On August 5th local time, US Federal District Judge Amit P. Mehta ruled that Google had violated the law by monopolizing the online search market, marking the first victory of the US government in a series of antitrust lawsuits against large tech companies.
In 2020, the US Department of Justice and prosecutors from 52 states and jurisdictions jointly sued Google, accusing it of paying billions of dollars to tech industry peers such as Apple and Samsung, smartphone manufacturers, and wireless service providers in exchange for Google Search being set as the default choice for smartphones and web browsers. If these partners choose to receive a share of Google's search revenue, they cannot pre install and promote competing search engines.
With the above methods, Google holds about 90% of the online search market share and about 95% of the smartphone market share. Judge Mehta also pointed out in the ruling that Google paid $26.3 billion to mobile phone manufacturers in 2021 alone to ensure that they set Google as the default search engine for new phones.
In the ruling, Judge Amit Meta of the United States District Court for the District of Columbia wrote, "Google is a monopolist and acts to maintain its monopoly position
Judgment of the United States District Court for the District of Columbia
This 286 page ruling not only reveals the various strategies Google has adopted to maintain its market dominance, but also exposes the astonishing details of the multi billion dollar contract between Google and Apple.
In summary, Apple chose Google as its default search engine for several reasons:
1. Google's "cash" capability: Google promises to pay Apple up to $10 million in one-time fees and half of its annual advertising revenue in return. In 2022 alone, the amount of advertising revenue paid to Apple reached $20 billion, which accounted for 17.5% of Apple's operating profit at that time.
2. The cost of developing a self-developed search engine is too high: Apple estimates that operating a comprehensive universal search engine would require an additional investment of up to $6 billion annually, in addition to the current search development expenses. Google's assessment at the end of 2020 showed that Apple would need to spend at least $20 billion to replicate Google's current technological infrastructure.
3. Concerns about Bing's search quality and monetization ability: Despite Microsoft's many attractive conditions, Bing's shortcomings in search quality and the resulting business risks cannot be compensated for with any amount of money.
Judgment of the United States District Court for the District of Columbia
Apple and Google: From Flexible Collaboration to Deep Binding
According to the ruling, in order to occupy exclusive and non exclusive default search engine positions on Apple devices, Google paid Apple a significant portion of its net advertising revenue, which reached $20 billion in 2022 alone. This figure is almost twice the amount paid by Google in 2020, which accounted for 17.5% of Apple's operating profit at that time.
Judgment of the United States District Court for the District of Columbia
The Internet Service Agreement (ISA) between Google and Apple plays an important role in building a general search engine (GSE) ecosystem and leading the Internet search market. The core of this agreement is to establish Google as the default search engine for Apple's Safari browser, which has a significant impact on market competition, revenue generation, and user experience.
In 2002
Google and Apple jointly signed the first Internet service agreement, marking the official entry of Google Search into Safari browser. Users can seamlessly access Google's search engine directly from the search box of Apple Web browser. This initial agreement adopts a non exclusive strategy, retaining flexibility for both parties to collaborate with other partners. Importantly, the agreement does not include revenue sharing payments.
In 2005
Google began to worry that Yahoo might replace it, so it proposed the idea of exchanging revenue sharing for exclusive operating rights. The 2005 revision fundamentally changed the nature of the agreement. Google has promised to pay Apple a one-time fee of up to $10 million and half of its annual advertising revenue in return for Safari's exclusive default search engine status.
Judgment of the United States District Court for the District of Columbia
In 2007
With the rise of smart phones, Internet service protocols have been further extended to iPhone, iPod and Safari for Windows, ensuring Google's core position in Apple's entire product line. More importantly, the newly added clause in the agreement clearly stipulates that if Apple creates a homepage containing multiple search engines on Safari, Google will not pay revenue sharing. This measure undoubtedly builds a solid defense line for Google's leading position in the mobile search field.
In 2009
In the face of market changes, Apple is trying to increase user flexibility in choosing other search engines while maintaining revenue sharing. Apple proposed to charge a slightly lower revenue share for non default queries, but Google rejected these terms and maintained the exclusivity of the agreement.
In 2012
Apple once again demands flexibility in cooperation, requiring revenue sharing to be maintained without using Google search services or setting Google as the default search engine. However, Google insists on its exclusive strategy and refuses to compromise.
In 2014
Both parties have reached a cooperation agreement, and Apple has confirmed that Google will continue to be the exclusive default search engine for Safari, while adding Google to the "bookmarks" and "highlighting it on Safari's default bookmark page".
Self developed search engine? Apple: The cost is too high, goodbye!
Apple is not unwilling to develop its own search engine. It has invested heavily in developing its search function and hired key personnel such as John Giannandrea from Google. Despite having the resources to create a competitive GSE, Apple chose not to enter the market largely due to the large revenue sharing payments provided by Google and the risks associated with launching new search engines.
Judge Meta pointed out that the huge amount of money paid by Google to Apple not only weakened Apple's willingness to challenge Google's dominant position in search, but even if Apple had such a willingness, it actually faced insurmountable obstacles.
Apple estimates that operating a comprehensive universal search engine would require an additional annual investment of up to $6 billion, in addition to current search development expenses. Google's assessment at the end of 2020 showed that Apple would need to spend at least $20 billion to replicate Google's current technological infrastructure.
Judgment of the United States District Court for the District of Columbia
Microsoft invests heavily in cooperation, Apple remains unmoved
In 2015, Microsoft made significant efforts to persuade Apple to change Safari's default search engine from Google to Bing. Microsoft believes that the intensifying competition between Bing and Google will bring long-term economic benefits to Apple. Microsoft emphasizes that if Apple collaborates with them, Apple will gain greater flexibility and improve user experience, including improved privacy features.
To this end, Microsoft is willing to throw out a heavyweight chip, proposing to share 90% of Bing's revenue with Apple, with an estimated total of nearly $20 billion within five years. Microsoft also expressed willingness to share 100% of Bing's revenue, and even willing to sell Bing directly to Apple, just to become the default search engine in Safari.
Judgment of the United States District Court for the District of Columbia
Faced with Microsoft's generous proposal, Apple appears unusually cautious. According to internal analysis by Apple, maintaining Google as the default search engine is expected to generate approximately $40 billion in revenue over the next five years, which is far more than twice what Microsoft can offer. Eddy Cue, senior vice president of Apple's Internet software and services business, pointed out that Microsoft needs to guarantee a minimum annual revenue of $4 billion in the first year, and increase it by $1 billion year by year, totaling $3 billion in five years. However, even so, this number is still difficult to match Google's existing cooperation conditions.
Apple ultimately decided to continue working with Google due to concerns about Bing's search quality and monetization ability. Eddie Ku admitted that despite Microsoft's many tempting conditions, Bing's shortcomings in search quality and the resulting business risks cannot be compensated for by any amount of money.
Microsoft CEO Satya Nadella said that Apple's mention of Bing in negotiations may be a strategic move aimed at pressuring Google for a higher revenue share. He further pointed out that if Bing withdraws from the competitive stage, it will be unknown whether Google will continue to pay high default state fees, as markets lacking competition often find it difficult to maintain high pricing strategies.