Big game on Safari as DOJ puts search traffic up for grabs
If Apple's default search contract with Google has to be shut down, what do they do next?
Another step in the US antitrust case against Google last week, with the Department of Justice filing their final recommendations, one of which demands the biggest disruption in Search for a decade.
It will most likely cost Apple a few billion dollars in annual revenue and gives them some intriguing strategy decision to make. It’s officially a Big Deal.
Quick recap. In 2020, US competition authorities filed a case to establish that Google had an illegal monopoly in search engines and search advertising. In August 2024 ruled that this was indeed the case, to the surprise of no-one but Google.
Wide ranging remedies were proposed, and now the DOJ has confirmed the final recommendation with minor changes (mostly softening on AI investment) . By August the Google break up could begin.
The remedy that interests me most relates to a shadowy “Internet Services Agreement” that has existed between Google and Apple since as far back as 2002.
That deal grew and grew and now guarantees Google exclusive rights to be the default search engine on Safari, in return for enormous revenue sharing and entrenched exclusivity.
Apple now delivers over 400 billion user queries a year from Safari to Google Search. That includes almost 95% of the general search traffic on iPhones. The DOJ calculates this guarantees 28% of all search queries in the US market.
And it pays. In 2022 Google’s revenue share payment to Apple was an estimated $20bn worldwide, equivalent to 17.5% of the operating profit of Apple in that year.
This isn’t Google’s only route to market. But it guarantees access to the most affluent iOS audiences and when combined with Android defaults it effectively locks up mobile search for Mountain View.
In 2016 Apple signed a ten year contract with options to extend as far as 2031. The contract was so lucrative it included a clause that required ‘both parties to co-operate to defend the agreement including in response to regulatory actions’. And now the DOJ has given them that chance by ruling that that deal is illegal.
So the biggest search contract in the world is due to be blown up, and Apple has to decide what to do next. It needs to consider the financial impact, but also has plenty of operational, brand and political considerations to manage as well. Let’s have a look at some of the options.
“Bing It”
Usual practice would be to ditch Google and pick the next player in line for a long term partnership. That leads you to Microsoft and Bing.
But Apple has long standing doubts about the quality of Bing search, which covers only 10% of the market. In 2015 Microsoft pitched a 90% revenue share but Apple turned it down because they were “horrible at monetizing advertising”. Internally it referred to the project to evaluate Bing as a potential partner as “Alice in Wonderland”.
“Duck Duck Go for it”
Apple makes a big play of privacy as a brand value, so maybe DuckDuckGo is the obvious partner? But DDG is really a wrapper that actually sends out many of its calls to Bing anyway, and maybe couldn’t handle the operational load. Most importantly, it hasn’t got the money given a turnover of just over $100m. This a Duck without a bill.
“Choice Screens”
Breaking up default agreements sometimes leads to ‘choice screens’ where the user would select a search engine service at the point of first usage.
This has been tested in the EU as part of the Digital Markets Act. In a study from 2023 by the European Consumer Organisation, controlled testing of various versions of choice screens found Google was still selected 79% of the time.
So it doesn't look like choice screens alone would address the monopoly problem, and Apple would take a revenue hit as a) less traffic went to higher yielding Google and b) any revenue share deal would be lower without exclusivity clauses.
“Take it In House”
Is this something that Apple can go after themselves? Could they seek to build their own search engine product and just in house it all? It already handles queries from Siri and Spotlight differently to Safari, and is working on a new version of Siri, albeit delayed until 2026. It sells $10bn+ of ad revenue per year for Apple News and TV, so could it ramp up and take on search?
Unlikely. Search advertising is a very different operation, tech and scale to anything that Apple sells today, and the technical and commercial barriers to entry are very high.
Could Apple be better at monetizing their search traffic than a General Search Engine that did that for a living and had the advantage of aggregation from wider sources and economies of scale? The answer is almost certainly not, and internal Apple documents suggest they agree.
“Jump on the AI train”
It would be remiss of me not to mention AI at some point, and I’m sure some would suggest Generative Search partners as the obvious answer for Apple. For completeness I include it here, if only to highlight how much of a dead end that is right now.
Firstly on scale, Rand Fishkin at SparkToro estimates Google run 14bn searches a day compared to 37m ChatGPT searches. The consumer facing operation of AI tools is still tiny by comparison. And secondly most gen search tools outsource their search indexing to Google or Bing anyway, and / or haven’t yet delivered scaled advertising monetisation.
So too small, too early stage to be a cash machine for Apple in 2026.
“Keep our options open”
I think the most likely route for Apple is to keep as many players on the field as they can.
In the browser market they will hold the jewel of Safari while Google is forced to divest Chrome, and Mozilla might go under without their equivalent Google deal.
They can create a choice architecture for search engines backed up by non-exclusive 12 month deals for revenue share. This would likely allow Google to take part and still service the majority of the traffic at a premium rate.
They can deliver and develop the search models for Apple Intelligence and new Siri, optimised to drive revenue directly or through those revenue share deals, and develop their advertising offering along side it.
My forecast;
Apple will probably lose a few billion in revenue, but out of $390bn so they’ll be ok.
Other search engines will gain at Google’s expense, with Bing the likely biggest winner based on brand recall on choice screens and the second best monetisation scale.
Publishers and marketers will have more meaningful traffic sources to access Apple users, and more price and service competition - but they will need to spend more time mastering Bing than otherwise they might.
The word ‘safari’ comes from the Swahili for ‘journey’. Intrigued to find out which route Apple takes in the next few months.
Sources
USA vs Google original judgement - here
Google Response to original judgement - here
USA vs Google Revised Proposed Final Judgement - here
Choice Screens - here
Apple ad revenue - here