DOJ’s antitrust action against Google could cause Apple to lose billions a year

A DOJ antitrust action against Google could cause Apple to lose billions of dollars a year in service revenue. The Department of Justice (DOJ) is challenging the legality of Google paying the Cupertino company a huge sum to remain the default search engine on iPhones.

While Apple is under antitrust investigation on several different fronts, this particular case targets Google…

Annual payment from Google to Apple

Open any web browser on an iPhone and type a search query into the built-in address/search bar and Google will get that traffic. You can change this behavior if you wish and choose another search engine instead, but hardly anyone does – or in the case of normals – doesn’t even know you. box do it.

This indicates that iPhone and iPad owners are a hugely lucrative source of revenue for Google. Not only because they bring in a lot of traffic, but because Apple Kit owners are a particularly valuable demographic. Ads placed in front of iPhone users can attract a bounty.

To maintain its position, Google pays Apple an annual amount that is considered a percentage of advertising revenue generated by Apple users.

Neither company discloses the percentage or the amount, but simply hides it in the service revenue category. However, a lawsuit found it to be $1 billion in 2014.

Since then, the sum is said to have risen dramatically, with educated estimates at $3 billion in 2017, tripling to $9 billion in 2018, rising to $15 billion last year and estimated at $18-20 billion this year.

Taking the past four quarters as an example, Apple’s total reported service revenue was just over $77 billion. If $15 billion came from Google, that’s 19%. Even by Apple standards, that’s a huge amount of money.

DOJ antitrust action against Google

All that money is now at risk. Bloomberg reports that the DOJ is accusing Google of anticompetitive behavior by making the “large” payment to Apple to maintain its dominant position in the search industry.

Google pays billions of dollars each year to Apple, Samsung and other telecom giants to illegally maintain its No. 1 search engine, the US Justice Department told a federal judge on Thursday.

DOJ attorney Kenneth Dintzer did not disclose how much Google spends to be the default search engine on most browsers and all US cell phones, but described the payments as “enormous numbers.”

“Google is investing billions in defects, knowing that people won’t change them,” Dintzer told Judge Amit Mehta at a hearing in Washington that marked the first major showdown in the case and drew senior DOJ Antitrust and Nebraska Attorney General officials in the audience. . “They buy exclusivity by default because mistakes mean a lot. »

Google’s contracts form the basis of the DOJ’s landmark antitrust case, which alleges the company tried to maintain its online search monopoly in violation of antitrust laws. State prosecutors are pursuing a parallel antitrust case against the search giant.

The hearing was the first step in a long and tedious process. The trial itself is not expected until next year, and if Google loses, it will no doubt appeal. There also appears to be no risk of loss of past revenue as it is Google rather than Apple that is accused of wrongdoing. But the big paychecks might not last too long.

Photo: Jingming Pan/Unsplash

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