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How Apple and Google Formed One of Tech鈥檚 Most Powerful Partnerships | WSJ - YouTube
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- [Narrator] You've probably
asked the question before.
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iPhone or Android?
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Apple Maps or Google Maps?
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Safari or Chrome?
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On the surface,
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Apple and Google represent
the ultimate tech rivalry
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but behind the scenes,
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executives have maintained
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a multi-billion dollar partnership
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that benefits them both massively.
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- I would describe Apple and Google
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as the classic example of frenemies.
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On the one hand, they're fierce rivals,
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on the other hand, they benefit greatly
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from figuring out ways to work together.
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- [Narrator] Google pays
Apple an estimated 8
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to $12 billion a year
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or 1/3 of Alphabet's annual profits
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to make sure it's the
default search engine
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on more than a billion Apple devices.
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That deal has helped Google
dominate the search market.
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In recent years, it's
accounted for 90 to 95%
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of search engine queries in the US.
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The deal between the two tech giants
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is so powerful that it's at the center
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of one of the biggest
US government lawsuits
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against a public company since the '90s.
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So how did two of Silicon
Valley's biggest rivals come
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to form one of tech's most
valuable partnerships?
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To understand Apple and
Google's frenemy relationship,
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you have to go back to the beginning.
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- In the early days,
they were quite close.
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At the time, the CEO of
Google was on Apple's board.
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It was part of the Silicon
Valley club, if you will.
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- [Narrator] In 2005, the two
companies laid the groundwork
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for what would become one of
the industry's biggest deals.
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Google struck a deal with Apple
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to become the default
search engine for Safari
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on Mac computers.
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- As Apple evolved sort
of the relationship,
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in 2007 when the iPhone came out,
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Google was then the default
search for the iPhone,
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Safari browser and has really just grown
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and grown from that point.
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- So Steve, I've had the
privilege of joining the board
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and there's a lot of
relationships between the boards
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and I thought if we just
sort of merged the companies,
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we could call them Applegoo.
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- As it became clear that Google was going
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to be more than just a search engine,
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that it wanted to grow
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and that Apple was going to be a rival,
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that became an issue.
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- [Narrator] In 2008, Google directly
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challenged Apple's business
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with the launch of its
Android operating system.
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The next year, Google
CEO Eric Schmidt resigned
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from Apple's board.
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Since then, both companies have expanded
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into each other's businesses
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with Google launching Android phones
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and Apple launching
services like the App Store
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and Siri, which was originally powered
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by Microsoft's Bing, not Google.
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- Search Wikipedia for Neil Armstrong.
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(beeping)
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- [Siri] Searching for Neil Armstrong.
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- [Narrator] It wasn't until 2017
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that Apple switched from Bing to Google
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for its search results on Siri
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and Spotlight, the Mac search function.
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That renewed deal between
Apple and Google came
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at a good time for both companies.
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Google was facing competition
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from Facebook's fast-growing
mobile ad revenue
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and it's new deal with
Apple put its search results
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and ads on more than a
billion Apple devices.
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Now up to half of Google searches come
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from Apple devices.
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- When you open up your iPhone,
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and go to Safari and write something
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that you wanna search for, boom,
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you're going to Google.
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And that's a lot of value.
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- [Narrator] For Apple, the deal
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has benefited its business twofold.
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First, it got more
consistent search results
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across Safari, Siri and Spotlight.
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But perhaps more importantly,
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the money it gets from
Google's ad revenue makes up 15
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to 20% of Apple's annual profits.
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That's helped fund Apple's ambitions
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to grow its services unit,
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which has driven growth for the company
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over the past few years.
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- Apple is like a store.
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It's selling its shelf space,
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that premo shelf space.
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And so when you go into a store
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and you see those candy bars right there
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at the register, that's the place to be
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if you're selling candy bars.
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And so for Google, they're
in that default spot.
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- [Narrator] Now all of that money
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and search traffic could be at risk
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because of this lawsuit.
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In October, the US Department
of Justice sued Google
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over antitrust concerns.
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The government is alleging that Google
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is a monopoly gatekeeper for the internet
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and it says that harms customers,
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advertisers and competing tech companies.
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One way the Justice Department says
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Google maintains its dominance
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is through exclusive business deals,
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like through its partnership with Apple.
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According to the lawsuit,
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some people at Google called the prospect
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of losing its default status
on Apple devices code red.
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Google representatives
said they weren't aware
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of the code red language
used in the lawsuit
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and neither Apple or Google
have officially disclosed
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the exact value of the deal
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or commented on the
Justice Department's eight
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to $12 billion projection.
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In a recent interview,
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the Journal's personal tech
columnist, Joanna Stern,
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asked Google's former CEO about the deal.
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- There was ultimately a deal
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that I did not personally negotiate
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but it was a lucrative deal for Apple.
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But important to say
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that with respect to Google,
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and with respect to use of
Google search on Apple phones,
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it is extremely easy to switch
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to another provider.
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- [Narrator] Google has denied
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the Justice Department's allegations
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and said it plans to
challenge the lawsuit.
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Its chief legal officer said
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the lawsuit wouldn't help consumers
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and that its relationship
with Apple is customary.
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Apple hasn't officially
commented on the lawsuit.
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So what happens if the Justice
Department is successful
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in its case?
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- This could drag out for many years.
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This is an interesting situation.
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In some ways, if the DoJ is successful,
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one of the companies that
might be harmed the most here
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is Apple given the fact
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that they perhaps had 15 or
20% of their profit coming
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from this relationship.
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- [Narrator] Of course, there
are other search engines
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out there, like Bing,
DuckDuckGo, Baidu and Yandex
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but none of them even come close
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to Google's dominance.
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Some financial analysts say
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that if anyone can give
Google a run for its money,
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it's Apple, and the antitrust lawsuit
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might just be the push Apple needs
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to divorce itself from Google.
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- We don't know exactly
where Apple is going
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with its future plans here.
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Some have speculated
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that potentially this
would be a good reason
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for Apple to develop
its own search engine.
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Others have said potentially
they might buy a search engine
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to beef up that capability.
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One of the things we know about Apple
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over the years is that it likes
to own its core competencies
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so it could control those worlds.
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And so that's always kind of hanging
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in the background.
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- [Narrator] Apple hasn't responded
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to requests for comment on plans
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to create or purchase
its own search engine.
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Still, a breakup of this
multi-billion partnership
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between Apple and Google
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could deal a financial blow to two
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of the world's biggest companies.
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And however this relationship plays out
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in the future has the potential
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to shape the way billions
of people use the internet.
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- [Tim] As we see Congress and
regulators debate the power
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of tech, this lawsuit is
just yet another example
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of kind of that public debate
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about their role in our
future and in our society.
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(dramatic music)
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