Google’s default search deal with Apple is worth so much to the search giant that Google pays 36 per cent of its search advertising revenue from Safari to keep its search engine as the default in Apple’s browser.
Google and Apple fought to keep this key detail of their long-standing default search deal private. But their closely guarded secret was revealed on Monday during testimony by Google’s chief economist, Kevin Murphy, at the Department of Justice’s antitrust trial investigating Google’s search business.
“Probably the biggest slip of the entire trial,” Big Tech on Trial, an account dedicated to providing updates from the Google trial, posted on X (formerly Twitter).
Google lawyer John Schmidtlein “visibly cringed” when Murphy revealed the confidential information, which Google had initially argued needed to be kept secret because it would “unduly prejudice Google’s competitive position with respect to competitors and other counterparties”.
For the DOJ – which has made the Google-Apple deal the centrepiece of its case alleging that Google maintains an illegal monopoly over search – this detail confirms how valuable default placements on iPhones are to the search leader.
The DOJ has argued that Google pays so much for default search deals to shut out competitors, lock search users into its services and maintain a stronghold over the search industry – a dominant position that could be further entrenched by Google’s advances in AI, Microsoft CEO Satya Nadella testified. In September, an Apple executive testified that the standard Google-Apple deal was apparently so lucrative that it even prevented Apple from creating its own rival search engine.
It’s still unclear exactly how much money the portion of Google’s search advertising revenue that comes from Safari amounts to, but several estimates have been floated. Statista reported that Google’s ad revenue will be $224 billion in 2022, and based on that, Engadget estimated that Apple is likely to be paid tens of billions of dollars for Google’s default Safari placements.
Previously, sources told the New York Times that Google would pay Apple around $18 billion in 2021 for the deal, but the exact amount of revenue sharing remained unknown until Monday. The DOJ trial also recently revealed that Google has paid a total of $26 billion for standard agreements that are allegedly responsible for driving up its search advertising revenue, which is currently soaring. Google’s global ad revenue is expected to reach nearly $340 billion by 2027, Statista reported, driven largely by Google’s search engine traffic, which currently accounts for “around 38 percent” of its global ad revenue.
In total, across all these standard deals, Digital Content Next CEO Jason Kint estimated in a post at X that it’s possible Google “generates at least $90 billion of its current annual revenue”.
Last month, Google CEO Sundar Pichai testified that default deals “can make a difference” and can be “very valuable” if “done right”, but maintained Google’s main defence that partners like Apple enter into these deals with Google because Google has a superior search engine.
If the DOJ proves that these standard deals ensure that Google maintains an illegal monopoly in general search markets, Google could be ordered to break up its search business, which would not only hurt Google’s bottom line, but also its partners like Apple.
While the trial continues for another week, Google continues to profit from the deals. From 2022 to 2023, Google’s ad revenue increased by $5 billion, Search Engine Land reported, and seemingly as Nadella predicted, Pichai attributed these gains to AI-driven innovation across Google products, including search.
“We remain focused on making AI more useful for everyone; there’s exciting progress and much more to come,” Pichai said in a statement reported by Search Engine Land.
Judge Amit Mehta, who is presiding over the antitrust trial, has said that the Google-Apple default deal is the “heart” of the DOJ’s case against Google. With each new detail revealed about how much Google is willing to pay Apple to keep their deal, the DOJ hopes to convince Mehta that the deal gives Google an unfair advantage over competitors. This week’s slip-up by one of Google’s witnesses threatens to disrupt the narrative Google is trying to build as it winds down its defence of this and other deals.
Mehta is not expected to rule on the case until 2024.
