$26 Billion: That’s How Valuable Being The Default Is to Google
But what does this number tell us really?
Google’s antitrust trial has recently revealed just how much the tech giant is willing to pay for its search engine to be the default on tech devices: $26.3 billion — at least, that’s the number they paid in 2021. Google had previously made great efforts to hide this number, but experts always knew it was a lot.
Now they know for certain:
To be clear, Google isn’t paying out this money to be the only search engine you can use on these devices, just the default browser on apps like Safari. But since most people don’t bother changing the defaults (even if all it takes is a few taps in the settings menu), for Google, this is a vital means of retaining its user base and ensuring advertising revenue doesn’t flow elsewhere.
It’s easy to look at this information and point all fingers at Google here as the big bad monopolizer, and quite possibly they are. But as J. Bradford DeLong points out in his brilliant analysis of the subject, Apple, who got $18 billion of that $26 billion, might be the real deviants, or at least equally to blame, here:
“rather than making Google the default for free, Apple is extorting it with the threat of selling that status to a higher bidder. It is arguably leveraging its single-buyer power to restrain trade and distort competition.”
In either case, these deals have left Microsoft watching from the sidelines, with Mikhail Parakhin, Microsoft’s head of advertising and web services, testifying that Apple has shown no interest in making the switch to Bing, despite Microsoft attempting to court them, saying that:
“If we were able to convince Apple to use Bing instead of Google as default, it would be transformational for us.”
Whatever way you look at it, it all comes back to the economics of the attention economy. Apple owns much of the attention of its iPhone users, so it is hardly unexpected that they should sell that to the highest bidder. That’s been the reality for some time. The only difference now is we can put a monetary value to that attention.
$26.3 billion is quite a challenging number to put your head around, though. Is the ad revenue really worth that much? Thankfully, David Pierce of the Verge did the math so we don’t have to:
“To put that $26.3 billion in context: Alphabet, Google’s parent company, announced in its recent earnings report that Google Search ad business brought in about $44 billion over the last three months and about $165 billion in the last year. Its entire ad business — which also includes YouTube ads — made a bit under $90 billion in profit. This is all back-of-the-napkin math, but essentially, Google is giving up about 16 percent of its search revenue and about 29 percent of its profit to those distribution deals.”
It’s worth noting that some of that money also goes to Mozilla for making Google the default on Firefox. Google also has similar agreements in place with Samsung and many other carriers, platforms, and device manufacturers.
In response, some commentators have argued that these companies should move to a “choice model,” where users are prompted about what default search they want to use when they first set up their devices or browsers. Sounds great for those of us who know where we’d rather be (Duckduckgo and Ecosia are both fine choices for different reasons), but potentially a headache for the less tech-savvy. And who does and doesn’t get to be on the final shortlist?
All that aside, the crucial question that remains, is whether these agreements are there to prevent competition or whether Google is fighting to stay relevant. Google, who is now moving into the defense portion of the trial, is obviously going to argue the latter, suggesting it faces serious competition from TikTok, ChatGPT, Yelp, and Amazon in a “hot market.” Time will tell if that argument holds up.
