Google search antitrust ruling could hurt iPhone maker Apple

A federal judge found Alphabet's (GOOG, GOOGL) Google search and advertising business to be in violation of antitrust laws. Presiding over the case levied by the Department of Justice, US District Judge Amit P. Mehta wrote "Google is a monopolist, and it has acted as one to maintain its monopoly."

Many experts are speculating whether this ruling over Google's search dominance could impact another tech giant: Apple (AAPL).

Yahoo Finance tech editor Dan Howley explains why this antitrust case could hurt the iPhone maker who has a revenue-sharing agreement with Google to make its search engine the default on its smartphones.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Luke Carberry Mogan.

Video transcript

All right.

Well, another big story, of course, we are watching this morning, Google facing a huge loss after a judge ruling its search and a businesses violated antitrust law alphabet stock down a little over 1% this morning.

The big question, could this actually have a major impact on another tech giant Yahoo Finance?

Is Dan, how he is here on set with us with the details.

So Dan, obviously the big question here, Apple, yes, yes.

So uh part of the uh this whole case going, going to to trial and, and some of the details that came out was the internet services agreement between Google and Apple.

And essentially what that means is that Apple is able to or required to use Google as its uh default search engine in safari in Siri uh in spotlight search.

Uh And so whenever you do a search through uh any of those services, you're going to be using Google's platform.

Now, what does that mean for Google?

Well, it means that it gets a ton of traffic driven its way.

Uh According to these court documents, uh Google did internal modeling in 2020 found that without Apple.

Uh It would lose uh without that deal with Apple, it would lose 60% to se uh 80% of search volume on Apple's I OS devices.

So if you removed Google as a default, it's losing all of that traffic and a lot of people just pull up their phone and do spotlight search or pull up their phone uh and search in safari.

Uh And so that's where it's getting that uh that would equate to uh let's see here.

Uh 28 to $32 billion for Google's bottom line, that's 15 to 17% of the company's total revenue in 2020.

That, that, that search volume is driving now on the Apple side of things.

Uh Yes, it's getting a good product but it also gets $20 billion a year for uh using that as the default.

Now, what does that go into?

Well, likely it goes into its services business.

Uh They don't really say where it goes.

Uh Apple is just like, oh, we got third party agreements.

That's a third party agreement.

So it's probably in its services business.

In 2022 Apple saw 78.1 billion uh in services revenue that 20 billion that equates to about 25% of services revenue for the year.

Uh It's not obviously uh a massive chunk for for Apple overall.

Uh it's 5% of the annual revenue but still uh uh a size piece uh of, of the overall pie for, for apple generally.

And so, you know, if all of this goes forward, if they manage to, uh, or don't manage to uh win any appeal, uh If these agreements are kind of null and void, we'll have to see where this goes.

Apple risks losing a ton of money.

Google risks losing a ton of money.

I think the, the big question is, do you wanna use bing?

Do you wanna use Yahoo?

No offense.

Uh Do you wanna use duck, duck go or do you wanna stick with Google?

And I think for a lot of people, they'll probably stick with, with Google at this point.

And so, you know, all of this is kind of uh an interesting discussion because uh according to the, the judge, they are in violation of antitrust laws, I, I use different products all the time and I still go back to Google.

So it's, you know, it's, it's difficult because are, are they so good because of, of this or are they just good?

And so people are gonna still stick with them.

It's interesting, interesting.

And I also think trying to figure out how big of an overhang this is ultimately going to be in the stock or when you put it in context.

Yes, it does equate to obviously, billions and millions of dollars potentially of lost business or exactly what that's going to mean.

But it's almost, it seems like a drop in the bucket then just given the massive size obviously and influence that Google and both Apple have on the market.

Yeah, I mean for, for Apple, yeah, I mean, it's, you know, I think the important thing to point out is that services is its fastest growing business, right?

That services is seen as kind of the the the backstop uh that helps Apple when it comes to uh flagging iphone sales.

It for years, that's been the narrative, right?

Was they're building out services uh as a bulwark against falling uh iphone sales.

That's why they got Apple TV plus Apple Music plus all these different services and oh yeah, $20 billion from Google a year, right?

So, uh I, I think that's a uh uh a potential uh issue for them just because it kind of hurts that narrative to a lot large degree that 25% of overall services revenue uh for uh 2022.

It's a huge, a huge issue for, for Google losing all that search volume is going to be a problem from I OS and it seems like it's too late now, potentially for Apple to say, oh, well, we'll just invest in our own search engine.

It seems like maybe the boat is passed on.

Apparently they uh according to these court documents, they had gone into looking at that and it would just be too much money for them to do.

Yeah.