DOJ: Google Pays Apple Over $10 Billion Each Year for Search Default

The United States v. Google antitrust trial opened today, and it’s already provided the type of revelation I was hoping for. Now we really do know how much Google pays Apple via a revenue share to keep Google Search the default on iPhone.

“This case is about the future of the internet and whether Google’s search engine will ever face meaningful competition,” DOJ lawyer Kenneth Dintzer said during an opening statement. “The evidence will show they demanded default exclusivity to block rivals.”

According to Google’s lawyers, customers use its Search service “because it delivers value to them, not because they have to,” echoing the company line. But the DOJ argues that Google is abusing its monopoly in this market—it owns an 89 percent share with consumers overall, the agency said, and 98 percent on mobile—by paying partners to use Google Search, a move it says “weaponizes” the service, preventing both competition and innovation from elsewhere.

As I noted in In the Footsteps of Giants (Premium), these two things aren’t mutually exclusive: many customers do choose Google Search because it’s currently the best choice, but Google can also abuse its market power to ensure that no competitive rivals ever emerge to challenge it.

Anyway, a DOJ lawyer said today that Google pays Apple at least $10 billion each year to keep its Search service as the default on the iPhone. This confirms previous rumors (which were in the $10 billion to $12 billion range) and helps to make the DOJ’s case: few if any competitors could or would pay that price or more to displace Google on the iPhone.

The DOJ also revealed more details about the relationship between Apple and Google. In 2007, Apple wanted to offer users a screen so they could pick between the Google and Yahoo search engines. But Google responded via email with, “No default placement, no revenue share,” in a clear threat to Apple’s bottom line.

“This is a monopolist flexing,” Mr. Dintzer explained, noting that Google’s annual payments to Apple quickly rose from $4 billion per year to the current double-digit levels. Google also pays carriers $1 billion per year for a similar arrangement on Android phones, and it has threatened phone makers like Samsung that tried to create rival search products.