Newly unsealed court documents in the U.S. Department of Justice's antitrust lawsuit against Google have revealed that Alphabet Inc. paid Apple Inc. a staggering $20 billion in 2022 to maintain its position as the default search engine in the Safari browser. The deal between the two tech giants is a central focus of the landmark case, in which antitrust enforcers allege that Google has illegally monopolized the market for online search and related advertising.
The payment amount, which both Google and Apple had sought to keep confidential, was confirmed by Apple's senior vice president of services, Eddy Cue, in court documents filed late Tuesday ahead of the closing arguments. The figures are not disclosed by either company in their securities filings, highlighting the significance of the agreement to both parties.
The documents also shed light on the importance of Google's payments to Apple's bottom line. In 2020, for example, Google's payments constituted 17.5% of Apple's operating income, underscoring the financial impact of the search engine deal on the iPhone maker's profitability.
The agreement between Apple and Google dates back to 2002, when Apple first agreed to use Google as the default search engine in Safari for free. However, the companies later decided to share revenue generated from search advertising. By May 2021, this arrangement translated to Google paying Apple more than $1 billion per month for its default status, according to prosecutors.
Microsoft Corp., which operates the competing search engine Bing, has repeatedly attempted to lure Apple away from its partnership with Google. The company offered to share 90% of its advertising revenue with Apple to make Bing the default search engine in Safari, a figure that was not previously disclosed. Microsoft CEO Satya Nadella testified at the trial last year, emphasizing the company's willingness to make numerous concessions, including hiding the Bing brand, to persuade Apple to make the switch.
"Whomever they choose, they king-make," Nadella said of Apple, highlighting the immense power the iPhone maker wields in the search engine market.
Despite Microsoft's efforts, Apple has remained committed to its partnership with Google. In court, Apple's Eddy Cue claimed that the company uses Google as the default search engine on its devices because Apple has "always thought it was the best." However, Cue also acknowledged that Apple was concerned about Bing's ability to compete in terms of "quality and capabilities."
The revelation of the $20 billion payment has raised questions about the competitive landscape in the search engine market and the potential impact of the antitrust lawsuit on the future of the Apple-Google partnership. If Google loses the case, the deal between the two companies could be dissolved, potentially opening the door for other search engines to compete for the coveted default position on Apple devices.
In Europe, the Digital Markets Act has already forced Apple to make changes to how browsers work on its devices. Users in the region are now able to choose a default browser when setting up their iPhones, with more options available than the handful of providers allowed in the United States.
