Google’s loss in an antitrust lawsuit could also have ripple effects on Apple.
Google suffered a significant setback yesterday in a district court in Columbia, overseen by Judge Amit Mehta, in an antitrust case that severely impacted its search and advertising business.
This ruling has the potential to profoundly affect Google’s core business operations. Also, there is speculation that Apple might end its revenue-sharing agreement with Google, which currently allows Google to serve as the default search engine across various devices.
The Information Services Agreement, established in 2002, has evolved over the years to accommodate technical advancements, including the introduction of devices like the iPhone.
This agreement stipulates that Apple uses Google as the default search engine in Safari, Spotlight Search, and Siri.
In return, Google pays Apple 36% of the search revenue generated from Google services on Apple devices.
Apple has not disclosed the exact earnings from this deal, but court documents estimate that service revenue for 2022 was around $20 billion. This figure is double the amount Google paid in 2020.
Apple reported service revenue of $78.1 billion in 2022. If the estimated $20 billion figure is accurate, this would mean that the deal accounted for approximately 25% of Apple’s service revenue for the year.
Apple’s services division is one of its fastest-growing segments and is a crucial buffer against declining iPhone sales.
Apple recorded revenue of $394.3 billion in 2022, with its contract with Google contributing 5% to its annual revenue.
Losing search volume could reduce Google’s revenue from $32 billion to $28 billion. Considering Google’s $182.5 billion revenue in 2020 represents a 15% to 17% decline in the company’s earnings.
Google is expected to appeal to the Justice Department, but if the ruling stands, both Apple and Google could face significant financial consequences.
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