Google’s $18B Default Deal with Apple Under Fire in Antitrust Case

During testimony in the Department of Justice’s antitrust case against Google, it was revealed that Google pays Apple 36% of the search advertising revenue generated from Google’s search engine being the default on Apple’s Safari browser. This key detail of the lucrative deal between the tech giants had been kept confidential previously, as both Google and Apple did not want it made public.

When Google’s expert economist Kevin Murphy disclosed the 36% figure, it was described as the “biggest slip of the entire trial” by those following the case. Google’s attorney, John Schmidtlein, was said to visibly cringe when the confidential information was shared. Schmidtlein had previously claimed the data needed to be kept secret because its disclosure would undermine Google’s competitive standing.

For the Department of Justice, this revelation confirms the great value default placement on iPhones holds for search leader Google. The DOJ argues that Google pay exorbitant amounts to be set as the default search engine in order to block out competitors, lock users into Google’s services, and maintain dominance in search. This deal with Apple is a prime example of how Google uses its vast financial resources to crowd out competition through arrangements like this, according to the DOJ.

Exact Revenue Amount Still Unclear, But Likely in the Billions

While the percentage of revenue shared is now known, the total dollar amount Google pays Apple remains unclear. Estimates suggest Apple likely receives tens of billions of dollars from Google each year for the default search deal. Last year, sources claimed the amount was around $18 billion.

Across all of Google’s similar default deals with browsers, carriers, and device manufacturers, the search advertising revenue derived is potentially $90 billion annually. Although the specifics are still unknown, it is clear that the arrangement with Apple is highly lucrative for both companies. Apple seemingly makes billions while also providing Google access to millions of potential search users.

The financial terms revealed indicate the extraordinary value Google places on being the preset search engine in Safari. Given that Apple received an estimated $18 billion in 2021, the 36% figure suggests Google made around $50 billion from Safari searches that year. For Google, no price appears too high to pay to remain the default on Apple products.

Google CEO Defends Deals as Beneficial Partnerships

Previously, Google CEO Sundar Pichai testified that default deals can be valuable if structured properly. He maintained Google’s position that partners like Apple choose Google simply because it offers superior search capabilities. Pichai claimed mutual benefit and the quality of Google’s search were behind partnerships like the one with Apple.

However, critics say the newly revealed financial details tell a different story. They suggest Google is spending billions not necessarily to provide the best search but to box out competitors through deals that make it exceedingly difficult for rivals to gain search share. Google’s willingness to pay so much to Apple reinforces the idea that Google highly values these deals for anticompetitive reasons.

If the DOJ proves the agreements illegally maintain Google’s monopoly in general search markets, the company could be forced to alter deals like the one with Apple. While the trial continues, Google is profiting from the current arrangements. But the future financial implications for Google and Apple could be significant if the agreements are impacted by the case.