That Google-Apple Duopoly
Why Google pays Apple, and why Apple helps Google
A few days ago the U.S. Justice Department filed its long awaited antitrust case against Google that raised a few eyebrows. My not-a-lawyer opinion is that in and by itself is pretty weak case and goes searching for a problem. It accuses Google of having a monopoly of the Search engine market in the U.S., and not not elsewhere even though in some European countries Google’s quota of search market is nearly 100%.
The case I’m sure has some political undertones that, as a non American, I won’t really pretend to understand or Euro-explain. Many readers will know best about that according to my subscriber stats… so, here’s American Nilay Patel, also a lawyer, explaining in non-legalese what I mean:
The U.S. Government says (in 64 pages) that Google search engine is too big, and that it pays other companies to stay big.
For years, Google has entered into exclusionary agreements, including tying arrangements, and engaged in anticompetitive conduct to lock up distribution channels and block rivals. Google pays billions of dollars each year to distributors — including popular-device manufacturers such as Apple, LG, Motorola, and Samsung; major U.S. wireless carriers such as AT&T, T-Mobile, and Verizon; and browser developers such as Mozilla, Opera, and UCWeb
Google has thus foreclosed competition for internet search. General search engine competitors are denied vital distribution, scale, and product recognition—ensuring they have no real chance to challenge Google. (…)
I really don’t think Google is abusing the market of search engines, I think switching search engines is easy, convenient and everybody can do it in a matter of seconds. Chrome even allows for several search engines working at the same time.
Google has really shady issues in the Android-Chrome-AdWords trifecta that I really don’t understand why the American Justice Department is going after this.
I thought this was apple.substack.com, why are we talking about Google?
One minute, please. Here’s another American, Ben Thompson, explaining what I find most interesting about the case:
From one perspective, the fact that Google has to pay so much to Apple is evidence that there is competition in the market. From another perspective, the fact that Apple can extract so much money from Google is evidence that it is Apple that has monopoly-like power over its value chain. A third perspective — surely the one endorsed by the Justice Department — is that the fact that Google values the default position so highly is ipso facto evidence that default position matters.
I suspect the true answer is a mixture of all three, with a dash of collusion
See? This is very smart thinking… but “collusion” is a super weird term. I wouldn’t use it because I don’t think there are actual meetings where C-level executives from both companies meet to discuss an agenda going forward. I think the Pichais and the Cooks are just intelligent enough to know what the other wants and gets. It’s more of an assistance. Google helps Apple, Apple helps Google.
Yeah, Apple could create its own search engine and what not… but in the meantime it gets “8 to 12 billion a year from Google”. A figure that the U.S. Government doesn’t say where it comes from, but probably the Goldman estimate from 2019.
Going back to the case, it really makes no sense:
Google is a far superior search engine by quality measures, as plenty of reports show. When European-based Android phones let the users choose search engine, they still pick Google.
You can easily switch search engines and use several in the same machine, unlike… certain app stores.
Google doesn’t block privacy measures. You can get the Google Search results with as many ad-blockers or privacy-settings as you want.
If Google has to Apple that many billions, is literally proof that the market forces are working. Microsoft could outmatch that. Apple could not take any money from anyone and let the user decide.
Why does Google pay Apple, then?
It forestalls adoption of competing search products that put a stronger focus on privacy (if at the cost of quality in results), so they don’t have a shortcut to challenge Google. They still can go with the Google Search-route of 1999-2004 of having a better product.
Brussels didn’t find that illegal, and I don’t think the U.S. judges will.
Maybe the payments refrain Apple from expanding Siri’s features in the longer term.
Why does Apple take the money, helping Google?
Apple gets money. — If the judges agree with the Government, Google will stop paying Apple (and others) and iPhone users will keep using Google. Thus the only thing that will change is that Apple will get fewer billions in pure profit every year.
Apple and Google aren’t really rivals, like Apple and Samsung or Xiaomi are. Always remember that Google services make Apple products better.
Apple gets one rival instead of more than one. If another company takes the above mentioned “shortcut” they could partner with a true rival and have unintended consequences. The most feared, in my opinion: an Android-based smartphone alternative popular but privacy-centric.
Does that make sense? I think it does. Thank you for reading.
Apple earnings come in a few hours. Let’s keep an eye on the 2021 guidance.