The “antitrust case of the century” not only puts Google, the search engine hegemon, facing its biggest threat in the 25 years since its founding, but it may also end the era when another Silicon Valley giant, Apple, made easy money through the Google agreement. In the Google search monopoly case that began nearly a month ago, the U.S. Department of Justice alleged that in order to maintain its status as the default search engine on the Internet and mobile devices, Google spent more than $10 billion a year and signed exclusive agreements with Apple and other companies.
Google's cooperation with Apple is an important point of contention among the Justice Department's multiple accusations against Google. After the trial of the Google monopoly case began last month, Justice Department lawyer Kenneth Dintzer pointed out that Google had rejected Apple's proposal to change the agreement and threatened to cancel the advertising sharing terms. "This is the performance of a monopolist."
So far, neither Google nor Apple has publicly disclosed how much revenue Apple will receive from the agreement to use Google search.
When testifying during the Google case last week, Nadella, the CEO of Microsoft, Google's old rival in search, called the cooperation agreement between Apple and Google a "vicious cycle" and believed that it hindered potential rivals of Google, including Microsoft's Bing engine. Nadella said that Microsoft has been trying to reach an agreement with Apple for many years to let Apple change the default engine of iPhone and other devices to Bing.
Wall Street Insights has mentioned that the closing arguments and final judgment in the Google case are not expected to be released until next year. Some media commented that the trial of this case will take a long time, and the case may also be pending for a long time due to Google's appeal. However, for Apple, the Google antitrust case comes at the wrong time.
On the one hand, in the face of challenges such as Huawei's return to the 5G market, the prospects for new iPhone sales and sales in China are unclear; on the other hand, the Google case has cast doubt on whether the long-term search engine agreement between Google and Apple can ultimately continue.
The agreement between Google and Apple was signed nearly two decades ago in 2005, when Google was founded. The agreement designates Google as Apple's default search engine, and Apple will receive 50% of the advertising revenue generated by Google searches on the Safari browser.
Since then, Google has been paying Apple billions of dollars a year to serve as the default search engine on Safari, a partnership that has benefited both tech giants. In 2016, Apple and Google expanded the scope of their agreement to include other Apple features such as Siri and Spotlight, further solidifying their cooperation.
Previously, media said that the specific amount of revenue Apple earned by setting Google as its search engine by default was confidential. The U.S. Department of Justice estimates that Apple receives $4 billion to $7 billion annually from this.
Brokerage firm Sanford C. Bernstein&Co. An analyst report estimates that Apple's revenue from such cooperation will reach $18 billion in 2022. Google has always benefited from Apple's position in the mobile Internet, occupying 90% of the entire search market.
Goldman Sachs analyst Eric Sheridan estimated in a report released last week that the Google search engine agreement could bring in a range of $16 billion to $17 billion within a year. That's roughly equivalent to 20% of Apple's projected services revenue for the fiscal year ending in September.
The search engine is still Google's largest source of revenue. In 2022, search advertising accounted for nearly 60% of the company's revenue, reaching $162.45 billion. According to Goldman Sachs and Sanford C. According to Bernstein's above estimate, Apple's revenue from the Google search agreement last year was about 10% of Google's annual search revenue.
Morgan Stanley analysts estimate that if the revenue from the Google agreement is lost, Apple's earnings per share (EPS) in fiscal 2025 will decrease by about 15%. If the loss is limited to the United States, EPS will decrease by about 10%.