One of the most interesting relationships in the tech industry is that between Apple and Google. The two companies represent the dominant mobile platforms, iOS and Android, and as such are fierce rivals. At least that's what you would think. Steve Jobs, after all, famously told his biographer, Walter Isaacson, that he wanted to "destroy Android because it's a stolen product."
They also have very different philosophies when it comes to user data, with Apple preaching that it believes "privacy is a fundamental human right." Google, by nature of the fact that it is the world's largest advertising platform, is also one of its largest collectors of user data.
As a result, there's always been something that didn't quite make sense. Apple makes a lot of money from Google in exchange for making the search giant the default option on the iPhone. For a couple of rivals, that's quite the partnership.
In fact, it has been estimated in the past that Google pays Apple more than $10 billion a year for the privilege. It makes sense that Google would want to fiercely protect its position on the world's most important mobile browser, Safari. The company also knows what every tech company does, that almost no one ever changes the default option for anything.
I suppose you could argue that most iPhone users are going to use Google anyway, so I guess it makes sense for Apple to get a kickback. Considering that it's literally free money for Apple -- there is zero opportunity cost for making Google the default search engine -- it makes sense from a business perspective.
Now, however, a research note says that payment is expected to increase to $15 billion in 2021. It also expects the amount to rise in 2022 to as much as $18 billion. While Apple doesn't break out its various sources of services revenue, most analysts believe the Google deal is the most profitable piece of the company's services pie.
In the 10 years that Tim Cook has been CEO of Apple, he has made it the most valuable, and most profitable, company, ever. The company's shift to services has played an outsized role in that growth, especially over the past few years, as iPhone growth had slowed. During that same time, services revenue has exploded.
In fact, the company reported an all-time high for services revenue last quarter. Having Google chip in $5 billion or so extra this year probably doesn't hurt.
Except, it does hurt. While it certainly helps the bottom line, it definitely hurts Apple's credibility. You see, in addition to making ridiculous amounts of money building products like the iPhone, the Mac, and AirPods; distributing apps in the App Store; and selling subscription services, Tim Cook's Apple has repeatedly preached its undying commitment to user privacy. The fact that Apple is profiting off of Google search ads seems to be in direct contradiction with that commitment.
That's a problem for Apple, which has gone out of its way to distinguish itself from its competitors in this area. The company doesn't collect user data for the purpose of showing "personalized ads" within its products. It doesn't track what you do across third-party apps and websites.
It has even taken a public stance against efforts to weaken privacy, even when that means refusing to cooperate with the FBI over access to devices belonging to mass shooters. That has strengthened the perception that Apple stands for privacy, and its actions have mostly backed that up. As a result, the company has largely evaded the scrutiny over data protection that have hit other big tech firms like Google and Facebook.
It's actually the reason the company faces so much pushback over its plan to detect child sexual abuse material in iCloud Photos using an on-device hash-matching technology. For a company that hangs up billboards that say "What happens on your iPhone stays on your iPhone," the idea that the company is "scanning" your photos and reporting on what it finds defies that promise.
At least in that case Apple can argue that it's doing the best it can to balance privacy while trying to accomplish a noble goal -- reducing the spread of truly terrible content. With the Google deal, there's no such argument. There's no noble goal. There's only the fact that Apple is funneling users directly to Google, which is then able to monetize their searches in exchange for free money.
As a company, the things you're willing to say "no" to often say a lot about what you really believe. If you believe that something is bad for your users, you should say no. If something goes against your values -- especially the ones you've used to build your brand -- you should say no.
I think we can all agree that $15 billion is a lot of money. Apple is absolutely in the business of making money, and it's very, very good at it. I'm just not sure anyone thought the company was willing to put a price tag on privacy.