Key Takeaways
- Apple argued its multi-billion dollar search deal with Google might not be vital in the long run, pointing to the rise of AI.
- The company plans to integrate AI services like ChatGPT and Perplexity into its Safari browser as search alternatives.
- Despite suggesting the deal’s waning importance, Apple executives admitted concern over losing the significant revenue from Google.
- An Apple executive even suggested the iPhone itself might not be necessary in a decade due to technological shifts.
- Apple is strategically positioning itself to benefit from new AI partnerships, potentially creating new revenue streams.
Apple Inc. is making an unusual case in its effort to preserve a highly profitable search partnership with Google’s parent company, Alphabet Inc.
The tech giant has suggested that the deal, which brings Apple approximately $20 billion annually, might not be crucial in the long term. Eddy Cue, Apple’s senior vice president of services, presented this argument during testimony at the U.S. Justice Department’s antitrust trial against Google.
Cue explained that the entire technology landscape is shifting. Apple is already planning to evolve its Safari web browser by incorporating artificial intelligence services. He mentioned AI platforms like OpenAI’s ChatGPT, Perplexity AI Inc., and Anthropic PBC’s Claude as potential future options within Safari.
He also noted a change in user behavior, with people increasingly moving away from traditional search methods. According to Business Standard, Cue revealed that Google search queries on Apple devices experienced their first-ever decline in April, a trend he attributed to users embracing AI.
“Technology shifts create these opportunities,” Cue stated, implying that AI providers could eventually serve as alternatives to conventional search engines within Safari. However, despite this forward-looking perspective, it was evident that Apple is keen to maintain its current agreement with Google, which faces termination if the Justice Department wins its case.
The situation is being closely watched by investors, as the outcome could significantly affect both tech giants. Google pays Apple substantial sums to have its search engine set as the default on Apple’s more than 2 billion active devices.
Currently, Safari offers Google as the preferred search engine, alongside alternatives such as Yahoo Search, Microsoft Corp’s Bing, and DuckDuckGo. Apple has revenue-sharing agreements with all these providers, but Google’s payments are the largest. This pact is a central issue in the government’s lawsuit against Google.
Cue’s testimony about Apple’s AI plans seemed designed to diminish the perceived importance of the existing Google deal. If the judge concludes that the industry has evolved and viable alternatives to Google now exist, there might be less impetus to dismantle the long-standing agreement.
He also took time to praise rival options, giving particular mention to Perplexity’s service. Analysts suggest that emphasizing such data points could bolster the argument that Google does not hold an anti-competitive position in the search market.
In a particularly striking comment, Cue even speculated about the future of Apple’s flagship product: “You may not need an iPhone 10 years from now, as crazy as it sounds,” he remarked, emphasizing the rapid pace of technological evolution.
This tactic is somewhat familiar for Apple, which has previously made surprising courtroom statements, sometimes even if they appear to contradict its marketing messages, to sway legal decisions.
The revenue from the Google arrangement has been a significant contributor to Apple’s services division, one of the company’s few consistent growth engines. Cue confessed to losing sleep over the possibility of the Google deal ending, adding that he believes Google should remain the preferred search option, even as new AI services are introduced.
Apple is also actively exploring new avenues for revenue. AI systems like ChatGPT and Perplexity could eventually enter into revenue-sharing agreements with Apple, potentially creating a new business model similar to the App Store, but for AI search.
The company already incorporates OpenAI’s ChatGPT in Siri for query fulfillment and has plans to add Google’s Gemini as an alternative later this year. Furthermore, Apple recently integrated Google into its new Visual Intelligence feature, which also involves a revenue-sharing arrangement between the two companies.
