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jasode · 2 years ago
For those unaware of history, Google's "ad revenue share" deal with Apple is similar to the early "distribution deal" that ~2002 Google struck with America Online. The basic financial enticement is the same: use our search engine and we'll give you a cut of the ad revenue.

I've not yet seen a legal explanation of why the Apple ad revenue share deal is now "illegal" and yet the AOL deal wasn't. Somewhat similar deals also happen with tv networks where they sign exclusive "distribution deals" with sports leagues and they share the money they get from tv commercials (the ads). "Put your NFL Monday game or college basketball tournament on our tv network and you get some of our ad revenue."

I guess the difference now is that Google is really big. Ok. But is that really the only reason?

halJordan · 2 years ago
It's not illegal to have these deals; it's not illegal to have a monopoly. It's illegal to use your monopoly to prevent others from successfully competing.

And again- no one has made the determination that it is illegal. The DOJ believes it's illegal, but the DOJ doesn't decide what's illegal. We're literally having the trial to figure it out.

So, you're relying on overly simplistic assumptions that are misleading you.

You can easily get the legal arguments, they're on Wikipedia, they're on the doj website, they're on the indictments. The information just needs you to go out and get it.

dmvdoug · 2 years ago
> The information just needs you to go out and get it.

I am definitely going to use that. And since I teach ninth graders, I predict I will be using that on a daily basis. Blessings upon you. (And the curses of ~175 9th graders every year.)

sonicanatidae · 2 years ago
Can anyone, anywhere demonstrate a public corporation that has a monopoly and hasn't abused it to keep competitors out?

Bueller?...Bueller....

burkaman · 2 years ago
I don't know the answer to your question, but the fact that the Google-AOL deal was never challenged doesn't mean it was legal. Plenty of illegal things are never challenged.
SllX · 2 years ago
Generally something is legal until there’s a law saying it isn’t. That’s kind of how it just works in America, and it not just here either.

When that Google-AOl deal Google wasn’t even close to as popular as it is now. It was a simple distribution deal. People are tunneled in on the iPhone because that’s Apple’s juggernaut now but this deal with Apple also goes back to like 2002 when I was still convincing people to switch off Yahoo and MSN to Google. They also made a similar deal with Mozilla which is still basically how Mozilla is still able to operate at all.

I mean 2002 Yahoo probably could have outspent 2002 Google. 2002 Microsoft definitely could have and it’s not like MSN was a juggernaut, but they were complacent. I’ll just say it: Google wanted it more. Search and Advertising was basically all they were at the time, no Gmail, no Google Maps, no YouTube or any of that other stuff we associate with them now, and they went out and took the opportunities they could. They developed a toolbar for IE users, setup distribution deals for the toolbar, put it in the Firefox directory, and sought out new avenues of information to index like when they acquired Deja News and Blogger, and subsequently launched Froogle, Google Blog Search, Google News, Alerts, Images, Patents, GOOG-411, etc. Even acquiring and developing Android was a play that ensured even if their relationships went south and Microsoft came to dominate Mobile in a way that was beginning to look a lot more possible in 2006 (and not so much in 2011) they would never be entirely locked out of Mobile if that ever became a thing (which uh, spoiler alert, it did).

And when did Google really start to look like the juggernaut in the room? Well in Jan 2005 they had 35.1% of the search market to Yahoo’s 31.8% and a year later Google was at 41.4% to Yahoo’s 28.7%.[1] So probably you could say sometime about 2004 around when they IPO’d, maybe, is the soonest you could say they were really a juggernaut. That’s dominance but that sure isn’t anything close to a monopoly, and they were just outcompeting in both quality and distribution and in their search and ad product offerings. Acquiring DoubleClick even after Microsoft bid up the price was also a pretty good hat trick that was like a rocket booster for their ad business, putting Microsoft in a position where they had to spend almost twice as much for aQuantive only to write it down 5 years later.

This is why antitrust law is so scuffed. The DOJ just ends up re-litigating old contracts and continuations of them hoping that in the current political climate they can find an angle for the headshot in front of a friendly judge. They’re going to lose hard while playing up whatever small victories they can get along the way while wasting a lot of money in court and then the administration is going to change again which might continue any cases in progress but is still going to have its political priorities shift.

[1]: https://www.zdnet.com/article/search-engine-market-shares-in...

jedberg · 2 years ago
> I've not yet seen a legal explanation of why the Apple ad revenue share deal is now "illegal" and yet the AOL deal wasn't.

Do you ever speed on the highway? Have you gotten a ticket for every time you did it? Just because you didn't get caught doesn't mean it's legal.

lvzw · 2 years ago
Exclusive deals can present antitrust issues, but the kicker is that this isn't even an exclusive deal, it's a default deal! Users can still can still use other search engines on iOS devices.
brainbag · 2 years ago
You can change the default of Safari, but not for Siri. "Search the Internet" voice command always uses Google. I'm personally hoping that either part of this lawsuit or part of their Siri upgrade allows us to change it.
layer8 · 2 years ago
Microsoft lost cases against the EU because they made Internet Explorer and Windows Media Player the default on Windows: https://en.wikipedia.org/wiki/Microsoft_Corp._v._Commission
davidodio · 2 years ago
using Kagi is pretty clumsy. We iOS users get to pick from a pretty limited list. In reality we should be able to set search to any endpiont that handles the ‘q’ param
2OEH8eoCRo0 · 2 years ago
Defaults matter. Google's internal communication indicates that they know this. Microsoft testified that defaults matter and that unless they (or anyone else) could put up more money than Google then they had no shot.

You could innovate and make a better product and it doesn't matter because you can't outbid Google.

1vuio0pswjnm7 · 2 years ago
"Somewhat similar deals also happen with tv networks where they sign exclusive "distribution deals" with sports leagues and they share the money they get from tv commercials (the ads)."

Except the networks pay the leagues to broadcast games. With so-called "tech" companies, this is reversed. Google is paying Apple and Samsung so that no other search engine gets to be the pre-installed default.

Sports leagues do not pay TV networks in order to prevent other leagues from doing deals with the networks. But Google pays hardware manufacturers to be the pre-instaled default and exclude other search engines.

ksec · 2 years ago
>Ok. But is that really the only reason?

Sentiment shift. Moral Compass in Silicon Valley ( or more like in the Tech Sector ), Smartphone Revolution and 15 years of zero interest rate.

None of the reported are really "news" apart from the precise 36% figure which is higher than most of our initial estimate. "Customer acquisition cost" isn't new. On a similar note Google also share their Ad revenue with Mozilla / Firefox.

We might not like a lot of what's going on with Google or Apple. But I dont think revenue share is in anyway wrong or illegal.

kergonath · 2 years ago
> But I dont think revenue share is in anyway wrong or illegal.

It’s a thin line between revenue sharing, which is fine, and anticompetitive bribes to entrench your dominant position and extinguish competition, which is not. I am not saying that it’s the second case, but that’s what the DoJ wants to prove.

shiroiuma · 2 years ago
I think there should be prosecution of Apple based on this, not Google. Because of this huge cut, Apple won't allow other browsers on their platforms, which is anti-competitive.
meiraleal · 2 years ago
> I guess the difference now is that Google is really big. Ok. But is that really the only reason?

So as you are insinuating things why not be clear and name it? What is it, corruption? Or do you think that the fact that AOL deal wasn't considered illegal, no deal ever will be and Apple/Google are free to do as they please? Your idea of justice is quite weird.

dang · 2 years ago
Can you please not post in the flamewar style? It's quite against the site guidelines: https://news.ycombinator.com/newsguidelines.html.

You can make your substantive points without that, so if you'd please do so instead, we'd be grateful.

jessicas_rabbit · 2 years ago
I believe OP was genuinely interested in identifying rationale for this discrepancy in legal precedent, regardless of any personal stance they hold on the justice of this business deal.
r00fus · 2 years ago
From Google's point of view - this is a worthwhile origination fee. If you lose the entire "default" iOS population, you could lose a generation of minds in a key market (US mobile users).

The more people dissociate "search" with "google it", the less Google makes on their larger non-iOS search revenue.

doctorpangloss · 2 years ago
The ad ecosystem is pretty complex. While you and I have opinions about it, and Google's business model, the problem with the DoJ is: it does NOT have opinions about advertising. It doesn't seem to have a coherent grip on the WHY behind this stuff at all, it seems to forget that courts legislate all the time, that opinions matter.

Maybe instead of courtroom antics and bullshit about making Google look bad; and maybe instead of narrowly focusing on the case law and quote enquote winnable that's-how-the-law-works arguments... they should go and pitch a persuasive opinion on why any of this shit matters. Because they're leaving an intellectual vacuum to be filled by fucking podcasters, all but guaranteeing the DoJ will lose.

Eisenstein · 2 years ago
You think the Department of Justice should launch a propaganda campaign instead of using legal argument in a trial?
Mrirazak1 · 2 years ago
I’m not surprised. But my question is isn’t this antithetical to the whole privacy stance? We don’t sell your data but we do allow companies to bargain you as a user for their products.
classified · 2 years ago
It's part of Apple's strategy. "If you want access to our users, you have to go through us".
chakintosh · 2 years ago
Apple's Safari has built in anti-tracking tools. Apple's stance is still "we're not selling YOUR data", but they do allow your data to be anonymously shared and not point to you.
fsflover · 2 years ago
> anti-tracking tools

Do they help against fingerprinting?

wmf · 2 years ago
Am I the only one who thinks 36% customer acquisition cost is not crazy?
xnx · 2 years ago
Definitely not the only one. Both Google and Apple (and their very highly paid economists, analysts, and CXOs) are betting that this deal is more beneficial to them than the alternatives.
jayveeone · 2 years ago
Framing the practice as customer acquisition is extremely generous.
nvy · 2 years ago
>Both Google and Apple (and their very highly paid economists, analysts, and CXOs) are betting that this deal is more beneficial to them than the alternatives.

That's tautological

AuthError · 2 years ago
it's not customer acquisition though, Google can most likely get lot of users off safari to chrome for cheaper but issue would be that Apple would then get incentive to build search (and like apple maps, they can just embed it into everything without option to change default)

disclaimer: Googler here(not in search PA), this is my personal opinion.

ketzo · 2 years ago
Not trying to be a dick or anything — how is it not customer acquisition?

Google knows that there is some percentage of iPhone users who will only ever search with the default Safari engine. Google really wants those users. Google is paying to make sure those users use Google.

I mean, that is definitionally “customer acquisition cost,” right? Or am I missing something?

jorvi · 2 years ago
> and like apple maps, they can just embed it into everything without option to change default

The EU would have serious problems with that because of the way Apple used the Music.app > Apple Music transition to basically crowbar themselves into the music streaming market.

sooheon · 2 years ago
I think you described customer acquisition in different words.
bradgessler · 2 years ago
It’s only 6% crazier than the 30% cut Apple gets from developers selling their apps through the App Store.
spiderfarmer · 2 years ago
I think it is crazy. Lots of businesses would be destroyed if it was that high.
rahimnathwani · 2 years ago
Not all of those users are incremental, though. If your iPhone came with Bing as the default search provider, would you just leave it like that?
cm277 · 2 years ago
Only if you consider CAC on a per-query basis, against top-line revenue, in perpetuity. There's a word for this and it's not CAC, it's tax. And that's what this is, it's a tax on advertisers due to Google's monopoly power. How do we know they have monopoly power? because they can afford to give 36% of top-line revenue in perpetuity to another party and still make money. This implies >80% gross margins, which let's face it, scream monopoly power.
wmf · 2 years ago
Don't all SaaS companies target >80% gross margins?

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pravus · 2 years ago
Maybe it's just me and my bad attitude toward products today but this could explain why everything seems to be turning into low-quality garbage. I'm not a millionaire business man so I must be doing it wrong, but spending over 1/3rd of your revenue stream on customer acquisition rather than anything product-related seems like a bargain I don't want as a consumer.
Rastonbury · 2 years ago
For SaaS companies, 30-40% sales and marketing expense ratio is totally normal with R&D 20-40%. You need to keep up (in both) if not competitors will eat at your revenue which means even less dollars for product/R&D, running businesses is hard!
YetAnotherNick · 2 years ago
It's 36% of revenue not even profit. Why would Google do such a deal?
JCM9 · 2 years ago
Because most users don’t switch the default search settings on their phone and Google’s search revenue would plummet if they lost iPhone traffic. Basically Google depends on paying another company to make sure a bunch of people accidentally use their core product. Yes, that’s a pretty crappy spot for Google to be in but they’ve not had much luck in any business outside search so they’re sorta stuck.
jacquesm · 2 years ago
Google's core product is advertising, not search.
thrill · 2 years ago
Because they believe it's in their financial interest to not have Apple's traffic go elsewhere. Even if they broke even on the deal, it starves the competition.
olliej · 2 years ago
Which is why this is coming up in an antitrust trial.

People do talk about how “Google is legitimately better than the competition”[1] while ignoring the competition that never happens because there’s no path to profitability due to googl’s entrenched position.

[1] which isn’t even necessarily true anymore: Google’s search results are awful these days and have been for years, because Google’s no longer competing on search it’s competing on ads.

taspeotis · 2 years ago
Because it’s worth 36% of revenue? Google is not unsophisticated, if it was worth less they would pay less.
thaumasiotes · 2 years ago
> Google is not unsophisticated, if it was worth less they would pay less.

That isn't how relationships work, regardless of sophistication.

There was a link yesterday about bug bounties, so here's a story from my time handling bug bounties:

1. A major website published a policy setting out their payment schedule for various types of vulnerabilities.

2. A particular researcher submitted an issue which he plausibly characterized as falling into a high-value class of vulnerabilities. He received an award based on that classification.

3. The same guy continued to find vulnerabilities on that platform. He would always include a discussion of how to use his new vulnerability to implement an attack in the high-value category. There was an obvious reason for this: his typical vulnerability was a bog-standard cross site scripting attack, and XSS was specifically listed in the payment schedule as less valuable than the attack type this researcher wanted to be paid for.

4. Every time one of these reports came in, I would forward it to the company with the note "This is a standard cross-site scripting attack, and your policy specifies that it is worth a bounty of $XXX. The researcher notes that this vulnerability can be used to implement an attack with effect Y, and he is correct, but this is true of all cross-site scripting attacks on your site."

5. Then the company would pay out the higher-value bounty.

So this is an example of the value of the report being set unambiguously in public, and a large, "sophisticated" company deliberately ignoring that because they didn't want to adjust their relationship with one particular researcher. (Other researchers reporting identical vulnerabilities didn't know the magic words; they got the listed payout for XSS.)

mdasen · 2 years ago
Because if Google doesn't, then it could see its search monopoly evaporate.

The vast majority of rich people in the world use iPhones. In the US/Canada/UK/Australia/Japan and many more rich countries, the iPhone is the most common device - and even within those countries, the iPhone's demographics skew wealthier. iPhone users are a ton more valuable to advertisers than Android users - they have more money and they're willing to pay for premium things.

Let's say Apple switched to Bing. Most users won't know how to change their search settings so Bing will now get 90%+ of iPhone search traffic (and the most valuable search traffic). This puts rocket fuel into Bing's ad business. Advertisers don't just think Google and nothing else. Suddenly, Bing is potentially more important since iPhone (and Mac) users that they want to reach are going through Bing.

This has big implications for Google's ad business beyond just traffic loss. When we're talking about bidding, more bidders push up the price. It's not just about losing the iPhone's traffic. It's also about losing the ad bidders on the other side. If you're a monopoly on search ads and you lose 30% of your search traffic to a competitor, you are probably losing a lot more than 30% of your revenue. This is because part of your revenue exists due to people getting outbid. Let's say that you and I are bidding for the "laptop" keyword. You bid $1 and I bid $2 to outbid you. Google gets $2. If I decide to move my bidding over to Bing, you get the laptop keyword for $1 and Google's revenue is halved for that keyword - and they're only getting 70% as much traffic on top of that. As traffic shifts, bidders will shift. As bidders shift, the amount paid for the traffic still coming to Google could decline in addition to their traffic declining. So it's not just the loss of Apple-device traffic. It's the loss of bidders that drive up the price of ads even when they lose.

And this has knock-on effects for Google's businesses. If Bing's search ads get this rocket fuel, they start getting the attention to take on Google's ad business for publishers. Google has been steering searches to their properties, but all of a sudden Bing could start steering searches to Microsoft owned properties. Maybe LinkedIn figures out how to get people to post videos in a YouTube-competitive way - and with the most valuable traffic being steered toward those videos. Yea, LinkedIn is supposed to be professional, but it's kinda lost a lot of that over time with random click bait already.

Being the default search engine is a powerful position. You might say that you'd use Google no matter what and we're on HN so you probably know how to change the default search engine. Most people would just end up going along with whatever the default is. Google rose to prominence via their search results, but people aren't feeling as happy about Google's search today. Google has kept their dominance by paying to be the default search engine for almost everyone - either by paying Apple and Mozilla or by paying engineers to create Chrome (and putting a lot of marketing money behind it).

threatofrain · 2 years ago
IMO Microsoft is a sleeping giant and it makes more sense for Apple to build their own search, especially with chat bots taking off.
mcphage · 2 years ago
Because it motivates Apple to not develop their own search engine.
crossroadsguy · 2 years ago
As in Google thinks Apple, a company that hasn’t been able to run a first rate (no make it second rate) software service after years - not one, will be able to make something that replaces Google Search? That’s a bit difficult to believe.

But then I believe Google wasn’t thinking Apple could do it well at all. I think Google is sure of - is the typical Apple customer base that will just gobble up whatever Apple shoves down their throat, heartily. Yeah, I think it’s this one :)

quickthrowman · 2 years ago
Because iOS users are substantially more valuable than Android users, 6-8x more valuable. I’m positive that Google comes out ahead on this by selling ads to iOS users.
mpalczewski · 2 years ago
I've always had the sense that Google was really bad at negotiating.
repelsteeltje · 2 years ago
Close enough to the regular 30% Apple tax. Plus a 6% cherry on top — because Google has enough to spend; especially since search is their core business.
hightrix · 2 years ago
Ads are their core business today. Search is only there to serve more ads. Google stopped being a search company when they bought/merged with double click.

Google without ads is an unprofitable company that constantly makes bad technology bets and cancels projects more often than they release anything useful.

majani · 2 years ago
They're making money hand over fist right now, and they still have startup-esque growth rates, so they don't need to be tough negotiators. When Google's revenue and growth flattens, you'll see the toughness come in
jakobson14 · 2 years ago
It's not a negotiation. It's google paying whatever sky-high sum apple demands, because google and their shitty search engine are toast the moment it's no longer the default.
modeless · 2 years ago
And in court. It wouldn't be surprising to me if they lost to Epic after Apple won, despite actually already allowing sideloading and alternative app stores.
d3w4s9 · 2 years ago
You are dreaming and there is no way that will happen.
msoad · 2 years ago
iPhone users won’t change anything if their “googling” experience is not powered by Google
sdwr · 2 years ago
Goes along with the "don't be evil" mantra. They started as pure tech and found a money geyser, no reason to upset the applecart when they're already making out like bandits.
warner25 · 2 years ago
If not for this deal, what would be the default search engine in Safari? I feel like most normal people (not HN weirdos) would be angry if their browser defaulted to something other than Google when they tried to "Google something." Isn't this part of what so many people have complained about with Edge and Bing?
gilgoomesh · 2 years ago
I don't think those same "normal" people would notice if they "Google something" and the result page had a DuckDuckGo icon in the top-left.
xcdzvyn · 2 years ago
Given the quality of DDG search results? I bet they would.
thirtyseven · 2 years ago
I assume that both parties have market research showing that enough people (maybe even 36%) don't care enough to figure out how to change the search engine or buy a different phone.

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guessbest · 2 years ago
I use brave search and usually end up clicking on the google button midway down on the page. Every search engine is inferior and if google wasn't the default search on iOS it would hurt the brand, especially since google is the default search on android. I'm a little older and using bing just feels like altavista in the 90's. Its good enough, but it feels like its selling me something I don't want. Just give me a good search result or I'll have to stop using the phone's web browser to look things up (or manually change the browser search engine with every release).
LastTrain · 2 years ago
Seems like a decent incentive for them to continue investing in Android
majani · 2 years ago
Owning an operating system is the most powerful position in all of software. That's incentive enough
isodev · 2 years ago
Why? They already have all users on Android with Google search by default.
gpm · 2 years ago
Because they earn 56.25% (1/0.64 - 1) more from any user they can attract to Android from iOS (at least with regards to search)
LastTrain · 2 years ago
Because the percentage Apple can demand is inversely correlated to Android market share.
samsonradu · 2 years ago
To get Apple's users to switch to Android probably.