Google’s top litigator, John Schmidtlein, was caught off guard in court recently when his own witness revealed a shocking secret. According to the expert, Google pays Apple a whopping 36% share of its revenue from search advertising made through Apple’s Safari browser. This confidential revelation, which took place during one of the most consequential antitrust trials in decades, left the courtroom buzzing.
The closely guarded secret that spilled out in court has grabbed attention on Wall Street and Silicon Valley, raising questions about how much Apple has to lose and how much Google’s rivals stand to gain if the trial doesn’t go in Google’s favor. This conflict is at the heart of the Justice Department’s argument in the trial – that Google’s contract with Apple illustrates how the tech giant illegally stifles competition.
The trial is expected to have significant implications for both companies, with analysts estimating that Google pays Apple between $18 billion and $20 billion annually as part of this deal. This revenue, which is crucial to Apple’s bottom line, is part of a bucket Apple calls “services,” which also includes Apple Arcade, Apple TV+, and Apple Music. The risk that this trial poses to Apple isn’t just about the billions at stake, but also about how much stockholders value this income stream.
The trial could spell new opportunities for Google’s rivals, although it’s unlikely to conclude anytime soon. While the evidence phase of the trial has wrapped up, closing arguments are still months away, and appeals could stretch the case into 2025.
The trial has also brought to light the challenges faced by Google’s competitors, who view Google’s default placement contracts as a barrier to fair competition. Microsoft CEO Satya Nadella revealed that he tried for years to secure a default engine deal with Apple but failed. Meanwhile, Kamyl Bazbaz, a spokesperson for DuckDuckGo, a competing search engine, has accused Google of using its agreements with Apple to block other search engines from competing. If the government prevails, there could be significant changes in store, including the possibility of a choice screen on devices to allow users a variety of search engines.
While the trial’s outcome remains to be seen, it is clear that both Apple and Google will be feeling the heat as the proceedings continue. The tech world will no doubt be watching closely to see how the trial unfolds and what impact it could have on the industry.
