Apple Google’s love and hate under the shadow of Antitrust: “love each other, kill each other”, or “run for each other”

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In 2017, Apple CEO Tim Cook and Google CEO Sundar Pichai were photographed having dinner at a high-end Vietnamese restaurant called tamarine. The media immediately speculated about the relationship between the two silicon valley giants, just like probing into star affairs.
While the two were drinking red wine at a window table in Palo Alto, their company was in intense negotiations to renew the most profitable business deal ever: it was the paper deal that made Google the default search engine for Apple’s iPhones and other devices. The updated deal is valuable for both companies, while also consolidating their dominance in the technology industry.
But now that cooperation is at stake. On Tuesday, the U.S. Department of justice launched a landmark lawsuit against Google, the largest antitrust case in the U.S. government in 20 years, threatening to end the seemingly unlikely partnership between the company and its rival Apple – the most profitable business deal ever.
The agreement, which dates back 15 years, highlights the special relationship between the two silicon valley giants, which prosecutors believe cut off a number of small and medium-sized enterprises through an unlikely deal.
Prosecutors also specifically mentioned the cooperation between Google and apple as a typical case in which the company used illegal means to protect its monopoly and curb competition in the Internet search industry.
But Google has said its dominance in the search market stems from the superior quality of its products. They also deny that there are acts that impede competition. The company has also said competition remains healthy in Google’s major revenue generating businesses, such as advertising and mobile.
“Silicon Valley has a strange term: CO opetition,” said Bruce Sewell, who was Apple’s general counsel from 2009 to 2017. It means that although the competition between the two sides is fierce, the necessary cooperation is also needed. ”
The reason why Apple’s marriage with Google is so incredible is that Apple’s executives have repeatedly attacked Google. Cook has criticized the Internet advertising business for “monitoring” consumers, which is Google’s main source of revenue. When Steve Jobs, the late co-founder of apple, discovered that Google intended to challenge the iPhone, he also claimed to launch a “thermonuclear war” against it.
Apple and Google’s parent company alphabet, with a combined market capitalization of more than $3 trillion, are competing fiercely in many areas, including smartphones, digital maps and laptops. But they also know how to turn enemies into friends when it is in their own interests. In fact, few deals are more profitable than the iPhone search engine agreement.
According to the U.S. Department of justice, nearly half of Google’s search traffic now comes from Apple devices, and the company internally will lose what it characterized as a “serious impact” Apple deal. When iPhone users search for information on Google, they will see search ads that drive Google’s business and find channels to other Google products, such as YouTube.
A former Google executive, who asked for anonymity, said the loss of Apple’s traffic made Google “scared.”.
The U.S. Department of justice wants the court to ban Google from carrying out similar transactions. They believe the deal unfairly helped Google become a core service in people’s online lives – it currently handles 92% of the world’s Internet search requests.
Whether online companies such as yelp and Expedia, noodle shops and news organizations, all kinds of enterprises often complain that Google has an unparalleled search advantage. Even when people just search the name of an enterprise, it can solemnly charge advertising fees, or simply guide users to use Google maps and other products. Microsoft, which was involved in an unprecedented antitrust lawsuit 20 years ago, has now told British regulators in a victim’s stance that if its Bing became the default search option for iPhones and iPads, it could make more advertising revenue from each search.
In addition, although small search engines like duckduckgo focus on privacy protection and hope to rob some users of Google, they are far from comparable in Apple’s ecosystem.
Apple is currently making between $8 billion and $12 billion a year from the deal, up from $1 billion in 2014. In exchange, they will use Google as the default search engine for their products. This may be Google’s biggest single expense, accounting for 14% to 21% of Apple’s annual profit, so apple is obviously reluctant to give up such a large sum of money.
In fact, cook and picchay met again in 2018 to discuss how to increase search revenue. According to the U.S. Department of justice lawsuit, a senior Apple employee wrote to Google after the meeting: “we have the same vision, we are family.”
If the 15 year old deal is ended and the two parties are forced to break up, Apple will obviously lose its huge revenue. But Google faces a more serious threat because it lacks reliable means to make up for lost traffic. Apple may also acquire or build its own search engine.
A former Google executive said the company believes internally that apple is one of the few companies in the world that can offer powerful alternative search solutions. Google is also concerned that if it can’t renew its agreement, Apple may set more obstacles for iPhone users to use Google search.
An apple spokesman declined to comment on the cooperation. A Google spokesman provided a blog post that the company defended the partnership.

Despite the ever-increasing “travel expenses” paid by Google to apple, the company has repeatedly claimed that its dominance in Internet search is due to users’ preference rather than to such “buying users”. Google believes that the Justice Department’s statement is biased, saying that the relationship between Google and apple is no different from Coca Cola’s payment of conspicuous shelf charges to supermarkets.
Google said Microsoft Bing and other search engines have also reached a revenue sharing agreement with apple, making it a secondary search option on the iPhone. It added that Apple allows users to change the default search engine from Google to other services – but very few do, because people don’t usually bother to adjust this setting, and there are many people who prefer Google.
Apple has rarely (or never) publicly acknowledged its deal with Google. Bernstein research, a market research firm, said Apple mentioned so-called licensing revenue in its earnings call for the first time this year.
A former Apple executive, who asked for anonymity because of its confidentiality agreement, said Apple’s leaders were thinking the same about Google as the general public: Google’s search engine does have practical value, so it’s worth tolerating some of its bad behavior.
“Their search engine is the best.” Cook was asked at the end of 2018 why he was working with a company he criticized. He added that Apple has created ways to weaken Google’s data collection behavior, such as providing a private browsing mode on Internet browsers.
The deal is not limited to searches in Apple’s Safari browser, but covers almost all search behavior on Apple devices, including using Apple’s virtual assistant Siri, as well as searches on Google’s iPhone app and Chrome browser.
The relationship between the two companies has experienced from friendship to competition, and then to today’s “competition and cooperation”. When Google was founded, its co founders, Larry Page and Sergey Brin, saw jobs as mentors who would walk with him to discuss the future of technology.
In 2005, apple and Google signed a deal that seemed inconspicuous at the time: Google would become the default search engine for Apple’s Safari browser on Macs.
Another former Apple executive, who declined to be named, said cook, who was still Mr. Jobs’s deputy at the time, soon saw the promise of a lucrative deal. Because Apple only needs to provide users with the search engine they want, Google’s payment has no cost to apple.
Apple has expanded the scope of the deal to include the upcoming heavyweight iPhone. When jobs launched the iPhone in 2007, he also invited Eric Schmidt, then Google’s CEO, to the stage.
“If our two companies merge directly, we can call it Apple goo.” Schmidt joked that he was also a member of Apple’s board. With Google search on the iPhone, he added, “we don’t need a merger to be better than a merger.”
After that, relations between the two sides began to deteriorate. Google has been quietly developing a competitor to the iPhone, an operating system that any handset manufacturer can use, and later Android. Jobs was furious. Apple sued a mobile phone manufacturer using Android in 2010. Jobs also told biographer Walter Isaacson, “if I need to, I’ll take my last breath to destroy Android.”
A year later, Apple launched Siri. But the technology of Microsoft has not been adopted by Microsoft.
However, the partnership between the two companies on the iPhone continues, after all, the return on the deal is too lucrative for either side to part with. A former Apple executive said Apple asked for regular renegotiation of the deal, and Google paid more each time.
“You have to maintain this relationship. You can’t cut it off.” But he declined to discuss the details of the deal, “in the meantime, when you’re negotiating on behalf of the company and trying to get the best deal, it’s time to be serious.”
Around 2017, just as the deal was waiting to be renewed, Google was besieged by competitors, and its click growth in mobile advertising fell short of expectations. Apple is not satisfied with Bing’s performance on Siri. At that time, cook had just announced that Apple planned to double its service revenue to $50 billion by 2020. This is an ambitious goal that can only be achieved through Google’s “road pricing.”.
By the fall of 2017, Apple announced that Google would support Siri and answer users’ questions. Google revealed that the cost of search traffic it paid for increased significantly. In the face of outside questioning, Google has given an intriguing explanation for why it suddenly paid an unnamed company billions of dollars more: “because the cooperation agreement has changed.”