- [Narrator] You've probably asked the question before.
iPhone or Android?
Apple Maps or Google Maps?
Safari or Chrome?
On the surface,
Apple and Google represent the ultimate tech rivalry
but behind the scenes,
executives have maintained
a multi-billion dollar partnership
that benefits them both massively.
- I would describe Apple and Google
as the classic example of frenemies.
On the one hand, they're fierce rivals,
on the other hand, they benefit greatly
from figuring out ways to work together.
- [Narrator] Google pays Apple an estimated 8
to $12 billion a year
or 1/3 of Alphabet's annual profits
to make sure it's the default search engine
on more than a billion Apple devices.
That deal has helped Google dominate the search market.
In recent years, it's accounted for 90 to 95%
of search engine queries in the US.
The deal between the two tech giants
is so powerful that it's at the center
of one of the biggest US government lawsuits
against a public company since the '90s.
So how did two of Silicon Valley's biggest rivals come
to form one of tech's most valuable partnerships?
To understand Apple and Google's frenemy relationship,
you have to go back to the beginning.
- In the early days, they were quite close.
At the time, the CEO of Google was on Apple's board.
It was part of the Silicon Valley club, if you will.
- [Narrator] In 2005, the two companies laid the groundwork
for what would become one of the industry's biggest deals.
Google struck a deal with Apple
to become the default search engine for Safari
on Mac computers.
- As Apple evolved sort of the relationship,
in 2007 when the iPhone came out,
Google was then the default search for the iPhone,
Safari browser and has really just grown
and grown from that point.
- So Steve, I've had the privilege of joining the board
and there's a lot of relationships between the boards
and I thought if we just sort of merged the companies,
we could call them Applegoo.
- As it became clear that Google was going
to be more than just a search engine,
that it wanted to grow
and that Apple was going to be a rival,
that became an issue.
- [Narrator] In 2008, Google directly
challenged Apple's business
with the launch of its Android operating system.
The next year, Google CEO Eric Schmidt resigned
from Apple's board.
Since then, both companies have expanded
into each other's businesses
with Google launching Android phones
and Apple launching services like the App Store
and Siri, which was originally powered
by Microsoft's Bing, not Google.
- Search Wikipedia for Neil Armstrong.
(beeping)
- [Siri] Searching for Neil Armstrong.
- [Narrator] It wasn't until 2017
that Apple switched from Bing to Google
for its search results on Siri
and Spotlight, the Mac search function.
That renewed deal between Apple and Google came
at a good time for both companies.
Google was facing competition
from Facebook's fast-growing mobile ad revenue
and it's new deal with Apple put its search results
and ads on more than a billion Apple devices.
Now up to half of Google searches come
from Apple devices.
- When you open up your iPhone,
and go to Safari and write something
that you wanna search for, boom,
you're going to Google.
And that's a lot of value.
- [Narrator] For Apple, the deal
has benefited its business twofold.
First, it got more consistent search results
across Safari, Siri and Spotlight.
But perhaps more importantly,
the money it gets from Google's ad revenue makes up 15
to 20% of Apple's annual profits.
That's helped fund Apple's ambitions
to grow its services unit,
which has driven growth for the company
over the past few years.
- Apple is like a store.
It's selling its shelf space,
that premo shelf space.
And so when you go into a store
and you see those candy bars right there
at the register, that's the place to be
if you're selling candy bars.
And so for Google, they're in that default spot.
- [Narrator] Now all of that money
and search traffic could be at risk
because of this lawsuit.
In October, the US Department of Justice sued Google
over antitrust concerns.
The government is alleging that Google
is a monopoly gatekeeper for the internet
and it says that harms customers,
advertisers and competing tech companies.
One way the Justice Department says
Google maintains its dominance
is through exclusive business deals,
like through its partnership with Apple.
According to the lawsuit,
some people at Google called the prospect
of losing its default status on Apple devices code red.
Google representatives said they weren't aware
of the code red language used in the lawsuit
and neither Apple or Google have officially disclosed
the exact value of the deal
or commented on the Justice Department's eight
to $12 billion projection.
In a recent interview,
the Journal's personal tech columnist, Joanna Stern,
asked Google's former CEO about the deal.
- There was ultimately a deal
that I did not personally negotiate
but it was a lucrative deal for Apple.
But important to say
that with respect to Google,
and with respect to use of Google search on Apple phones,
it is extremely easy to switch
to another provider.
- [Narrator] Google has denied
the Justice Department's allegations
and said it plans to challenge the lawsuit.
Its chief legal officer said
the lawsuit wouldn't help consumers
and that its relationship with Apple is customary.
Apple hasn't officially commented on the lawsuit.
So what happens if the Justice Department is successful
in its case?
- This could drag out for many years.
This is an interesting situation.
In some ways, if the DoJ is successful,
one of the companies that might be harmed the most here
is Apple given the fact
that they perhaps had 15 or 20% of their profit coming
from this relationship.
- [Narrator] Of course, there are other search engines
out there, like Bing, DuckDuckGo, Baidu and Yandex
but none of them even come close
to Google's dominance.
Some financial analysts say
that if anyone can give Google a run for its money,
it's Apple, and the antitrust lawsuit
might just be the push Apple needs
to divorce itself from Google.
- We don't know exactly where Apple is going
with its future plans here.
Some have speculated
that potentially this would be a good reason
for Apple to develop its own search engine.
Others have said potentially they might buy a search engine
to beef up that capability.
One of the things we know about Apple
over the years is that it likes to own its core competencies
so it could control those worlds.
And so that's always kind of hanging
in the background.
- [Narrator] Apple hasn't responded
to requests for comment on plans
to create or purchase its own search engine.
Still, a breakup of this multi-billion partnership
between Apple and Google
could deal a financial blow to two
of the world's biggest companies.
And however this relationship plays out
in the future has the potential
to shape the way billions of people use the internet.
- [Tim] As we see Congress and regulators debate the power
of tech, this lawsuit is just yet another example
of kind of that public debate
about their role in our future and in our society.
(dramatic music)