Apple and Google in the shadow of antitrust: "love and kill each other" or "separate things"?

 "If our two companies merge directly, we can call it'AppleGoo'." Schmidt, who was also a member of Apple's board of directors at the time, joked, with the help of Google search on the iPhone, "We do not need to merge and it is better to merge. ."

According to reports, in 2017, Apple CEO Tim Cook and Google CEO Sundar Pichai were photographed having dinner at a high-end Vietnamese restaurant called Tamarine. The media immediately speculated about the relationship between the two Silicon Valley giants, just like inquiring into celebrity scandals.

When the two were drinking red wine at a table by the window of the restaurant in Palo Alto, their company was in intense negotiations to renew the most profitable business deal in history: it was with this paper agreement that, Google was able to become the default search engine for Apple’s iPhone and other devices. The updated transaction is of great value to both companies, while also consolidating their dominance in the technology industry.

But now, this cooperation is at stake. Last Tuesday, the U.S. Department of Justice launched a landmark lawsuit against Google. This is the largest antitrust case in the U.S. government in 20 years. It may end the seemingly unlikely cooperation between the company and its rival Apple. Relationship-This is also the most profitable business agreement ever.

The agreement dates back 15 years. Although the two parties rarely discuss the matter publicly, it highlights the special relationship between the two Silicon Valley giants. Prosecutors believe that these two seemingly incompatible rivals passed. Such a seemingly unlikely transaction cut off the development path of many small and medium enterprises.

The prosecutor also specifically mentioned the partnership between Google and Apple, believing that this is a typical case of the company using illegal means to protect its monopoly position and curb competition in the online search industry.

But Google has said that the company's dominant position in the search market stems from the excellent quality of its products. They also deny that there are acts that hinder competition. The company has also said that competition remains healthy in Google's main revenue-generating businesses such as advertising and mobile.

Apple has served as general counsel in 2009 and 2017 Bruce Vince Sewell (Bruce Sewell), said: "Silicon Valley has a strange terms: competing (co-opetition) means that although the two sides fierce competition, but also The necessary cooperation is required."

The marriage between Apple and Google is unbelievable because Apple executives have repeatedly attacked Google. Cook has criticized the Internet advertising business for "monitoring" consumers, and this business is Google's main source of income. When the late Apple co-founder Steve Jobs discovered that Google intended to challenge the iPhone, he also declared that he would launch a "thermonuclear war" against it.

Apple and Google’s parent company Alphabet have a combined market value of more than $3 trillion, and they compete fiercely in many areas such as smartphones, digital maps and laptops. But they also know how to turn enemies into friends when it is in their own interests. In fact, deals that are more profitable than the iPhone search engine agreement are rare.

According to the U.S. Department of Justice, nearly half of Google’s search volume now comes from Apple devices, and the company internally will lose Apple’s transaction as a “serious impact” event. When iPhone users search for information on Google, they will see search ads that promote the development of Google’s business , and they can also find channels to other Google products (such as YouTube).

A former Google executive who requested anonymity said the loss of Apple’s traffic made Google “fear”.

The US Department of Justice hopes that the court will issue an injunction prohibiting Google from conducting similar transactions. They believe that this transaction used unfair means to help Google become the core service of people's online life-the company currently handles 92% of global Internet search requests.

Whether it is online companies such as Yelp and Expedia, or noodle shops and news organizations, various companies often complain that Google has an unparalleled search advantage. Even when people just search for the name of a certain company, it can charge advertising fees grandiosely , Or simply guide users to use their own products such as Google Maps. Microsoft was also caught in an unprecedented scale of antitrust lawsuits 20 years ago, but now it has told British regulators as a victim that if the company's Bing can become the default search option for iPhone and iPad, then You can earn more advertising revenue with each search.

In addition, although small search engines like DuckDuckGo take privacy protection as their main selling point and hope to snatch some of Google's users, they are far from being comparable to Google in Apple's ecosystem.

Apple currently makes $8 billion to $12 billion in annual profits from this transaction, up from $1 billion in 2014. In exchange, they will use Google as the default search engine for their products. This may be Google’s largest single expenditure, accounting for 14% to 21% of Apple’s annual profits, so Apple is obviously unwilling to give up such a huge sum of money easily.

In fact, Cook and Pichai met again in 2018 to discuss how to increase search revenue. According to the U.S. Department of Justice lawsuit, a senior Apple employee wrote to Google after the meeting: "We have the same vision and are close to each other."

If the end of this 15-year-old deal is forced to break up, Apple will obviously lose its huge amount of income. But the threat facing Google is even more serious because it lacks reliable means to make up for lost traffic. Apple may therefore acquire or build its own search engine.

A former Google executive said that the company believes that Apple is one of the few companies in the world that can provide a powerful alternative search solution. Google is also worried that if the agreement cannot be renewed, Apple may set up more obstacles when iPhone users use Google search.

An Apple spokesperson declined to comment on the cooperation. A Google spokesperson provided a blog post that the company defended the partnership.

Although the "travel fee" paid by Google to Apple continues to rise, the company has repeatedly claimed that its dominance in the Internet search field is due to user preference, not because of this "user buying" behavior. Google believes that the Department of Justice’s statement is partial. They said that the partnership between Google and Apple is no different from Coca-Cola’s payment of prominent shelf fees to supermarkets.

Google said that other search engines such as Microsoft Bing have also reached a revenue-sharing agreement with Apple to become an auxiliary search option on the iPhone. It added that Apple allows users to change the default search engine from Google to other services-but few people do, because people are usually reluctant to adjust this setting, and there are indeed many people who prefer Google.

Apple rarely (or even never) publicly acknowledged a deal with Google. Bernstein Research, a market research company, said that Apple mentioned so-called licensing revenue for the first time this year in its earnings call.

A former Apple executive who requested anonymity because of the non-disclosure agreement said that Apple’s leaders considered Google the same as the general public: Google’s search engine does have practical value, so it’s worth tolerating some of its bad behavior.

"Their search engine is the best." Cook said at the end of 2018 when asked why he worked with a company he criticized. He also added that Apple has created methods to weaken Google's data collection behavior, such as providing a private browsing mode on the Internet browser.

The transaction is not limited to searches in Apple's Safari browser, but covers almost all search behaviors on Apple devices, including the use of Apple's virtual assistant Siri and searches on Google's iPhone application and Chrome browser.

The relationship between the two companies has gone from friendship to competition, and then to today's "cooperation". At the beginning of Google's founding, the company's co-founders Larry Page and Sergey Brin regarded Jobs as a mentor, and they would walk with them to discuss the future of technology.

In 2005, Apple and Google signed an agreement that seemed inconspicuous at the time: Google would become the default search engine for Apple's Safari browser on Mac computers.

Another former Apple executive who asked not to be named said that not long after, Cook, who was still Jobs’ deputy at the time, saw the prospect of a generous return from the agreement. Since Apple only needs to provide users with the search engine that they want, the payment made by Google is cost-free to Apple.

Apple has expanded the scope of the transaction to include the upcoming heavyweight product iPhone. When Jobs launched the iPhone in 2007, he also invited Eric Schmidt, then Google’s CEO, to take the stage.

"If our two companies merge directly, we can call it AppleGoo." Schmidt joked that he was also a member of Apple's board of directors. He added that with the help of Google search on the iPhone, “we are better than merging without merging.”

After that, the relationship between the two parties began to deteriorate. Google has been quietly developing a competitor to the iPhone, which is an operating system that any mobile phone manufacturer can use, which is later Android. Jobs was furious. Apple sued a mobile phone manufacturer that used the Android system in 2010. Jobs also once told biographer Walter Isaacson (Walter Isaacson): "If necessary, I will use my last breath to destroy Android..."

A year later, Apple launched Siri. But instead of using Google's technology at the bottom, it switched to the embrace of Microsoft Bing.

However, the partnership between the two companies on the iPhone is still going on. After all, the return on this transaction is too generous, and it is difficult for either party to give up. A former Apple executive said that Apple requires regular renegotiation of the deal, and Google will pay more each time.

"You have to maintain this relationship and you can't break the relationship." said Seville, the former general counsel of Apple, but he refused to discuss the details of the transaction. "At the same time, when you are negotiating on behalf of the company and trying to reach the best deal, then It’s time to get real."

Around 2017, when the deal was waiting to be renewed, Google faced competitor blockade, and its mobile ad click growth did not meet expectations. Apple is not very satisfied with Bing's performance on Siri. At that time, Cook just announced that Apple plans to double its service revenue by 2020 to $50 billion. This is an ambitious goal, which can only be achieved through Google's "buy road expenses".

By the fall of 2017, Apple announced that Google will provide support for Siri to answer user questions. Google revealed that the cost of search traffic it paid has increased significantly. In the face of external questions, Google gave an intriguing explanation for why it suddenly paid billions of dollars to an unnamed company: "Because the cooperation agreement has changed."


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