Apple’s plans to integrate artificial intelligence (AI)-powered search options into its Safari browser could pose a substantial threat to Google. Google’s highly profitable advertising business heavily relies on iPhone users utilizing its search engine.
The news triggered a sharp decline in the shares of Google’s parent company, Alphabet, which closed down by 7.3%, resulting in a roughly $150 billion reduction in its market capitalization.
A source familiar with the matter informed Reuters that the iPhone maker was “actively looking at” overhauling Safari, citing testimony from Apple executive Eddy Cue during an antitrust lawsuit on Wednesday concerning Google’s dominance in online search.
According to the source, Cue stated that Safari searches experienced their first decline last month as users increasingly shifted towards AI. Apple’s stock also saw a downturn, closing 1.1% lower.
Google, in a statement posted on its company blog, maintained that it continued to observe growth in the overall volume of search queries, including “total queries coming from Apple’s devices and platforms.”
“People are seeing that Google Search is more useful for more of their queries — and they’re accessing it for new things and in new ways,” the company wrote.
Google attributed the growth in total search volume to voice and visual search features. It remained unclear whether Cue employed the same basis for comparison in his testimony when analyzing different types of searches.
Nevertheless, the Apple executive’s remarks suggest that a significant transformation in search is likely underway, jeopardizing Google’s dominant search business – a primary advertising destination for marketers that has now become a target for United States antitrust regulators, who have filed two major lawsuits against the company.
Google holds the position of the default search engine on Apple’s browser, a highly coveted arrangement for which it pays the iPhone manufacturer approximately $20 billion annually, or about 36% of its search advertising revenue generated through the Safari browser, as estimated by analysts.
Banning Google from paying companies to be the default search engine is among the remedies proposed by the US Justice Department to dismantle its dominance in online search.
“The loss of exclusivity at Apple should have very severe consequences for Google even if there are no further measures,” commented DA Davidson analyst Gil Luria.
“Many advertisers have all of their search advertising with Google because it is practically a monopoly with almost 90% share. If there were other viable alternatives for search, many advertisers could move much of their ad budgets away from Google,” Luria added.
Google is not without its defenses.
Despite being labeled as a laggard in the AI race by critics following the buzz surrounding ChatGPT’s launch in late 2022, Google has invested heavily in its AI initiatives and leveraged its extensive data resources.
The company introduced an “AI mode” on its search page earlier this year, aiming to retain its millions of users from migrating to other AI models.
It recently expanded AI Overviews — summaries that appear above the traditional hyperlinks to relevant webpages in response to a search query — for users in over 100 countries and integrated advertisements into the feature, thereby boosting Search ad sales.
CEO Sundar Pichai mentioned in his testimony at an antitrust trial last month that Google hopes to reach an agreement with Apple by the middle of this year to incorporate its Gemini AI technology into new phones.
Bloomberg reported that Apple’s Cue also stated on Wednesday that the company would include AI search providers, such as OpenAI and Perplexity AI, as search options in the future.
“(Apple’s plan) also shows how far generative search sites, such as ChatGPT and Perplexity have come,” noted Yory Wurmser, principal analyst for advertising, media and technology at eMarketer.
Wurmser pointed out that Google’s willingness to pay tens of billions of dollars to remain the default search engine underscores the critical importance of these agreements.
For instance, ChatGPT reported over 1 billion weekly web searches for its search feature in April. As of February, it had more than 400 million weekly active users.
