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On August 5th local time, U.S. federal district judge Amit P. Mehta ruled that Google had violated the law by monopolizing the online search market. This was the first victory for the U.S. government in a series of antitrust lawsuits against large technology companies.

Image source: Photo by Zheng Yuhang, reporter of China Business Network

In 2020, the U.S. Department of Justice, together with attorneys general from 52 states and jurisdictions, jointly sued Google, accusing Google of paying billions of dollars to technology peers such as Apple and Samsung, smartphone manufacturers and wireless service providers in exchange for Google Search being set as the default option for mobile phones 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 method,Google has about 90% of the online search market and about 95% of the smartphone market.Judge Mehta also pointed out in his 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 on new phones.

In his ruling, U.S. District Court Judge Amit Mehta of the District of Columbia wrote:Google is a monopoly and acts to maintain its monopoly。”

The 286-page ruling not only reveals the strategies Google has adopted to maintain its market dominance, but also exposes shocking details of the multi-billion dollar contract between Google and Apple.

To summarize, Apple chose Google as its default search engine for several reasons:

1，Google's ability to make money: Google promises to AppleIn return for a one-time fee of up to $10 million and half of annual advertising revenueOnly inIn 2022, the amount of advertising revenue it paid to Apple reached $20 billion., the amount wasIt accounts for 17.5% of Apple's operating profit。

2，The cost of developing your own search engine is too high: Apple estimates that operating a comprehensive general search engine would require an additional investment of up to $6 billion per year in addition to current search development expenses. Google's assessment at the end of 2020 showed that it would cost Apple at least $20 billion to replicate Google's current technical infrastructure.

3，Concerns about Bing search quality and monetization capabilities: Although Microsoft has offered many attractive conditions, Bing's shortcomings in search quality and the resulting business risks cannot be compensated by any amount of money.

• Apple and Google: From flexible cooperation to deep binding

According to the ruling, “In exchange for exclusive and non-exclusive default search engine placement on Apple devices, Google pays Apple a significant portion of its net advertising revenue, which is estimated to be $20 billion in 2022 alone.That’s nearly double what Google paid in 2020.This payment accounted for 17.5% of Apple's operating profit at the time.。

The Internet Services Agreement (ISA) between Google and Apple plays a pivotal role in building the General Search Engine (GSE) ecosystem and guiding the Internet search market. The core of the agreement is to establish Google as the default search engine for Apple's Safari browser, a move that has a significant impact on market competition, revenue generation, and user experience.

2002

Google and Apple have signed their first Internet service agreement, marking the official entry of Google Search into the Safari browser. Users can seamlessly access Google's search engine directly from the search box of the Apple web browser.This initial agreement is non-exclusive., leaving both parties with the flexibility to work with other partners.Importantly, the agreement does not include revenue sharing payments。

2005

Google began to worry that Yahoo might replace itself, so it proposed the idea of ​​exclusivity in exchange for revenue sharing. The 2005 revision fundamentally changed the nature of the agreement.Google promised to pay Apple a one-time fee of up to $10 million and half of its annual advertising revenue in exchange for exclusive default search engine status on Safari browser。

2007

With the rise of smartphones, the Internet service agreement was further extended to iPhone, iPod and Safari for Windows, ensuring Google's core position in Apple's entire product line. Crucially, the new terms of the agreement clearly stipulate thatGoogle won't pay revenue share if Apple creates homepage with multiple search engines on SafariThis move undoubtedly built a solid defense for Google's leading position in the mobile search field.

2009

Faced with market changes, Apple is trying to increase users' flexibility in choosing other search engines while maintaining revenue sharing.Apple offered to take a slightly lower revenue share for non-default queries, but Google rejected those terms, keeping the agreement exclusive.。

2012

Apple again raised the need for flexibility in the partnership, demanding to maintain revenue sharing even when Google search services are not used or set as the default search engine.Google sticks to its exclusivity strategy and refuses to compromise。

2014

The two parties reached a cooperation agreement, and Apple confirmed that Google will continue to be Safari's exclusive default search engine, and will add Google to "Bookmarks" and "highlight it on the Safari default bookmarks page."

• Developing your own search engine? Apple: Too expensive, goodbye!

It is not that Apple is unwilling to develop its own search engine. Apple 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 competing GSE,Apple chose not to enter the market in large part because of the large revenue-sharing payments offered by Google and the risks associated with launching a new search engine.。

Judge Mehta pointed out that the huge amount of money Google pays to Apple not only weakens Apple's willingness to challenge Google's search dominance, but even if Apple has such a desire, it actually faces insurmountable obstacles.

Apple estimates that operating a comprehensive general search engine would require an additional investment of up to $6 billion per year in addition to current search development spending. Google's assessment at the end of 2020 showed thatIt would cost Apple at least $20 billion to replicate Google's current technology infrastructure。

• Microsoft pays big bucks for cooperation, but Apple remains unmoved

In 2015, Microsoft made a major effort to convince Apple to change Safari's default search engine from Google to Bing. Microsoft believed that increased competition between Bing and Google would bring long-term economic benefits to Apple. Microsoft emphasized that if Apple cooperated with them, Apple would gain greater flexibility and the user experience would be enhanced, including improved privacy features.

To this end, Microsoft has spared no effort to throw out a big chip, proposing to share 90% of Bing's revenue with Apple, with an estimated total of nearly US$20 billion within five years.Microsoft also said it was willing to share 100% of Bing's revenue and was even willing to sell Bing directly to Apple just to become the default search engine in Safari.。

Faced with Microsoft's generous proposal, Apple was unusually cautious. Apple's internal analysis showed thatKeeping Google as the default search engine is expected to bring in about $40 billion in revenue over the next five years, more than double 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 each year, totaling $3 billion in five years. However, even so, this figure 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 its ability to monetizeCue admitted that despite Microsoft's many attractive offers, Bing's shortcomings in search quality and the resulting business risks could not be compensated by any amount of money.

Microsoft CEO Satya Nadella said that Apple's mention of Bing in the negotiations may be a strategic means to put pressure on Google to get a higher revenue share. He further pointed out that if Bing withdraws from the competition, it will be unknown whether Google will continue to pay high default status fees, because markets without competition often find it difficult to maintain high pricing strategies.

Daily Economic News compiled from public information

Daily Economic News