In a significant ruling for both Google and Apple, Judge Amit Mehta decided on Tuesday that the tech giant will maintain control over its Chrome and Android platforms while continuing to financially support its search engine’s promotion through partnerships. This decision allows Google to uphold its lucrative arrangement with Apple, estimated to be worth around $20 billion in 2022, where Google serves as the default search engine on iPhones and other Apple devices.
The ruling reflects a compromise, as Judge Mehta determined that Google cannot enter into exclusive partnerships that would potentially limit competition, yet it retains the right to pay companies for the distribution of its services. This outcome is seen as favorable for Apple, which will not be forced to find an alternative search provider for its devices—a task that could have posed significant challenges for the company during a tumultuous period characterized by changes in its App Store practices due to European regulations and a growing focus on artificial intelligence (AI).
Wedbush Securities analyst Dan Ives highlighted the ruling’s positive impact on investor sentiment, noting that the uncertainty around a potential breakup of Google’s search partnership had been a source of concern for Apple shareholders. Following the ruling, Apple’s shares rose by more than 3%, while Google’s stock climbed nearly 9%.
Google remains the dominant player in the search market, accounting for approximately 90% of global usage, leaving competitors like Bing with less than 4%. If Apple were to lose its association with Google, it would have faced a significant challenge in selecting an alternative search engine or developing its own—an endeavor Apple’s Eddy Cue indicated was economically risky and unlikely given the rapidly evolving tech landscape.
A critical aspect of the ongoing Department of Justice case is the question of Google’s popularity: Is it primarily due to its performance, or is it simply a function of being the default option on various devices? Apple has suggested the latter, asserting that there are no viable alternatives to Google at present.
While Google maintains a leading position, it is also contending with shifts in consumer behavior influenced by AI technologies. Reports indicate that the volume of search queries on Apple devices contracted for the first time in April, despite Google’s claims of overall query growth including those from Apple platforms. This decline could be attributed not solely to users migrating to AI applications but potentially a shift in how they are using existing services.
In light of these developments, both companies are faced with the imperative to evolve. Google is already expanding its AI initiatives, having broadened access to its AI Mode in the Google app for U.S. users. Concurrently, Apple appears to be exploring options to adapt, with internal discussions around acquiring AI search startup Perplexity.
Ultimately, the ruling allows Apple to strategize its next steps in the evolving search landscape without immediate pressure, providing the company with the autonomy to innovate and adapt as it contemplates the future role of search engines amid the rise of AI technologies.
