-billion partnership between Apple and Google could deal a financial blow to two of the world’s biggest companies. And however this relationship plays out in the future has the potential to shape the way billions of people use the internet.