Google pays Apple a whopping 36% of the advertising revenue it generates from its deal as the exclusive search engine for Safari.
This revelation was made this week in the US government’s anti-monopoly court case against Google — which both Apple and Google have tried to keep from going public.
University of Chicago economics professor Kevin Murphy, called by Google as its main economics expert, made the shock admission — over which the search giant’s lawyer John Schmidtlein was seen cringing. Oh dear, the cat is truly out of the bag now.
Last month, Google’s senior vice-president for search, Prabhakar Raghavan, revealed that Google paid $26.3-billion in 2021 to be the default search engine on Apple, Samsung and other phone manufacturers.
This was “the company’s biggest cost” that year, according to Raghavan, and more than what it spent on research and development. The latter is a tacit admission of the US government’s argument that Google has created a monopoly not through innovation but by squashing the competition.
To get a sense of how much Apple makes from that 36%, Digital Content Next CEO Jason Kint estimated that Google makes as much as $90-billion of its current annual revenue from these default search deals. “That’s insane,” tweeted Kint, who heads the DCN trade association for digital publishers.
Google has argued in the two-month trial that publicising these figures “would unreasonably undermine Google’s competitive standing in relation to both competitors and other counterparties”.
Alternatively, as the rest of reality now knows, it has enabled Google to keep anyone else out of the lucrative search industry.
Google earned $224-billion in 2022, according to Statista, which is a fair chunk of change. No wonder it has made such aggressively expensive offers to smartphone manufacturers — especially Apple, which has sold one billion iPhones and iPads. These Apple users are first-prize for the programmatic advertising that Google sells as does Facebook, which saw its revenue hit by $10-billion when Apple introduced its app-tracking transparency last year. This feature allows users to restrict how advertisers track them.
While Facebook’s surveillance capitalism has been hobbled by this, Google had a secret back door, as it were into these iPhone owners — who tend to be wealthier (in no small part because they can afford Apple products) and spend money on apps — certainly much more than Android users in general.
Google’s push into mobile operating systems (remember it bought then nascent OS Android in July 2005) was originally meant to shore up its advertising business for mobile. It went on to claim some 90% of mobile OSes, much like Microsoft dominated the desktop computing era with Windows.
It was no small irony that Microsoft is now the underdog — in both search and mobile OSes.
Last month, Microsoft CEO Satya Nadella testified that he “focused every year of my tenure as CEO to see if Apple would be open” to making Microsoft’s Bing search engine the default.
“Everybody talks about the open web, but there is really the Google web,” he added.
Google’s “competitive standing” as it ironically calls its monopoly practice is a misnomer. It owns the entire value chain of programmatic advertising, from selling the ads, placing them on other websites, and running the auctions for these ads. Another way of looking at it is: Google has been making a killing and doesn’t want you to know how much. But now we know. DM