Alphabet Inc., the parent company of Google, made payments totaling $20 billion to Apple Inc. in 2022 for securing Google as the default search engine on Apple’s Safari browser, as revealed by recently unsealed court documents in the Justice Department’s antitrust lawsuit against Google. This payment agreement between the tech giants lies at the core of the significant legal battle, wherein antitrust enforcers accuse Google of unlawfully monopolizing the online search market and its related advertising sector.
The case, which has garnered considerable attention, is nearing its conclusion, with both the Justice Department and Google set to present closing arguments on Thursday and Friday, anticipating a verdict later this year. Google and Apple had previously aimed to keep the payment details confidential. During the trial held last year, Apple executives refrained from disclosing the specific amount, simply stating that Google paid “billions.” However, a Google witness inadvertently revealed that Google shares 36% of its search ad revenue with Apple.
The recent court filings, submitted late Tuesday prior to the closing arguments, mark the first public acknowledgment of the payment figures by Apple’s senior vice president of services, Eddy Cue. Notably, neither company discloses such financial details in their securities filings. Additionally, these documents underscore the significance of Google’s payments to Apple’s financial performance. For instance, in 2020, Google’s payments accounted for 17.5% of Apple’s operating income.
The agreement between Apple and Google holds immense importance, as it determines the default search engine on the most widely used smartphone in the United States. Initially, Apple agreed to incorporate Google as the default search engine in Safari in 2002 without financial compensation. However, over time, the companies opted to share revenue generated from search advertising. By May 2021, this arrangement translated into Google making monthly payments exceeding $1 billion to Apple for its default status, as outlined in the court documents.
Microsoft Corporation, the operator of the competing search engine Bing, made multiple attempts to sway Apple away from its alliance with Google. According to the disclosed court documents, Microsoft proposed sharing 90% of its advertising revenue with Apple to establish Bing as the default search engine on Safari. These figures had not been disclosed previously. During the trial proceedings last year, Microsoft CEO Satya Nadella testified that the company was prepared to offer various concessions, including concealing the Bing brand, to persuade Apple to make the switch, which he described as “game-changing.” Nadella remarked, “Whomever they choose, they king-make,” underscoring the pivotal role Apple plays in shaping the dynamics of the tech industry.