Google might lose its $26 billion search deals in antitrust trial
Now, any day, a federal judge is expected to make a turning point decision that can increase some of the most profitable agreements in Silicon Valley: Google’s default Search contracts.
It is more than 26 billion dollars per year, 20 billion dollars Apple. This alphabet’s operating income is almost quarter.
For decades, the Apple-Google Pact has helped to determine who controlled the Internet, so it is exactly now in the plus signs.
US regional judge Ammit Mehta decided that Google had monopolized in search and advertisements last year. Since the last stage of the hearing in May, it has been weighing remedies and a separate case in Google’s advertising business will begin under a different judge next month.
Google is at risk of losing some search traffic and predictability, while analysts say Apple can take a larger financial hit. The effect will think whether Apple has made new agreements and how wide the decision has been implemented.
Jeferveries analysts say the judge may block special contracts, but still allow some payments. Nevertheless, Apple’s pre -tax profit may drop up to 7%.
Some economists and Wall Street analysts believe that Google can stand out in the long run – it is now saved from costly agreements that do not increase demand.
Looking for competition
Barclar Analysts said that on August 5, Google’s payments and contracts loosening, smaller peers will still be “almost impossible”.
Megacap rival Microsoft He spilled $ 100 billion in Bing and could not catch Google’s Chrome.
Apple Services Senior Vice President Eddy Cue said that no price that Microsoft could be offered during the Antitröst attempt would be enough to justify crossing to Bing, because Google offered a stronger results and a better money -making engine.
“I do not believe that Microsoft is a price in the world. They offered to give Bing for free. They could give us the whole company,” He said.
Apple executives claim that it is easy for users to change their search engines. Currently, Apple allows Americans to switch to Yahoo, Bing, Duckbuckgo or Ecosia as the default search engine, but very few.
“I think it’s the best search engines,” Apple CEO Tim Cook said about Google in 2018. He said.
Economist Londes Smith, who modeled how people decide which search engine to use, described the phenomenon as a natural monopoly in which the scale quality and quality strengthen the scale.
“I don’t understand this agreement with Apple, because if they didn’t pay $ 20 billion to Apple, do they really think that people will really use another search engine? I don’t see that, Smith said to CNBC.
Smith compared Google to an assistant program: it makes sense to break it very little economic.
“How do we get our water, electricity and all of this? We have an arranged monopoly. We don’t go and don’t break it up.” “We understand that there is an effective result for society, and we do not want the water company to exploit us.”
From a pure economic perspective, some of the Wall Street would claim that payments resembled unnecessary insurance and Google’s domination was adequate enough without them.
Data show that users prefer Google even if they are an option.
In Europe, where regulators forced users to choose their own default after a European Commission decision against Google, the company’s market share barely changed. Statcounter The data showing this is still around 90%.
Dan Niles, the founder of Niles Investment Management, proved to CNBC that European Google could develop without these payments, he said that the US market moves faster and more than the lost.
“To me Google to me, to be honest, after this is done… Next year, if it continues on this road, there may be one of the best performances there.” He said.
Even the proposed solution points in this direction are due to the fact that the larger risk is due to the pushing of Doj for search data sharing, while the blanket allows shorterly assumed contracts and more than one provider instead of exclusivity.
Decision
Former FTC President William Kovacic, CNBC’ye, the Ministry of Justice essentially the limitation of Google’s exclusivity agreements will open the door to the emergence of new competitors, he said.
“Partly, this is a belief act, dedi he said, showing that innovation usually follows unexpectedly after the abolition of past cases.
Rebecca Allensworth, a scientist of Antitröst and Big Tech, said that payments are not something that freezes people to use Google and “innovation insurance”, but that competitors should not have a chance to compete.
“Google was really hard to make these payments,” VanderBilt’s law professor Allensworth said. He said. “Industry innovation in a way. Or at least if there is innovation, it will be for Google’s benefit.”
Kovacic warned that a chrome calls – one of the more extreme drugs – can be more symbolic than being effective and calls a “flashy, bright object” that does not do much to solve the problem.
“Great disintegration has always been an antitröst spell,” he said. “However, you may wonder if this is uncomfortable with solutions that have more interest in solving the competition problem you have determined today.”
Doj was worried that Google could repeat his game book with him. The artificial intelligence platform Gemini also pushes restrictions on private AI distribution agreements and even proposes data sharing powers.
They force Google to provide competitors to access anonymous data about which users are looking for and which results they click.
However, Allensworth stressed that it is not a zero -total game.
“You can have a very strong antitröst medication … And then two, five, ten years later, this company is actually going extremely well,” he said. “These are not existential threats for the company.”
AI Opportunity
Since 2003 – before you existed – iPhone or Chrome – Google’s default search agreements with Apple helped shape the Internet. Alphabet CEO in 2017 Sundar Pichai And Cook is seen in Tamarine, a luxurious Vietnam restaurant in Palo Alto, while sipping red wine, teams completed one of the most profitable arrangements in technology: Google to keep the apple devices default.
Eight years later, the same two CEOs still in the rudder – but the dynamics changed. A new search period emerges, not from contracts, but by productive artificial intelligence.
Wall Street analysts thought that Google had removed Apple’s Apple’s $ 20 billion check and leaving this money to AI and Cloud and lifted profits while keeping its sovereignty intact.
“Then let’s assume that Google is limited to payment for search distribution agreements, and others can use Google’s search technology, then Google can give priority to other features that may be out of the scope of these situations?” In April, he studied Bernstein analysts. “Gemini.”
Niles, Gemini and the company is seen as a delay in AI, the most powerful product on the market, he said.
Pichai said he talked about adding twins to Cook during the hearing about adding twins to apple devices, but the integration has not yet happened.
In June 2024, Apple announced Openai’s integration of Chatgpt into WWDC. Apple’s Cue, astonishment and other AI services such as anthropic can be added to Safari as an option, he said.
However, it cannot touch Google’s scale.
The astonishment reported that Google has performed 15 million queries a day compared to 10 billion.
And Pichai said that Google did not stand in April by expressing that AI would “deeply transform the search”. This transformation is currently the real test that Google’s dominance or finally opens the door of competitors.
WRISTWATCH: Alphabet is talking about $ 10 billion Meta Cloud Fean, Apple Gemini.
