Google faced a significant blow to its search and advertising empire on Monday as Judge Amit Mehta ruled in favor of the Department of Justice in an antitrust case. This ruling doesn’t just hit Google; it could also cost Apple billions.
The ruling may force Google to overhaul its core business, potentially ending a lucrative revenue-sharing agreement with Apple.
This agreement, known as the Information Services Agreement (ISA), has been in place since 2002 and ensures Google is the default search engine on Apple’s Safari browser, Spotlight Search, and Siri.
Under this deal, Google pays Apple 36% of the search revenue generated on Apple devices. Although Apple remains tight-lipped about the exact figures, court documents estimated Apple’s earnings from this deal at around $20 billion in 2022, double the $10 billion received in 2020.
This revenue likely falls under Apple’s Services segment, which saw $78.1 billion in 2022. If the $20 billion estimate holds, the Google deal alone accounts for roughly 25% of Apple’s Services revenue. The Services segment is crucial for Apple, especially as it seeks to offset slowing iPhone sales with platforms like Apple Music+ and Apple TV+.
Overall, Apple’s 2022 revenue was $394.3 billion, with the Google agreement contributing about 5% to the total. The potential loss of the ISA would be a significant financial hit.
Google, too, stands to lose. Internal modeling from 2020 suggested that replacing Google as the default search engine on iOS devices could result in a 60% to 80% drop in search volume. This could slash Google’s revenue by $28 billion to $32 billion, representing a 15% to 17% cut to its 2020 revenue of $182.5 billion.
The fallout from this ruling is poised to impact both tech giants heavily, shaking up the landscape of the search and advertising industries.
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