The Future of Search 🔍
Google & Apple, The (Not So) Secret Pact 🤝
There are over 1 Billion active iPhones in the world, and they all have one thing in common… Google is their default Search Engine.
Google pays Apple $12 Billion/year for this perk. Here’s why:
Search Engines are a global monopoly (Google owns 92.5% of Market Share).
Mobile Operating Systems are a global duopoly (73% Google vs. 26% Apple).
Mobile is important - by 2025, 72% of all internet users will solely use mobile.
The only risk to Google’s dominance of search is Apple.
If Apple opens up their devices to other search engines, Google could quickly lose grip of some key markets (60% of mobiles in the US run on iOS)… and so for a small fee of $12 Billion/year Google can defend their monopoly.
Google’s Search Empire 🔍
Search is the Jewel in Google’s Crown, its magnitude is staggering:
Ads Based Business Model = Collecting Attention
In the words of Sridhar Ramaswamy who helped build up Google’s Ad Business… "What we have learned over the past 10 years is that if a product is free, then you are the product. The $150 billion made in search advertising, paid by advertisers, that’s actually coming from you and me."
An unfortunate trade-off of being reliant on ads revenue is that you must optimize for maximum attention (i.e. time on site / repeat usage). Unless it leads to a sale which they’ve supported with Ads, it’s not ideal to send traffic to other sites.
For Instance, Jeremy Stoppelman (Founder of Yelp) claims that Google pulled content off of Yelp and then redirected potential Yelp Customers to restaurant reviews on Google, starving his company of site traffic.
One can argue Google is doing this to create a better user experience… but ultimately ads keeps the lights on at Google, so paid search results have to be prioritized (which explains why only 23% of Organic Results lead to site visits).
Apple Search 🍎
In Q1’21, Apple reminded everyone that after its core product (iPhone), its next biggest business unit are Services - with “more than 660 million paid subscriptions”. I predict that the next service they’ll offer will be a Search Engine:
How an Apple Search Engine could be different:
Ad Free Model = No User Data needed
Less pressure to prioritize Paid results = different search results
Makes the whole Apple eco-system even better. Imagine if it could search seamlessly across the Internet, Apple TV+, Apple Music, Apple News, etc.
Apple might not have a choice.
New Anti-Trust Legislations could prevent Apple from selling iPhones with its own apps installed. Apple could use a search engine as a defensive play, to nudge iPhone users to re-download their Apps and subscribe to services.
Why it makes sense?
Privacy is becoming a core product feature at Apple. They’ve plastered it on billboards and Tim Cook has been vocal that "technology does not need vast troves of personal data stitched together… in order to succeed.”
Despite increased risk of Anti-Trust scrutiny, a search engine is somewhat defensible: it erodes Google’s monopoly and gives consumers more choice.
Pricing: Paid or Free?
Paid: Assuming Apple charged each of its 660 million subscribers a $1.50/month for its Search Engine, it could easily offset the $12B/Year that Google pays. An easier way to position this would be to bundle search with other services (Apple One gives you 6 Services for $30/month).
Free: A better strategy is to give away the Search Engine for free to every Apple Device (iPads, iPhones, Macs). To oversimplify, let’s assume the average Apple device has a Gross Margin of 38% and costs $1,000 (this is a low-ball as the avg. iPhone costs $873 and laptops range from $1K-$2.8K). Apple would need to sell 31.6M devices to offset the $12B/Year from Google. Yes, it’s a tall task - Apple sold 285M Devices in 2020 and this means they would need to sell ~11% more devices… but perhaps the incremental brand value of doubling down on Privacy is worth sacrificing a short term revenue bump from Google.
It may be here sooner than we think…
Remember Sridhar? The Google veteran I quoted earlier… well he’s working on an “Anti-Google” Search Engine called Neeva. It offers a “customer-first and ad-free experience” for $4.95/month.
When Tim Cook testified before the Antitrust Committee in 2020, he made it clear that Apple doesn’t buy competitors — it buys companies which have products or technologies that Apple can turn into features. Neeva is the perfect start-up to acquire and morph into an Apple Search Engine.
Founder Approved ✅
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