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  • - [Narrator] You've probably asked the question before.

  • iPhone or Android?

  • Apple Maps or Google Maps?

  • Safari or Chrome?

  • On the surface,

  • Apple and Google represent the ultimate tech rivalry

  • but behind the scenes,

  • executives have maintained

  • a multi-billion dollar partnership

  • that benefits them both massively.

  • - I would describe Apple and Google

  • as the classic example of frenemies.

  • On the one hand, they're fierce rivals,

  • on the other hand, they benefit greatly

  • from figuring out ways to work together.

  • - [Narrator] Google pays Apple an estimated 8

  • to $12 billion a year

  • or 1/3 of Alphabet's annual profits

  • to make sure it's the default search engine

  • on more than a billion Apple devices.

  • That deal has helped Google dominate the search market.

  • In recent years, it's accounted for 90 to 95%

  • of search engine queries in the US.

  • The deal between the two tech giants

  • is so powerful that it's at the center

  • of one of the biggest US government lawsuits

  • against a public company since the '90s.

  • So how did two of Silicon Valley's biggest rivals come

  • to form one of tech's most valuable partnerships?

  • To understand Apple and Google's frenemy relationship,

  • you have to go back to the beginning.

  • - In the early days, they were quite close.

  • At the time, the CEO of Google was on Apple's board.

  • It was part of the Silicon Valley club, if you will.

  • - [Narrator] In 2005, the two companies laid the groundwork

  • for what would become one of the industry's biggest deals.

  • Google struck a deal with Apple

  • to become the default search engine for Safari

  • on Mac computers.

  • - As Apple evolved sort of the relationship,

  • in 2007 when the iPhone came out,

  • Google was then the default search for the iPhone,

  • Safari browser and has really just grown

  • and grown from that point.

  • - So Steve, I've had the privilege of joining the board

  • and there's a lot of relationships between the boards

  • and I thought if we just sort of merged the companies,

  • we could call them Applegoo.

  • - As it became clear that Google was going

  • to be more than just a search engine,

  • that it wanted to grow

  • and that Apple was going to be a rival,

  • that became an issue.

  • - [Narrator] In 2008, Google directly

  • challenged Apple's business

  • with the launch of its Android operating system.

  • The next year, Google CEO Eric Schmidt resigned

  • from Apple's board.

  • Since then, both companies have expanded

  • into each other's businesses

  • with Google launching Android phones

  • and Apple launching services like the App Store

  • and Siri, which was originally powered

  • by Microsoft's Bing, not Google.

  • - Search Wikipedia for Neil Armstrong.

  • (beeping)

  • - [Siri] Searching for Neil Armstrong.

  • - [Narrator] It wasn't until 2017

  • that Apple switched from Bing to Google

  • for its search results on Siri

  • and Spotlight, the Mac search function.

  • That renewed deal between Apple and Google came

  • at a good time for both companies.

  • Google was facing competition

  • from Facebook's fast-growing mobile ad revenue

  • and it's new deal with Apple put its search results

  • and ads on more than a billion Apple devices.

  • Now up to half of Google searches come

  • from Apple devices.

  • - When you open up your iPhone,

  • and go to Safari and write something

  • that you wanna search for, boom,

  • you're going to Google.

  • And that's a lot of value.

  • - [Narrator] For Apple, the deal

  • has benefited its business twofold.

  • First, it got more consistent search results

  • across Safari, Siri and Spotlight.

  • But perhaps more importantly,

  • the money it gets from Google's ad revenue makes up 15

  • to 20% of Apple's annual profits.

  • That's helped fund Apple's ambitions

  • to grow its services unit,

  • which has driven growth for the company

  • over the past few years.

  • - Apple is like a store.

  • It's selling its shelf space,

  • that premo shelf space.

  • And so when you go into a store

  • and you see those candy bars right there

  • at the register, that's the place to be

  • if you're selling candy bars.

  • And so for Google, they're in that default spot.

  • - [Narrator] Now all of that money

  • and search traffic could be at risk

  • because of this lawsuit.

  • In October, the US Department of Justice sued Google

  • over antitrust concerns.

  • The government is alleging that Google

  • is a monopoly gatekeeper for the internet

  • and it says that harms customers,

  • advertisers and competing tech companies.

  • One way the Justice Department says

  • Google maintains its dominance

  • is through exclusive business deals,

  • like through its partnership with Apple.

  • According to the lawsuit,

  • some people at Google called the prospect

  • of losing its default status on Apple devices code red.

  • Google representatives said they weren't aware

  • of the code red language used in the lawsuit

  • and neither Apple or Google have officially disclosed

  • the exact value of the deal

  • or commented on the Justice Department's eight

  • to $12 billion projection.

  • In a recent interview,

  • the Journal's personal tech columnist, Joanna Stern,

  • asked Google's former CEO about the deal.

  • - There was ultimately a deal

  • that I did not personally negotiate

  • but it was a lucrative deal for Apple.

  • But important to say

  • that with respect to Google,

  • and with respect to use of Google search on Apple phones,

  • it is extremely easy to switch

  • to another provider.

  • - [Narrator] Google has denied

  • the Justice Department's allegations

  • and said it plans to challenge the lawsuit.

  • Its chief legal officer said

  • the lawsuit wouldn't help consumers

  • and that its relationship with Apple is customary.

  • Apple hasn't officially commented on the lawsuit.

  • So what happens if the Justice Department is successful

  • in its case?

  • - This could drag out for many years.

  • This is an interesting situation.

  • In some ways, if the DoJ is successful,

  • one of the companies that might be harmed the most here

  • is Apple given the fact

  • that they perhaps had 15 or 20% of their profit coming

  • from this relationship.

  • - [Narrator] Of course, there are other search engines

  • out there, like Bing, DuckDuckGo, Baidu and Yandex

  • but none of them even come close

  • to Google's dominance.

  • Some financial analysts say

  • that if anyone can give Google a run for its money,

  • it's Apple, and the antitrust lawsuit

  • might just be the push Apple needs

  • to divorce itself from Google.

  • - We don't know exactly where Apple is going

  • with its future plans here.

  • Some have speculated

  • that potentially this would be a good reason

  • for Apple to develop its own search engine.

  • Others have said potentially they might buy a search engine

  • to beef up that capability.

  • One of the things we know about Apple

  • over the years is that it likes to own its core competencies

  • so it could control those worlds.

  • And so that's always kind of hanging

  • in the background.

  • - [Narrator] Apple hasn't responded

  • to requests for comment on plans

  • to create or purchase its own search engine.

  • Still, a breakup of this multi-billion partnership

  • between Apple and Google

  • could deal a financial blow to two

  • of the world's biggest companies.

  • And however this relationship plays out

  • in the future has the potential

  • to shape the way billions of people use the internet.

  • - [Tim] As we see Congress and regulators debate the power

  • of tech, this lawsuit is just yet another example

  • of kind of that public debate

  • about their role in our future and in our society.

  • (dramatic music)

- [Narrator] You've probably asked the question before.

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How Apple and Google Formed One of Tech’s Most Powerful Partnerships | WSJ

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    joey joey posted on 2021/05/31
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