Google might lose its $26 billion search deals. Analysts say that could fuel its AI growth
Any day now, a federal judge is expected to issue a landmark ruling that could upend some of the most lucrative deals in Silicon Valley: Google’s default search contracts.
At stake is more than $26 billion a year, $20 billion of which goes to Apple. That’s nearly a quarter of Alphabet’s operating income.
For decades, the Apple-Google pact has helped determine who controls the internet, which is exactly why it’s now in the crosshairs.
U.S. District Judge Amit Mehta ruled last year that Google held a monopoly in search and ads. He’s been weighing remedies since the final phase of the trial wrapped in May, with a separate case on Google’s ad business set to begin next month under a different judge.
While Google risks losing some search traffic and predictability, analysts say Apple could take a bigger financial hit. The impact will hinge on whether Apple lines up new deals and how broadly the ruling applies.
Jefferies analysts say the judge may block exclusive contracts but still allow some payments. Even so, Apple’s pre-tax profits could drop by as much as 7%.
Some economists and Wall Street analysts believe Google might come out ahead in the long run — freed from costly deals that no longer drive demand.
Searching for competition
Barclays analysts said in an August 5 note that if Google were to unwind the payments and contracts, it would still be “nearly impossible” for smaller peers to compete.
Megacap rival Microsoft has poured $100 billion into Bing and hasn’t been able to catch Google’s Chrome.
Apple Senior Vice President of Services Eddy Cue testified during the antitrust trial that no price Microsoft could offer would be enough to justify switching to Bing, because Google delivered stronger results and a better monetization engine.
“I don’t believe there’s a price in the world that Microsoft could offer us. They offered to give us Bing for free. They could give us the whole company,” Cue said.
Apple executives contend that it’s easy for users to switch search engines. Currently, Apple allows Americans to switch to Yahoo, Bing, DuckDuckGo, or Ecosia as their default search engine, but few do.
“I think their search engine is the best,” Apple CEO Tim Cook said about Google in 2018.
Economist Lones Smith, who modeled how people decide which search engine to use, described the phenomenon as a natural monopoly, where scale breeds quality, and quality reinforces scale.
“I don’t understand this deal it has with Apple, because if they didn’t pay Apple $20 billion, do they think that people would really be using another search engine? I don’t see that,” Smith told CNBC.
Smith likened Google to a utility: Breaking it up makes little economic sense.
“How do we get our water, electrical, and all that? We have a regulated monopoly. We don’t go and break it up,” he said. “We understand that there’s an efficient outcome for society, and we just don’t want the water company to be exploiting us.”
From a pure economics perspective, some on Wall Street would argue that the payments look like unnecessary insurance and that Google’s dominance is sticky enough without them.
Data suggests users opt for Google even when there is a choice.
In Europe, where regulators forced users to pick their own default after a European Commission ruling against Google, the company’s market share barely budged, with StatCounter data showing it still hovers around 90%.
Dan Niles, founder of Niles Investment Management, told CNBC that while Europe proves Google can thrive without these payments, the U.S. market moves faster, and what’s next matters more than what’s lost.
“Google to me, quite honestly, once this is done … next year, if they continue down this path, it could be one of the best-performing stocks out there,” Niles said.
Even Google’s proposed remedy points in that direction, allowing shorter default contracts and multiple providers instead of blanket exclusivity, while warning that the bigger risk comes from the DOJ’s push for search data-sharing.
The decision
Former FTC Chair William Kovacic told CNBC that the Justice Department is essentially betting that limiting Google’s exclusivity deals will open the door for new competitors to emerge.
“In part, it’s an act of faith,” he said, though past cases have shown that once barriers are removed, innovation often follows in unexpected ways.
Rebecca Allensworth, a scholar of antitrust and Big Tech, said the payments aren’t necessarily what keep people using Google and likened it to “innovation insurance,” freezing the ecosystem so that rivals don’t have a chance to compete.
“Google fought really, really hard to be able to make those payments,” said Allensworth, a law professor at Vanderbilt. “It makes the industry innovation-proof, in a way. Or at least, if there’s going to be innovation, it’s going to be by and for the benefit of Google.”
Kovacic warned that a Chrome divestiture — one of the more extreme remedies floated — might be more symbolic than effective, calling it “a flashy, shiny object” that wouldn’t do much to solve the issue.
“The big breakup has always been antitrust fascination,” he said. “But you can wonder whether that distracts you from solutions that have more to do with solving the competitive problem that you’ve identified today.”
The DOJ, concerned that Google could repeat its playbook with its artificial intelligence platform Gemini, is also pushing for restrictions on exclusive AI distribution deals — and even proposing data-sharing mandates.
These would force Google to give rivals access to anonymized data about what users search for and which results they click.
But Allensworth emphasized that it’s not a zero-sum game.
“You can have a very strong antitrust remedy … and then two, five, ten years later, that company is actually doing extremely well,” she said. “These are not existential threats to the company.”
AI opportunity
Since 2003 — before the iPhone or Chrome existed — Google’s default search deals with Apple have helped shape the internet. In 2017, Alphabet CEO Sundar Pichai and Cook were spotted sipping red wine at Tamarine, an upscale Vietnamese restaurant in Palo Alto, while their teams finalized one of the most lucrative arrangements in tech: keeping Google the default on Apple devices.
Eight years later, the same two CEOs are still at the helm — but the dynamics have changed. A new era of search is emerging, driven not by contracts, but by generative AI.
Wall Street analysts have considered the upside if Google stopped writing Apple a $20 billion check and redirected that money into AI and cloud, lifting profits while keeping its dominance intact.
“Let’s then assume that Google is limited from paying for search distribution deals, and others can leverage Google’s search tech stack, then what other properties can Google prioritize that may fall outside the scope of these cases?” mused Bernstein analysts in April. “Gemini.”
Niles said that with Gemini the company has a chance to shift from being seen as lagging in AI to potentially offering the strongest product on the market, a change already showing up in benchmark tests.
Pichai said during the trial that he spoke to Cook about adding Gemini to Apple devices but that integration hasn’t yet materialized.
In June 2024, Apple announced the integration of OpenAI’s ChatGPT at WWDC. Apple’s Cue testified that other AI services like Perplexity and Anthropic could also be added to Safari as options.
But neither can touch Google’s scale.
Perplexity reportedly handles 15 million queries per day, compared to Google’s 10 billion.
And Pichai said Google isn’t standing still, testifying in April that AI will “deeply transform” search. Whether that transformation cements Google’s dominance or finally opens the door to rivals is the real test now.
WATCH: Alphabet hits intraday record high on $10B Meta cloud deal, Apple Gemini talks
Following a lawsuit brought against the California Air Resources Board (CARB) by major heavy truck manufacturers over California’s emissions requirements, CARB has struck back with fresh lawsuit of its own alleging that the manufacturers violated the terms of the 2023 Clean Truck Partnership agreement to sell cleaner vehicles.
Daimler Truck North America, International Motors, Paccar and Volvo Group North America sued the California Air Resources Board in federal court this past August, seeking to invalidate the Clean Truck Partnership emissions reduction deal they signed with the state in 2023 to move away from traditional trucks and toward zero-emission vehicles (ZEVs). The main point of the lawsuit was that, because the incoming Trump Administration rolled back Environmental Protection Agency (EPA) policies that had previously given individual states the right to set their own environmental and emissions laws, the truck makers shouldn’t have to honor the deals signed with individual states.
“Plaintiffs are caught in the crossfire: California demands that OEMs follow preempted laws; the United States maintains such laws are illegal and orders OEMs to disregard them,” the lawsuit reads. “Accordingly, Plaintiff OEMs file this lawsuit to clarify their legal obligations under federal and state law and to enjoin California from enforcing standards preempted by federal law.”
After several weeks of waiting for a response, we finally have one: CARB is suing the OEMs right back, claiming that the initial suit proves the signing manufacturers, “(have) unambiguously stated that they do not intend to comply.”
They want to sell Americans more diesel
In its lawsuit, CARB argues that monetary damages alone would not make the people of the State of California whole as far as damages are concerned, citing that the stated goal of the 2023 Clean Truck Partnership was, “to achieve emissions reductions that cannot be measured strictly in financial terms,” according to ACT-News.
The agency is asking the court to compel the truck companies to perform on their 2023 obligations or, failing that, to allow CARB to rescind the contract and recover its costs. A hearing on the truck makers’ request for a preliminary injunction was held Friday, with another court date set for November 21, when CARB will seek to dismiss the case brought forth by the truck brands. The outcome of these cases could shape how state and federal government agencies cooperation on emissions rules in the future.
You can read the full 22-page lawsuit, below, then let us know what you think of CARB’s response (and their chances of succeeding) in the comments.
SOURCES: CARB; via ACT-News, Trucking Dive.
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Starting this month, parking lots in South Korea with more than 80 spaces will be required to install solar canopies and carports. But, unlike similar laws that have been proposed in the US, this new law doesn’t just apply to new construction – existing lots will have to comply as well!
South Korea’s Ministry of Trade, Industry and Energy announced in August that it has prepared an amendment to the Enforcement Decree of the Act on the Promotion of the Development, Use, and Diffusion of New and Renewable Energy to the effect that all publicly- and privately-owned parking lots in the Asian country with room for more than 80 vehicles will be compelled to add solar panels to their lots in a move designed to proactively expand renewable energy and create more solar and construction jobs.
In addition to creating jobs and working to stabilize the local grid with more renewable energy, the proposed solar canopies will offer a number of practical, day-to-day benefits for Korean drivers, as well.
The shaded structures will protect vehicles from heavy rain, snow, and the blistering summer sun — keeping interiors cooler, extending the life of plastics and upholstery, and even helping to preserve battery range in EVs and PHEVs by reducing their AC loads (and, of course, provide charging while the cars are parked).
To their credit, Ministry officials absolutely get it. “Through this mandatory installation,” one unnamed official told Asia Business Daily, “we expect to expand the distribution of eco-friendly renewable energy generation facilities while providing tangible benefits to the public. By utilizing idle land such as parking lots, we can maximize land use efficiency. In addition, installing canopy-type solar panels can provide shade underneath, offering noticeable comfort to people using parking lots during hot weather.”
The new rule was approved in late September, and is expected to go into effect later this month, with new installation projects set to begin immediately.
It could work here
South Korea is proving that an idea like is practical. Here in the US, we’re proving that out, too – the Northwest Fire District in Arizona partnered with Standard Solar to build a conceptually similar, 657 kW solar carport system across 12 parking lots (shown, above) that delivers more than 1.23 million kWh of clean, emissions-free power annually and offsets the equivalent of 185,000 vehicles’ worth of harmful carbon emissions.
That’s just Arizona. In New York, a new initiative to help expand solar into parking lots has more than doubled commercially zoned land where EV charging stations can be sited, “freeing up” an additional 400 million square feet of space throughout the city.
Sun-rich states like Texas, New Mexico, and Florida could also benefit, and even if we’re “just” adding fresh energy sources to municipal parking, dealer lots, and public schools, we could do a lot to reduce the cost of energy generation for the entire community. And, for what it’s worth, that seems to be right in line with the big reasons why people are choosing to add solar to their homes today.
What do you guys think – would something like this work in the US, or are we too far gone down the sophomoric, pseudo-libertarian rabbit hole to ever dig our way out? Let us know your take in the comments.
SOURCE | IMAGES: Asia Business Daily, via LinkedIn; Standard Solar.
If you’re considering going solar, it’s always a good idea to get quotes from a few installers. To make sure you find a trusted, reliable solar installer near you that offers competitive pricing, check out EnergySage, a free service that makes it easy for you to go solar. It has hundreds of pre-vetted solar installers competing for your business, ensuring you get high-quality solutions and save 20-30% compared to going it alone. Plus, it’s free to use, and you won’t get sales calls until you select an installer and share your phone number with them.
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Autonomous taxi company Waymo faced scrutiny last month when a car was caught on video illegally passing a stopped school bus that was letting children off in Atlanta. Now, the National Highway Traffic Safety Administration (NHTSA) is looking into it.
Georgia State Representative Clint Crowe seemed stunned after being presented with video of a Waymo driverless car illegally passing a stopped school bus on Briarcliff Road in Atlanta last month. “I’m a big fan of new technologies and emerging technologies and I think that driverless cars are going to become more prevalent,” he told local NBC news affiliate WBIR. “But we got [sic] to think about how they’re going to comply with the law.”
WBIR | Waymo illegally passes school bus
Crowe co-sponsored Addy’s Law in 2024. The legislation was named after 8-year-old Addy Pierce, who was killed in Henry County after being struck while crossing the street to get to her bus. The law stiffened penalties for illegally passing a stopped school bus, carrying penalties of up to $1,000 in fines and even jail time.
According to Crowe, those rules still apply to autonomous vehicles. “The majority of our traffic laws, the penalty is usually a fine and or driver’s license suspension. These cars don’t have a driver, so they don’t have a driver’s license and so we’re really going to have to rethink who’s the responsible party, who’s going to be responsible for being in control of that vehicle and who’s going to be the operator of that vehicle,” he said.
Crowe believes manufacturers should face stronger consequences when their vehicles break the law, saying the $1,000 fine doesn’t go far enough.
Now, thanks to pressure from social media and politicians like Crowe and Geoirgia State Senator Rick Williams, who helped co-author Addy’s Law, it seems like NHTSA is getting involved.
Prompted by media reports, the US Department of Transportation issued an investigation regarding Waymo’s AV, which states that, “the AV initially stopped, but then drove around the front of the bus by briefly turning right to avoid running into the bus’s right front end, then turning left to pass in front of the bus, and then turning further left and driving down the roadway past the entire left side of the bus. During this maneuver, the Waymo AV passed the bus’s extended crossing control arm near disembarking students (on the bus’s right side) and passed the extended stop arm on the bus’s left side.”
While it remains to be seen how much work NHTSA is actually doing amid the ongoing shutdown of the Federal government, it’s worth noting that, regardless of the outcome, Senator Williams said he plans to introduce new legislation that would hold driverless car companies accountable with higher fines if their vehicles violate traffic laws. If that passes in Georgia, it could set the stage for politicians across the US and even abroad to use similar fins to halt the spread of autonomous taxis in their states.
“Driverless cars should be stopped until it can be figured out,” said Williams. “We should not have this on the road. It’s too dangerous for our children.”
You can read NHTSA summary, below.
We’re typically pretty tech- and autonomous-forward here, but as a parent I would absolutely lose my s*** if a Waymo or Robotaxi or whatever else ran over my kid. but I’ve also seen plenty of human drivers blow past a school bus with a knee on the steering wheel and both eyes glued firmly to their phones. Let us know who you’d be more ready to trust with your kids’ lives in the comments.
SOURCES: WBIR, NHTSA, via School Transportation News.
If you’re considering going solar, it’s always a good idea to get quotes from a few installers. To make sure you find a trusted, reliable solar installer near you that offers competitive pricing, check out EnergySage, a free service that makes it easy for you to go solar. It has hundreds of pre-vetted solar installers competing for your business, ensuring you get high-quality solutions and save 20-30% compared to going it alone. Plus, it’s free to use, and you won’t get sales calls until you select an installer and share your phone number with them.
Your personalized solar quotes are easy to compare online and you’ll get access to unbiased Energy Advisors to help you every step of the way. Get started here.
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