The U.S. Department of Justice's antitrust case against Google could lead to a big loss…for Apple as well as the search giant.
According to the financial analyst firm Bernstein, as first reported by The Register, there is a good chance the courts may rule against Google in the DOJ's antitrust suit and force Apple and the search giant to end their arrangement that keeps Google as the default search engine on iPhones.
"We believe there is a possibility that federal courts rule against Google and force it to terminate its search deal with Apple," Bernstein says in its report. "We estimate that the ISA [Information Services Agreement] is worth $18B-20B in annual payments from Google to Apple, accounting for 14-16 percent of Apple's annual operating profits."
Every year, Google pays Apple as much as $20 billion in order to be the default search engine on the iPhone. Thanks to this multi-billion dollar deal between the two companies, Google is the search engine automatically available to iPhone users when they use the Safari web browser. If they put a string of keywords in the browser's address bar, it will automatically query Google every time, unless a user manually goes to the browser settings and changes the default option.
And the $20 billion that Google pays Apple is an increase from previous years. For example, the amount Apple gets paid by Google has increased by as much as $5 billion since 2021.
Why does Google pay this extraordinary amount of money to Apple just to be sure it's the easier search option presented to users? It's about market share.
The iPhone dominates the market share for mobile devices, making up 55 percent of all smartphones in the U.S. Furthermore, Apple's own Safari is the only web browser pre-installed on every device. Naturally, a significant portion of iPhone owners use Safari because it works and it's already there. So, whichever search engine powers queries on Safari basically has access to hundreds of millions of eyeballs to serve search ads and other products to.
Google pays Apple to make sure that its used by the majority of iPhone users and doesn't cede search engine market share to one of its competitors like Microsoft's Bing.
And, that's exactly the type of thing the DOJ is looking at Google for. Earlier this year, the Justice Department filed an antitrust lawsuit against the search giant, claiming it engages in activity that has created a monopoly for Google in the web search and search engine advertising industry.
As The Register points out, a ruling in the case is likely many months away. And, as Bernstein notes, it's likely that Apple would be able to sign another search engine to a similar deal as the iPhone maker isn't the subject of the DOJ's antitrust lawsuit.
But a loss for Google could mean that the search company would not only be forced to cease search deals with Apple, but ones with Samsung and Firefox creator Mozilla too.
Last month, according to Apple Insider, Apple SVP Eddy Cue testified at the Google antitrust trial that the deal between the two companies came about because Google's search engine was the best option at the time.
We'll likely see how the case turns out sometime next year.
