The US v. Google antitrust trial revolves around the significance of defaults. Although switching browsers or platforms is simple, the default choice upon turning on a device holds substantial importance. Google recognizes this and has invested a staggering $26.3 billion in 2021 to secure its position as the default search engine across various browsers, phones, and platforms.
The disclosure of this $26.3 billion figure emerged during the cross-examination of Prabhakar Raghavan, Google’s search head, by the Justice Department. The information became public following a debate earlier in the week between the two sides and Judge Amit Mehta regarding whether the amount should be redacted. Mehta’s pursuit of increased transparency in the trial led to the open sharing of this significant piece of information.
To provide context for the $26.3 billion expenditure, Alphabet, Google’s parent company, recently reported that Google Search ad business generated around $44 billion in the past three months and approximately $165 billion in the last year. The entire ad business, which includes YouTube ads, resulted in a profit of just under $90 billion. These calculations are estimates, but in essence, Google sacrifices about 16 percent of its search revenue and 29 percent of its profit for these distribution deals.
Google is giving up about 16 percent of its search revenue and about 29 percent of its profit to those distribution deals
Most of this expenditure goes to Apple. According to The New York Times, Google’s agreement to be the default search engine in Safari across Google products cost them approximately $18 billion in 2021. This particular deal with Apple has garnered significant attention during the early stages of the trial due to Apple’s significant portion of the total amount. Additionally, Google pays Mozilla for default placement in Firefox, pays Samsung for the same on its devices, and has agreements with numerous device manufacturers, wireless carriers, and other platforms to secure default status.
Until now, these figures have remained closely guarded secrets, leaving competitors and analysts to speculate on the true value of being the universal default choice for Google. This information surfaces as Google begins its defense phase of the trial, with Raghavan testifying that Google is consistently at risk of losing users to platforms like TikTok and ChatGPT. Raghavan even mentioned that some users refer to Google as “Grandpa Google.” He acknowledged Yelp and Amazon as competitors and emphasized that in such a competitive market, Google must exert maximum effort to remain relevant. In contrast, the Justice Department argues that spending $26.3 billion to secure default status everywhere actually inhibits competition. With a few more weeks of testimony remaining, Mehta will be tasked with determining which argument is correct.