It’s time to Apple to get out of its dependence on easy money and opt for a higher score: develop its own search engine.
For years, the smartphone maker has benefited financially from a lucrative deal in which Google paid Apple billions of dollars to be the default search engine option on iOS devices. However, the arrangement is not likely to survive in a world of growing antitrust scrutiny. This is why Apple must proactively anticipate any risk and come up with its own offer. The move would help appease regulators, but would also be smart for its core business.
The numbers for the Google search offer are getting too glaring. Last week, Bernstein raised his eyebrows when he updated his latest projections on the deal. The firm has estimated that Apple will receive $ 15 billion from Google this year, rising to $ 20 billion next year.
In fact, payout payments were a centerpiece of last October’s US Department of Justice antitrust lawsuit against Google, for good reason. This makes it nearly impossible for a small start-up to gain a foothold in the market where Google has a monopoly-like grip. According to StatCounter, the Internet giant owns 92% of the global search engine industry. And with payments only skyrocketing, I don’t see how this blatantly anti-competitive practice can hold up in court.
But the end of the partnership can be a blessing. Research is one of the few big tech markets that can make a difference for a multi-billion dollar company like Apple. Bernstein claims that Google generates more than $ 50 billion in revenue from iOS customers. So why not cut out the middleman and get a bigger slice of the pie? With an active iPhone user base of over one billion and a strong balance sheet, Apple may be the only company that has the size and the resources to be a viable rival to Google.
The market could definitely use more players. Although Amazon.com has made progress in monetizing product search results, its efforts remain primarily focused on online shopping ads. The general research industry has not seen much competition or innovation over the past decade.
Here’s another bright spot: Apple would become more intellectually honest about its credentials for privacy. CEO Tim Cook has repeatedly criticized digital advertisers for their lack of transparency about their operating practices – including tracking activity behavior and acquiring vast treasures of user personal data – while touting the virtues of how his company prioritizes confidentiality. It’s hypocritical when Apple takes money from Google, which is known for some of the same things that Cook criticized. By creating a search engine with better privacy protections, Apple can truly live up to its principles.
More importantly, investing heavily in research capabilities can make Apple’s core products more attractive. Unlike its automotive initiative, the engineering required is similar to Apple’s work on mobile software and cloud services. Because this is an adjacent field, any expertise gained can enhance its technological capabilities elsewhere – from artificial intelligence to speech recognition – making owning an iPhone or iPad a better experience.
Of course, it won’t be easy to beat Google. But with the double benefit of potentially adding tens of billions in revenue and the prospect of improving the grip of its core products, Apple should definitely give it a try. – (c) 2021 Bloomberg LP