Google and Alphabet Inc. CEO Sundar Pichai arrives at the federal courthouse in Washington, Monday, Oct. 30, 2023.
Jose Luis Magana | AP
Google pays Apple more than a third of its search advertising revenue from Safari under the terms of the two companies’ search default agreement, an Alphabet witness said in open court Monday amid a protracted antitrust battle between Google and the Department of Justice.
The 36% figure, which was not previously known to the public, is one of the clearest indications of how lucrative Google’s search deal has been for both Apple and the search engine company. Both companies have fought to limit revealing the deals’ details, citing potentially anticompetitive effects.
The incidental disclosure from Alphabet’s expert witness Kevin Murphy, a professor of economics at the University of Chicago, was not expected. Murphy’s testimony came as part of the company’s efforts to fight the Justice Department’s claims that the company illegally maintains dominance over search and advertising markets.
Williams & Connolly antitrust partner John Schmidtlein visibly cringed when Murphy revealed the number, Bloomberg News reported.
The search default agreement is a major focus of the proceedings. Judge Amit Mehta has described the Apple-Google deal as the “heart” of the case. It’s a number Wall Street pays attention to as well. Bernstein analyst Toni Sacconaghi has estimated in a note to clients that Apple would see $19 billion in 2023 revenue as a result of the search engine default deal with Google.
Neither Apple nor Google immediately responded to a request for comment.
Alphabet CEO Sundar Pichai defended such deals when he testified in the proceedings. But Google’s competitors have described the arrangement as damaging to their business. Microsoft CEO Satya Nadella, for example, pushed back in detail when he testified in October.
Nadella said that “every year” he had held the top job at Microsoft, he had “dialogues” with Apple over a default search engine deal for Microsoft’s Bing, even if that meant billions in short-term losses. Nothing had yet come of those talks, Nadella said.
Nadella said that the idea of an “open web” was a misnomer. “Everybody talks about the open web, but there really is the Google web,” he said on the stand.