With over a billion active iOS devices, Apple currently defaults searches to Google… but would it be willing to build a worthwhile competitor? Plus, with Apple’s developer conference this coming Monday, I run through the rumour mill of what to expect. Let’s go!
When you open Safari on your iPhone and type in a search query in your browser, you’re brought to a Google page with your results. This isn’t an accident; it’s a result of one of the most lucrative deals in technology and one of the most powerful examples of defaulting…
For the right to own iOS searches, it is reported Google pays Apple an estimated $8 billion to $15 billion in annual payments. This is up from $1 billion a year in 2014 and could account for 14-20% of Apple’s total revenue. It is estimated that nearly half of Google’s search traffic comes from Apple devices and internally, Google describes the scenario of losing the Apple deal as “code red”.
While this deal has been great for both parties, there are a few reasons why I think Apple might eventually close the door and create its own search engine. First, the deal is currently under scrutiny in a landmark antitrust complaint by the US’s Justice Department. This is one of many antitrust charges Apple is facing - if it could take the easy win of getting out of government crosshairs, and sticking it to a long-term tech rival, I think it would.
Next is Apple’s pivot to privacy as a product feature. In its most recent software releases, Apple has given users the power to opt out of app tracking, mask email activity, and prevent cookies from tracking them on Safari. To me, the next evolutionary step is developing a privacy focused search engine. The model for this already exists. Neeva is an ad-free search engine that operates on a subscription model and now has half a million monthly active users. Personally, with rising subscription fatigue and the 25+ year precedent of “free” searches, I think the more likely angle is a search engine with keyword advertising only. Similar to DuckDuckGo, I think Apple would opt for a search engine that doesn’t build user profiles or display personalized ads based on previous browsing sessions; only ads that are contextualized to whatever the search query is.
And finally, for Apple to continue to experience the type of growth and shareholder returns in the next decade that it has in the past 10 years, there are very few product categories/industries that would help it get there; think banking, healthcare, education, cars. Search is much more up its sleeve than the above (but I can still dream of an Apple Car!). Search is the most potent advertising channel since it is positioned at the bottom of the funnel for trillions in consumer purchases, so let’s do some quick math…
In 2020, Google’s ad business brought in $147 billion
Let’s generalize and say that the 50% of Google Search traffic that comes from Apple devices is potentially worth $73 billion annually
Modestly, I’ll assume Apple can convert 20% of its users to Apple Search users, equating to $14.7 billion
At the same time, Apple would not be able to generate as much ad revenue as Google due to its personalized ads and two decade head start. I’ll assume a 30% cut, bringing Apple’s first year Search revenues to $10.3 billion
So while Apple would be forgoing $15 billion in annual payments from Google in the near-term, I could easily see an Apple Search division bringing in $50 billion in annual revenue by 2030
So the final question is, whether Apple could build a product that rivals the competency of Google Search. While there are other search engines out there, Google handles 92% of the world’s searches; if you tell me you use Bing, I’ll call you a liar... As an observer, I think Apple has the pieces to build a competitor and achieve critical mass. First, is the power of defaulting. Services like Apple Music and Apple News now have 100+ million monthly users because they come pre-installed; Apple Search could achieve similar usage stats as most consumers just don’t feel the need to dig through their settings to change a default.
Next is Apple’s engineering and search chops. Apple already has a search engine called Spotlight on all its devices to help you find files, contacts, convos, apps, and more (swipe down from your iPhone’s home screen or click ⌘-space on your Mac). In a little known, but I think illustrative, change to iOS 14, Apple began to show its own web search results and link directly to websites rather than a Google query for Spotlight searches. Apple also already has a modest ad business with App Store searches and within Apple News. And finally, in 2018, Apple poached Google’s head of search, John Giannandrea. At the time the hire was seen as an effort to boost Apple’s AI capabilities and help with Siri, but eight years of running the world’s most popular search engine has me dreaming of the possibilities…
WWDC Rumour Roundup:
Apple’s WWDC kicks off with the company’s keynote at 1 PM EST on June 6. Here’s what to expect:
iOS:
Last year, was a bit of a snooze with the highlight feature being Focuses; a new way for your iPhone to display notifications based on whether you're working, driving, etc.
This year is rumoured to bring more substantial changes, with upgrades planned for Apple’s apps - special emphasis will apparently be put on turning iMessage into a more social app, akin to WhatsApp.
The tentpole feature will likely be a revamp to notifications and the lock screen, with the ability to add widgets for digestible glances without having to unlock your phone. I think this likely foreshadows an always-on screen for the iPhone 14 in the fall.
iPadOS:
Will this finally be the year that iPad can truly replace your Mac? iPad’s hardware has been over-powered compared to its software counterpart for years. If rumours are true, Apple is planning to revamp multi-tasking when you have a keyboard attached, allowing for multiple apps and windowing like you’d expect on a Mac.
WatchOS:
WatchOS is the hardest/easiest upgrade to predict. Like the past few years, expect improved health and activity tracking, additional types of workouts, and some more watch faces. Apart from that, not really sure what to expect?
MacOS:
It’s going to be called macOS Mammoth (at least based on trademark filings and Apple’s California landmark naming trends)… other than that, you can probably expect improvements to Apple’s default apps. Another rumour is an overhaul to the System Preferences app to make it better resemble the iOS settings (very exciting lol!).
Hardware:
WWDC is a software event, but has had its fair share of hardware introductions in the past. If there is hardware, expect it to be on the Mac front. The rumour mill is rampant with a potential colourful refresh to the MacBook Air or a new Mac mini; both with new M2 chips.
I’d also expect Apple to at least tease its high-end Mac Pro with Apple silicon, as it is the only device left in the Mac lineup that hasn’t made the switch from Intel to Apple silicon.
One More Thing?
The worst kept secret in Silicon Valley is that Apple is working on a mixed-reality headset. If you asked me a month ago, I’d have said there was an 80% chance Apple teases it at WWDC and Apple reportedly showed it to its board of directors; a sign than an announcement could be imminent…
New rumours peg the launch/announcement slipping to 2023, so I don’t think it will be shown, but I think Apple could reveal the operating system for the headset at WWDC; RealityOS has appeared in trademark applications recently! For this next era of computing to be successful, Apple will need developer support to build an ecosystem of apps that make these devices worthwhile…
At the very least, there will be lots of AR and VR talk as it is clearly a focus for the company, even if the hardware is not yet ready for the limelight…
That’s a wrap folks! Hope you all had a great weekend. Stay tuned for a WWDC recap in the next edition!