{"id":22,"date":"2024-08-25T08:06:15","date_gmt":"2024-08-25T08:06:15","guid":{"rendered":"https:\/\/www.appliedmojo.com.au\/blog\/?p=22"},"modified":"2024-08-25T08:25:07","modified_gmt":"2024-08-25T08:25:07","slug":"why-google-pays-apple-to-be-its-default-search-engine","status":"publish","type":"post","link":"https:\/\/www.appliedmojo.com.au\/blog\/analysis\/why-google-pays-apple-to-be-its-default-search-engine\/","title":{"rendered":"Why Google pays Apple to be its default search engine"},"content":{"rendered":"\n
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Google is facing perhaps its biggest challenge since its inception. A US Judge has ruled that Google acted like a monopolist, to retain its position as the dominant search engine. The antitrust judge has called out Google for its practice of paying Apple and other platforms, billions of dollars to retain Google as their default search engine. The effect of this decision can range from hefty fines to even the company being broken up.<\/p>\n\n\n\n

The monopolist tag is one that is often a paradoxical result of a company being too good at what it does. When the company\u2019s product is so good that users overwhelmingly pick it over the alternatives, the competitors slowly cede away market share to the leading company and eventually disappear into oblivion or pivot into smaller niche markets. This was very much the case with Google for a long time, as it zoomed past its competitors that had the first mover advantage in the search space. The search space doesn\u2019t even have the network effects enjoyed by the leading social networking sites, that plays a crucial role in creating monopolies out of incumbents. Without the benefit of network effects, Google continues to dominate, purely due to the quality of its results.<\/p>\n\n\n\n

And yet, there is merit in understanding whether Google is indulging in monopolistic practices by paying Apple $21 billion, to be its default search engine. If Google was so sure about it being the best search engine available for users, is there even a need to try to pay to be kept its default search?<\/p>\n\n\n\n

The following analysis tells us that it does makes sense for Google to do this, even if it thinks that it has the best search product in the market. And this has to do with how Apple operates as a company \u2013 its much-discussed practice of keeping its ecosystem at the center of all its products, regardless of short-term quality compromises. Without Google offering an insanely good payout for retaining Google as its default search, Apple would absolutely come up with its own search engine. And Apple would have its own search engine set to being its default, even if its search quality is nowhere close to what Google search offers. And Google knows that it is not in a position to risk losing Apple customers, even if their search product\u2019s quality today is head and shoulders above the rest. According to this article<\/a>, more than half of Google\u2019s search business comes from users on Apple devices.<\/p>\n\n\n\n

A great example of the power of Apple\u2019s ecosystem lock-in is how Apple prefers to keep its own Maps product as default over Google Maps. Google Maps has historically been considered as the best and most popular maps application out there, but Apple decided to build its own maps application and ship it to its users in spite of its flaws relative to Google Maps. Most people would remember the severe user backlash and mocking that Apple Maps received back in 2012 during its launch, because of its quality issues. Apple even had to come out with a rare apology to its users.<\/p>\n\n\n\n

But Apple Maps persisted with its maps applications, absorbing all the harsh negative feedback and using it to make its product better. And today, Apple maps is killing it, metaphorically. It is the leading maps applications on iOS devices, according to Horace Dediu, who is a world-renowned Apple analyst.<\/p>\n\n\n\n

Six years ago Apple Maps was serving 5 Billion requests per week. (3x Google Maps on iOS.) I expect that to be double now and about 90% of iOS users using it or 900 million. Maps is also used on iPadOS and MacOS and WatchOS so I\u2019d say 1 billion users total easily.<\/p>— Horace Dediu (@asymco) June 1, 2021<\/a><\/blockquote>