"If I were MS, I would give Apple 100% of the profits and put a search engine on the iPhone"

Critique by Former Google Ads Team Member Sridhar Ramaswamy

"If I were them (Microsoft·MS), I would give 100% of the revenue share to Apple to gain traffic."

American computer scientist Sridhar Ramaswamy recently said this on a podcast. Amid predictions that the generative artificial intelligence (AI) craze, which started with ChatGPT, could completely transform the search engine market, he explained that for the 'absolute powerhouse' Google’s position to be shaken, MS must join hands with Apple and become the default search engine on the iPhone.

Former Google employee and founder of the search engine Niva, Sridhar Ramaswamy (Photo by Sridhar Ramaswamy's SNS)

According to the US economic media Business Insider on the 23rd (local time), Ramaswamy said on the podcast on the 16th that MS partnering with Apple would be a kind of foothold. Having worked at Google for nearly 16 years from 2003 to 2018 and serving as the head of Google’s former advertising team, he created Niva in 2019, a search engine that uses AI to provide answers without ads.

Ramaswamy believed that a contract giving Apple 100% of the revenue share would not bring any money to MS but could shake Google’s dominance in the search engine market. He added that Google had previously given more than 100% of revenue to the world’s largest online service AOL and nearly 100% to Yahoo, saying, "That’s exactly how the market is formed."

AOL was the most popular website with the highest traffic on the internet in the 1990s, and Yahoo held that position from 2000 to 2006. Google, founded in 1998, rapidly grew and began dominating the search engine market from the mid-2000s. MS once partnered with Yahoo and AOL in 2011 to counter Google’s rapidly growing advertising market but failed to curb Google’s growth. Currently, Google holds a large share of the online advertising market.

Google dominates not only its own operating system Android and Chrome but also the default search engine on Apple devices such as the iPhone, thereby controlling the global search market.

According to market research firm StatCounter, Google’s share of the mobile search engine market is 96.71% (as of February), higher than the overall 93.37% including desktops and tablets. Controlling the very gateway through which users access search engines has greatly helped maintain its dominance.

However, news has emerged that the contract between Google and Apple is set to expire at the end of this year. US investment bank Bernstein stated in a memo to investors last month that the three-year contract between the two companies is estimated to end this year, and it is unclear whether Apple will renew with Google or contract with a new company through bidding.

Google pays Apple nearly $20 billion (about 25.6 trillion KRW) annually to be the default search engine on the iPhone. According to The Wall Street Journal (WSJ) and Forbes, this amount was estimated to be $8 billion to $12 billion in 2020, rising to $15 billion in 2021, and $18 billion to $22 billion in 2022.

Google has dominated the search market on the iPhone without major competitors, but this year the situation may change. MS is threatening Google by launching Bing, a new search engine equipped with AI like ChatGPT. MS expects that increasing its market share in the search engine market by 1 percentage point will increase advertising revenue by $2 billion.