Google's $20 Billion Deal with Apple Reveals in Antitrust Trial

Alphabet Inc., the parent company of Google, paid Apple Inc. a staggering $20 billion in 2022 for Google to remain the default search engine in Apple's Safari browser, newly unsealed court documents revealed in the Justice Department's antitrust lawsuit against Google. 

According to Bloomberg on Thursday, the deal between these tech giants lies at the core of the landmark case, where antitrust enforcers allege that Google has unlawfully monopolized the market for online search and related advertising. 

The Justice Department and Google are set to present closing arguments in the case over Thursday and Friday, with a decision anticipated later this year. 

Both Google and Apple had endeavoured to keep the payment amount undisclosed.

During the trial last fall, Apple executives testified that Google paid "billions" without specifying the exact number. However, a Google witness later inadvertently revealed that Google pays Apple 36% of the revenue it earns from search ads. 

Court documents, filed late Tuesday before the closing arguments, provide the first public confirmation of these figures by Apple's senior vice president of services, Eddy Cue. 

Such financial details aren't typically disclosed by either company in their securities filings. Moreover, these documents underscore the significance of the payments to Apple's financial performance. For instance, in 2020, Google's payments to Apple constituted a notable 17.5% of the iPhone maker's operating income. 

The agreement between Google and Apple stands out as one of Google's most critical default deals, as it dictates the search engine for the most widely used smartphone in the US. 

Initially, Apple had agreed to use Google in the Safari browser in 2002 for free. However, the companies later decided to share revenue generated from search advertising. By May 2021, this arrangement translated to Google paying Apple over $1 billion each month for its default status, as prosecutors highlighted in the filing. 

Meanwhile, Microsoft Corp., the operator of the competing search engine Bing, made repeated attempts to sway Apple away from its alliance with Google.

According to court documents, the company proposed sharing 90% of its advertising revenue with Apple to make Bing the default search engine in Safari. These figures had not been previously disclosed. 

During the trial last year, Microsoft CEO Satya Nadella testified that the company was willing to make several concessions, including concealing the Bing brand, to convince Apple to switch, which he described as "game-changing." 

"Whomever they choose, they king-make," Nadella remarked regarding Apple's influential decision-making power.