Google (GOOG, GOOGL) is reportedly losing ground in the search industry to AI upstarts. But the company isn’t taking the threat to its most important business lying down.
During a hearing as part of Google’s ongoing antitrust battle over its search dominance, Apple (AAPL) senior vice president of services Eddy Cue testified that the iPhone maker saw a drop in web searches via Safari for the first time last month, according to Bloomberg.
Google pays Apple roughly $20 billion a year to set Google Search as the default search engine in its Safari browser. So a drop in Safari searches could mean a drop in Google Search traffic. Though Google says its search traffic continues to grow, even on Apple devices.
Cue attributed the decline to more users opting for generative AI-based services like OpenAI’s (OPAI.PVT) ChatGPT search and Perplexity (PEAI.PVT), adding that Apple will likely add the platforms to its search options in Safari in the future.
All of this comes as Google continues to battle the Justice Department’s (DOJ) efforts to convince a federal judge in its antitrust case to force the company to sell off its Chrome browser, among other elements of its search business.
Of course, part of the DOJ’s plans include forcing Google to kill exclusivity deals like the one that helps fill Apple’s coffers. And by testifying that Apple saw a drop in Safari searches, the company could be hoping to preserve its $20 billion deal. After all, if Google is in decline, why should the court bother taking an axe to Apple’s lucrative agreement?
“Broadly speaking, we believe Apple is hoping to avoid losing the [revenue] share agreement with [Google] that reportedly provides roughly $20 [billion] annually (DOJ remedies could mandate termination of the agreement),” TD Cowen analyst John Blackledge wrote in an investor note.
“Within this backdrop, it’s logical that [Apple] might want to discuss alternatives to Google Search in order to demonstrate to the court that Google’s existing Search business faces real threats amid the emergence of Gen AI-based chatbot search platforms,” he added.
Google’s battle plans
Google has been on the defensive since OpenAI debuted ChatGPT in late 2022. The search giant, which was caught off guard by the app’s popularity and quickly debuted its generative AI Bard chatbot with mixed results. Since then, it renamed Bard as Gemini and released a host of high-powered generative AI models for the platform.
Google also revealed its AI Overview, a box that appears above the company’s standard search results, complete with generative AI-powered responses to users’ queries. But that also had issues at first, telling people to do things like add glue to pizza to keep the cheese from sliding off or to eat rocks.
Google has since had far fewer high-profile errors with AI Overviews, though it’s still not perfect. And, according to the company, users are taking advantage of the service. During Alphabet’s latest earnings call, CEO Sundar Pichai said more than 1.5 billion customers use AI Overviews per month.
The company is also testing its AI Mode feature in Google Search. Available alongside Google’s Image, Shopping, and Short Videos search options, AI Mode is designed specifically to combat ChatGPT search and Perplexity, as well as Microsoft’s Copilot Search, eschewing the company’s traditional 10 blue links in favor of a chatbot-style interface.
Apple’s statements don’t necessarily mean Google is losing ground to competitors either, Morgan Stanley’s Brian Nowak explained in an analyst note.
“Google app usage continues to grow on iOS, suggesting the challenges may be more of an indication of a shift away from the browser as opposed to Google Search itself,” Nowak wrote.
In other words, Google Search is still performing well and growing on Apple’s devices, just not in the Safari browser. Instead, users could be accessing the search platform via the company’s Google app.
Does that mean Google Search is dead in the water? No. But it does make for a convenient way for Apple to present the service as in decline and, therefore, not worth breaking up or, you know, ending any $2 billion deals.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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