ISLAMABAD, AUGUST 7: Analysts projected that Apple’s lucrative agreement with Google would be jeopardized if the agreement is revoked, as the Alphabet-owned search engine was found to be operating an illegal monopoly, according to Reuters. Wall Street analysts suggested on Tuesday that Google may be able to avoid antitrust lawsuits by ending the contract that sets its search engine as the default on Apple devices.
Morgan Stanley analysts estimate that Google pays Apple $20 billion a year for the privilege, or around 36% of its revenue from search advertising made through the Safari browser.
According to expert estimates, the iPhone maker’s profit might decline by 4-6% if the acquisition is canceled.
According to media reports in May that referenced a document submitted by the Department of Justice in the antitrust action, the agreement extends until at least September 2026 and Apple has the option to unilaterally extend it for a further two years.
“The most likely outcome now is the judge rules Google must no longer pay for default placement or that companies like Apple must proactively prompt users to select their search engine rather than setting a default and allowing consumers to make changes in settings if they wish,” analysts at Evercore ISI stated.
Tuesday’s trading for Apple’s shares was flat, missing the market’s recovery following Monday’s worldwide selloff. Alphabet barely moved following its 4.5% decline in the previous session.
Herbert Hovenkamp, a law professor at the University of Pennsylvania, stated that the lesson from this is that if you have a product that commands a dominant market position, you should avoid using exclusive agreements and make sure any arrangement you establish offers the buyer free choice to substitute away.
Undoubtedly, the “remedy” stage might take a while, and there might be appeals to the US Supreme Court, the US Court of Appeals, and the District of Columbia Circuit. The legal squabbling may continue until 2026.
AI tilt
Even said, Apple will still have a few options if the partnership is canceled, including providing Microsoft Bing as an alternative or perhaps launching a brand-new OpenAI-powered search engine.
Analysts concur that Apple’s transition to AI-powered search offerings will accelerate as a result of the verdict. It just declared that it would integrate OpenAI’s ChatGPT chatbot into its products.
Moving away from exclusive agreements that would shield Apple from regulatory scrutiny, the business has announced that it is in talks with Google to integrate the Gemini chatbot and that it intends to integrate further AI models.
With the use of AI technology, Apple is also updating Siri, granting it greater autonomy to perform activities like sending and receiving texts and writing emails that have previously proven challenging.
Even though it’s not anticipated that those attempts will yield much revenue in the near future, they might aid in utilizing the new technology.
“Apple could see this as a temporary setback, especially since it earns a lot from the Google search deal, but it is also an opportunity for them to pivot to AI solutions for search,” Gadjo Sevilla, an analyst with Emarketer, said.
