Google Antitrust Ruling Could Cost Apple $20 Billion Annually

Google antitrust ruling may pose $20 billion risk for Apple

Google pays Apple $20 billion annually, or about 36% of what it earns from search advertising made through the Safari browser, for the privilege, according to Morgan Stanley analysts. If the deal is undone, the iPhone maker could take a 4-6% hit to its profit, the analysts estimated. Apple's lucrative deal with Google could be under threat after a U.S. judge ruled that the Alphabet-owned search giant was operating an illegal monopoly. A potential remedy for Google to avoid antitrust actions could involve terminating the agreement, which makes its search engine a default on Apple devices, Wall Street analysts said on Tuesday. Google pays Apple $20 billion annually, or about 36% of what it earns from search advertising made through the Safari browser, for the privilege, according to Morgan Stanley analysts. If the deal is undone, the iPhone maker could take a 4-6% hit to its profit, the analysts estimated. The pact runs until at least September 2026 and Apple has the right to unilaterally extend it for another two years, according to media reports in May that cited a document filed by the Department of Justice in the antitrust case. "The most likely outcome now is the judge rules Google must no longer pay for default placement or that companies like Apple must proactively prompt users to select their search engine rather than setting a default and allowing consumers to make changes in settings if they wish," Evercore ISI analysts said. Apple's shares were trading flat on Tuesday, underperforming a recovery in the broader market after Monday's global selloff. Alphabet was little changed, after falling 4.5% in the previous session. "The message here is that if you've got a dominant market position with a product, you'd better avoid the use of exclusive agreements and make sure any agreement you make gives the buyer free choice to substitute away," said Herbert Hovenkamp, a professor of law at the University of Pennsylvania. To be sure, the "remedy" phase could be lengthy, followed by potential appeals to the U.S. Court of Appeals, the District of Columbia Circuit and the U.S. Supreme Court. The legal wrangling could play out into 2026. AI TILT Still, if the tie-up is scrapped, Apple will have several options including offering customers alternatives such as Microsoft Bing to customers, or potentially a new search product powered by OpenAI. Analysts agree that the ruling will speed up Apple's move towards AI-powered search services. It recently announced that it would bring OpenAI's ChatGPT chatbot to its devices. In a shift away from exclusive deals that would help Apple ward off regulatory scrutiny, the company has said it is also in talks with Google to add the Gemini chatbot and plans to add other AI models as well. Apple is also revamping Siri with AI technology, giving it more control to handle tasks that had proven tricky in the past such as writing emails and interacting with messages. While those efforts are expected to make little money in the coming years, they could help capitalize on the new technology. "Apple could see this as a temporary setback, especially since it earns a lot from the Google search deal, but it is also an opportunity for them to pivot to AI solutions for search," said Gadjo Sevilla, analyst at Emarketer. (Reporting by Aditya Soni in Bengaluru; additional reporting by Priyanka G in Bengaluru and Kenrick Cai in San Francisco; Editing by Sayantani Ghosh and Anil D'Silva)

Google antitrust ruling may pose $20 billion risk for Apple

Reuters is an international news organisation owned by Thomson Reuters Apple's lucrative deal with Google could be under threat after a U.S. judge ruled that the Alphabet-owned search giant was operating an illegal monopoly. A potential remedy for Google to avoid antitrust actions could involve terminating the agreement, which makes its search engine a default on Apple devices, Wall Street analysts said on Tuesday. Google pays Apple $20 billion annually, or about 36% of what it earns from search advertising made through the Safari browser, for the privilege, according to Morgan Stanley analysts. If the deal is undone, the iPhone maker could take a 4-6% hit to its profit, the analysts estimated. The pact runs until at least September 2026 and Apple has the right to unilaterally extend it for another two years, according to media reports in May that cited a document filed by the Department of Justice in the antitrust case. "The most likely outcome now is the judge rules Google must no longer pay for default placement or that companies like Apple must proactively prompt users to select their search engine rather than setting a default and allowing consumers to make changes in settings if they wish," Evercore ISI analysts said. Apple's shares were trading flat on Tuesday, underperforming a recovery in the broader market after Monday's global selloff. Alphabet was little changed, after falling 4.5% in the previous session. "The message here is that if you've got a dominant market position with a product, you'd better avoid the use of exclusive agreements and make sure any agreement you make gives the buyer free choice to substitute away," said Herbert Hovenkamp, a professor of law at the University of Pennsylvania. AI TILT Still, if the tie-up is scrapped, Apple will have several options including offering customers alternatives such as Microsoft Bing to customers, or potentially a new search product powered by OpenAI. Analysts agree that the ruling will speed up Apple's move towards AI-powered search services. It recently announced that it would bring OpenAI's ChatGPT chatbot to its devices. In a shift away from exclusive deals that would help Apple ward off regulatory scrutiny, the company has said it is also in talks with Google to add the Gemini chatbot and plans to add other AI models as well. Apple is also revamping Siri with AI technology, giving it more control to handle tasks that had proven tricky in the past such as writing emails and interacting with messages. While those efforts are expected to make little money in the coming years, they could help capitalize on the new technology. "Apple could see this as a temporary setback, especially since it earns a lot from the Google search deal, but it is also an opportunity for them to pivot to AI solutions for search," said Gadjo Sevilla, analyst at Emarketer.

Google antitrust ruling may pose $20 billion risk for Apple

Apple's lucrative deal with Google could be under threat after a U.S. judge ruled that the Alphabet-owned search giant was operating an illegal monopoly. A potential remedy for Google to avoid antitrust actions could involve terminating the agreement, which makes its search engine a default on Apple devices, Wall Street analysts said on Tuesday. Google pays Apple $20 billion annually, or about 36% of what it earns from search advertising made through the Safari browser, for the privilege, according to Morgan Stanley analysts. If the deal is undone, the iPhone maker could take a 4-6% hit to its profit, the analysts estimated. (For top technology news of the day, subscribe to our tech newsletter Today's Cache) The pact runs until at least September 2026 and Apple has the right to unilaterally extend it for another two years, according to media reports in May that cited a document filed by the Department of Justice in the antitrust case. "The most likely outcome now is the judge rules Google must no longer pay for default placement or that companies like Apple must proactively prompt users to select their search engine rather than setting a default and allowing consumers to make changes in settings if they wish," Evercore ISI analysts said. Apple's shares were trading flat on Tuesday, underperforming a recovery in the broader market after Monday's global selloff. Alphabet was little changed, after falling 4.5% in the previous session. "The message here is that if you've got a dominant market position with a product, you'd better avoid the use of exclusive agreements and make sure any agreement you make gives the buyer free choice to substitute away," said Herbert Hovenkamp, a professor of law at the University of Pennsylvania. Apple used Google's chips to train new AI models To be sure, the "remedy" phase could be lengthy, followed by potential appeals to the U.S. Court of Appeals, the District of Columbia Circuit and the U.S. Supreme Court. The legal wrangling could play out into 2026. AI TILT Still, if the tie-up is scrapped, Apple will have several options including offering customers alternatives such as Microsoft Bing to customers, or potentially a new search product powered by OpenAI. Analysts agree that the ruling will speed up Apple's move towards AI-powered search services. It recently announced that it would bring OpenAI's ChatGPT chatbot to its devices. In a shift away from exclusive deals that would help Apple ward off regulatory scrutiny, the company has said it is also in talks with Google to add the Gemini chatbot and plans to add other AI models as well. Apple is also revamping Siri with AI technology, giving it more control to handle tasks that had proven tricky in the past such as writing emails and interacting with messages. While those efforts are expected to make little money in the coming years, they could help capitalize on the new technology. "Apple could see this as a temporary setback, especially since it earns a lot from the Google search deal, but it is also an opportunity for them to pivot to AI solutions for search," said Gadjo Sevilla, analyst at Emarketer. Read Comments

Google antitrust ruling may pose $20 billion risk for Apple

Google pays Apple $20 billion annually, or about 36% of what it earns from search advertising made through the Safari browser, for the privilege, according to Morgan Stanley analysts. If the deal is undone, the iPhone maker could take a 4-6% hit to its profit, the analysts estimated. The pact runs until at least September 2026 and Apple has the right to unilaterally extend it for another two years, according to media reports in May that cited a document filed by the Department of Justice in the antitrust case. "The most likely outcome now is the judge rules Google must no longer pay for default placement or that companies like Apple must proactively prompt users to select their search engine rather than setting a default and allowing consumers to make changes in settings if they wish," Evercore ISI analysts said. Apple's shares were trading flat on Tuesday, underperforming a recovery in the broader market after Monday's global selloff. Alphabet was little changed, after falling 4.5% in the previous session. "The message here is that if you've got a dominant market position with a product, you'd better avoid the use of exclusive agreements and make sure any agreement you make gives the buyer free choice to substitute away," said Herbert Hovenkamp, a professor of law at the University of Pennsylvania. To be sure, the "remedy" phase could be lengthy, followed by potential appeals to the U.S. Court of Appeals, the District of Columbia Circuit and the U.S. Supreme Court. The legal wrangling could play out into 2026. Still, if the tie-up is scrapped, Apple will have several options including offering customers alternatives such as Microsoft Bing to customers, or potentially a new search product powered by OpenAI. Analysts agree that the ruling will speed up Apple's move towards AI-powered search services. It recently announced that it would bring OpenAI's ChatGPT chatbot to its devices. In a shift away from exclusive deals that would help Apple ward off regulatory scrutiny, the company has said it is also in talks with Google to add the Gemini chatbot and plans to add other AI models as well. Apple is also revamping Siri with AI technology, giving it more control to handle tasks that had proven tricky in the past such as writing emails and interacting with messages. While those efforts are expected to make little money in the coming years, they could help capitalize on the new technology. "Apple could see this as a temporary setback, especially since it earns a lot from the Google search deal, but it is also an opportunity for them to pivot to AI solutions for search," said Gadjo Sevilla, analyst at Emarketer. (Reporting by Aditya Soni in Bengaluru; additional reporting by Priyanka G in Bengaluru and Kenrick Cai in San Francisco; Editing by Sayantani Ghosh and Anil D'Silva)

Here is how Google antitrust ruling can cost Apple $20 billion

A potential remedy for Google to avoid antitrust actions could involve terminating the agreement Apple's lucrative deal with Google, could be under threat after a US judge ruled that the Alphabet-owned search giant was operating an illegal monopoly, Reuters reported. A potential remedy for Google to avoid antitrust actions could involve terminating the agreement, which makes its search engine a default on Apple devices, Wall Street analysts said on Tuesday. Google pays Apple $20 billion annually, or about 36% of what it earns from search advertising made through the Safari browser, for the privilege, according to Morgan Stanley analysts. If the deal is undone, the iPhone maker could take a 4-6% hit to its profit, the analysts estimated. The pact runs until at least September 2026 and Apple has the right to unilaterally extend it for another two years, according to media reports in May that cited a document filed by the Department of Justice in the antitrust case. "The most likely outcome now is the judge rules Google must no longer pay for default placement or that companies like Apple must proactively prompt users to select their search engine rather than setting a default and allowing consumers to make changes in settings if they wish," Evercore ISI analysts said. Apple's shares were trading flat on Tuesday, underperforming a recovery in the broader market after Monday's global selloff. Alphabet was little changed, after falling 4.5% in the previous session. "The message here is that if you've got a dominant market position with a product, you'd better avoid the use of exclusive agreements and make sure any agreement you make gives the buyer free choice to substitute away," said Herbert Hovenkamp, a professor of law at the University of Pennsylvania. To be sure, the "remedy" phase could be lengthy, followed by potential appeals to the US Court of Appeals, the District of Columbia Circuit and the US Supreme Court. The legal wrangling could play out into 2026. Still, if the tie-up is scrapped, Apple will have several options including offering customers alternatives such as Microsoft Bing to customers, or potentially a new search product powered by OpenAI. Analysts agree that the ruling will speed up Apple's move towards AI-powered search services. It recently announced that it would bring OpenAI's ChatGPT chatbot to its devices. In a shift away from exclusive deals that would help Apple ward off regulatory scrutiny, the company has said it is also in talks with Google to add the Gemini chatbot and plans to add other AI models as well. Apple is also revamping Siri with AI technology, giving it more control to handle tasks that had proven tricky in the past such as writing emails and interacting with messages. While those efforts are expected to make little money in the coming years, they could help capitalise on the new technology. "Apple could see this as a temporary setback, especially since it earns a lot from the Google search deal, but it is also an opportunity for them to pivot to AI solutions for search," said Gadjo Sevilla, analyst at Emarketer.

Google monopoly ruling may pose $20 bln risk for Apple

STORY: Apple's lucrative relationship with Google could be at risk after a judge ruled that the search giant is operating an illegal monopoly. The Alphabet-owned firm pays the iPhone-maker $20 billion per year to be the default search engine on the handsets. That's according to analysis by Morgan Stanley. But analysts say avoiding antitrust penalties could require terminating the agreement. Instead, users might be prompted to a choose a search engine. It's estimated ending the exclusivity deal could knock up to 6% off Apple's profits, and leave it looking for new options. One might be to offer alternatives like Microsoft's Bing. Another could be to develop a new search product, maybe powered by OpenAI. Apple has already said it's bringing the firm's chatbot to its products. But it's also in talks to offer Google's Gemini bot and other AI models - which analysts say is a sign it's worried about doing more exclusive deals. Apple's search engine pact with Google runs until at least September 2026. Legal experts say wrangling over the monopoly ruling could last just as long, and maybe go all the way to the Supreme Court.

What Apple stands to lose in landmark Google antitrust verdict

The landmark antitrust ruling against Google on Monday is shaking up one of the longest-standing partnerships in tech. At the heart of the case are billions of dollars worth of exclusive agreements Google has inked over the years to become the default search engine on browsers and devices across the world. No company benefited more than fellow Big Tech giant Apple -- which US District Judge Amit Mehta called a "crucial partner" to Google. During a weeks-long trial, Apple executives showed up to explain and defend the partnership. Under a deal that first took shape in 2002, Google paid a cut of search advertising revenue to Apple to direct its users to Google Search as default, with payments reaching $20bn for 2022, according to the court's findings. In exchange, Google got access to Apple's valuable user base -- more than half of all search queries in the US currently flow through Apple devices. Since Monday's ruling, Apple has been quiet. But it is likely to be deeply involved in the next phase of the case, which will address the proposed fix to Google's legal breaches. Remedies in the case could be targeted or wide-ranging. The Department of Justice, which brought the case, has not said what it will seek. "The most profound impact of the judgment is liable to be felt by Apple," said Eric Seufert, an independent analyst. JPMorgan analysts wrote that the ruling left Apple with a range of "inconvenient alternatives", including the possibility of a new revenue sharing agreement with Google that does not grant it exclusive rights as the default search engine, thereby reducing its value. Reaching revenue sharing deals with alternative search engines like Microsoft's Bing, they wrote, would "offer lower economic benefits for Apple, given Google's superior advertising monetisation". Mehta noted in his ruling that the idea of replacing the Google agreement with one involving Microsoft and Bing had come up previously. Eddy Cue, Apple's senior vice-president of services, "concluded that a Microsoft-Apple deal would only make sense if Apple 'view[ed] Google as somebody [they] don't want to be in business with and therefore are willing to jeopardise revenue to get out. Otherwise it [was a] no brainer to stay with Google as it is as close to a sure thing as can be,'" Mehta wrote. Apple could build its own search engine. It has not yet done so, and the judge in the case stopped short of agreeing with the DoJ that the Google deal amounted to a "pay-off" to Apple to keep it out of the search engine market. An internal Apple study in 2018, cited in the judge's opinion, found that even if it did so and maintained 80 per cent of queries, it would still lose $12bn in revenue in the first five years after separating from Google. Mehta cited an email from John Giannandrea, a former Google executive who now works for Apple, saying "there is considerable risk that [Apple] could end up with an unprofitable search engine that [is] also not better for users". Google has vowed to appeal against the ruling. Nicholas Rodelli, an analyst at CRFA Research, said it was a "long shot", given the "meticulous" ruling. Rodelli said he believe the judge "isn't likely to issue a game-changing injunction" such as a full ban on revenue-sharing with Apple. Depending on the remedy the judge decides for Google's antitrust violations, Seufert said Apple could "either be forced to accept a much less lucrative arrangement with Microsoft [over Bing] or may be prevented from selling search defaults at all." "It's certainly going to adjust the relationship between Google and Apple", said Bill Kovacic, a former Federal Trade Commission chair and professor of competition law and policy at George Washington university law school. Apple is not the only company potentially affected by Monday's ruling. According to the court, Google's 2021 payment to Mozilla for the default position on its browser was more than $400mn, about 80 per cent of Mozilla's operating budget. A spokesperson for Mozilla said it was "closely reviewing" the decision and "how we can positively influence the next steps". Meanwhile, the search market is undergoing a transformation, as companies such as Google and Microsoft explore how generative AI chatbots can transform traditional search features. Apple's partnership with OpenAI, announced in June, will allow users to direct their queries to its chatbot ChatGPT. A smarter Siri voice assistant powered by Apple's own proprietary AI models will also create a new outlet for user queries that might otherwise go to Google. Apple's models are trained using Applebot, a web crawler that, much like the technology behind a search engine, compiles public information from across the internet. Traditional search is showing no signs of slowing. Research from Emarketer finds that, in the US alone, spend on search advertising will grow at an average of about 10 per cent each year, hitting $184bn in 2028. Google, the dominant player by a long shot, captures about half of that spend. Apple's current deal with Google would have allowed it to unilaterally extend the partnership into 2028. The Cupertino, California-based iPhone maker has its own antitrust battle to wage. The DoJ's antitrust division, led by Jonathan Kanter, filed a sweeping lawsuit against Apple in March, making it the latest Big Tech giant to be targeted by the Biden administration's enforcers. The legal troubles reflect an ongoing decline in Apple's relationship with policymakers in Washington, despite an effort by chief executive Tim Cook to step up the company's lobbying of the Biden White House, according to research by the Tech Transparency Project. TTP found that Apple spent $9.9mn on lobbying the federal government in 2023 -- its highest in 25 years, though still much lower than the likes of Google, Amazon and Meta.