The New York Times’ looks at “a deal that controls the internet” — Apple’s agreement to feature Google as the preselected search engine for iPhones, saying America’s Justice Department views it “as a prime example of what prosecutors say are Google’s illegal tactics to protect its monopoly and choke off competition…”
The scrutiny of the pact, which was first inked 15 years ago and has rarely been discussed by either company, has highlighted the special relationship between Silicon Valley’s two most valuable companies — an unlikely union of rivals that regulators say is unfairly preventing smaller companies from flourishing. “We have this sort of strange term in Silicon Valley: co-opetition,” said Bruce Sewell, Apple’s general counsel from 2009 to 2017. “You have brutal competition, but at the same time, you have necessary cooperation.” Apple and Google are joined at the hip even though Mr. Cook has said internet advertising, Google’s bread and butter, engages in “surveillance” of consumers and even though Steve Jobs, Apple’s co-founder, once promised “thermonuclear war” on his Silicon Valley neighbor when he learned it was working on a rival to the iPhone. Apple and Google’s parent company, Alphabet, worth more than $3 trillion combined, do compete on plenty of fronts, like smartphones, digital maps and laptops. But they also know how to make nice when it suits their interests. And few deals have been nicer to both sides of the table than the iPhone search deal.
Nearly half of Google’s search traffic now comes from Apple devices, according to the Justice Department, and the prospect of losing the Apple deal has been described as a “code red” scenario inside the company. When iPhone users search on Google, they see the search ads that drive Google’s business. They can also find their way to other Google products, like YouTube. A former Google executive, who asked not to be identified because he was not permitted to talk about the deal, said the prospect of losing Apple’s traffic was “terrifying” to the company. The Justice Department, which is asking for a court injunction preventing Google from entering into deals like the one it made with Apple, argues that the arrangement has unfairly helped make Google, which handles 92 percent of the world’s internet searches, the center of consumers’ online lives…[C]ompetitors like DuckDuckGo, a small search engine that sells itself as a privacy-focused alternative to Google, could never match Google’s tab with Apple. Apple now receives an estimated $8 billion to $12 billion in annual payments — up from $1 billion a year in 2014 — in exchange for building Google’s search engine into its products. It is probably the single biggest payment that Google makes to anyone and accounts for 14 to 21 percent of Apple’s annual profits. That’s not money Apple would be eager to walk away from.
In fact, Mr. Cook and Mr. Pichai met again in 2018 to discuss how they could increase revenue from search. After the meeting, a senior Apple employee wrote to a Google counterpart that “our vision is that we work as if we are one company,” according to the Justice Department’s complaint.
The article remembers Steve Jobs unveiling the iPhone in 2007 — and then inviting Google CEO Eric Schmidt onto the stage. Schmidt, who was also on Apple’s board of directors, joked “If we just sort of merged the two companies, we could just call them AppleGoo.”
He’d also added that with Google search on the iPhone, “you can actually merge without merging.”
“If that makes any sense to you, you have a big problem.”
— C. Durance, Computer Science 234