Privacy would be a distinguishing feature
A recent news article published by the Financial Times has sparked another round of speculation that Apple could be working on its own search engine to power web searches within iOS, iPadOS and macOS devices, as well as Apple’s smart home products. The company has been pulling together the talent to strengthen its web services, and this includes pedigree from the search and mapping worlds.
If the reports are true and Apple is indeed building a search engine from scratch, there’s no underestimating the size of this task. The company has a lot of catching up to do if it intends to approach the calibre of Google in this area. But there are some arguments for Apple to explore this move.
In most parts of the world, Google is established as a verb, and the first few blue links it feeds back to web users are more like gold. The top links, presented as sponsored, are sold to the highest bidder, a very lucrative and efficient business model. Google’s market share with search in most countries is above 90%, and this dominance has been drawing attention from regulators.
Last week, following a 16-month investigation, the US Department of Justice filed a lawsuit against Google for alleged antitrust violations. Google has been arguing, with some validity, that it’s not alone in the market. There were web search services before Google and there are tech giants and start-ups looking to usurp the Cupertino company.
It’s not the quality of its service that has regulators questioning Google’s market power and social influence, but the way it positions itself in the billions of devices that are in use worldwide. Google pays hardware makers and operators to be the default search engine in the devices they sell. To change their search provider, users would need to dig several layers deep into their device settings — and have the inclination to do so.
Most searches done on Apple hardware, including through Siri, are powered by other companies, and this does mean, for the most part, Google. The arrangements between Google and the hardware companies and operators it works with are very profitable all around.
In theory, Apple has a large number of users in most developed markets to enable it to go it alone in the search world, so the company could take a greater part of the search value chain. Like Google, Apple has the attention of billions of users, although it would need a unique angle to convince a critical and dubious audience about the advantages of its search engine.
This is where privacy comes in. Apple would stress that it’s working hard to protect its users from being tracked by keeping search histories separate from user accounts. This level of anonymity could provide comfort to users who worry that Google knows a little too much about them. Privacy would be the main selling point for Apple when it needs to explain why its search results begin to appear different.
But there’s an important dilemma here. Apple doesn’t currently carry high development or operating costs for search, and it receives billions of dollars per year from Google for being the default search provider, offset by payments to Google for providing Siri search. This is a major source of revenue for its services business. So, search is most likely nicely profitable for Apple.
With its strong stance toward privacy, Apple wouldn’t be able to make money as a search provider as Google does. That’s because the enormous amount of user data that Google holds enables better ad targeting, which pushes ad prices up. If Apple is really building a search engine, it would have only a limited revenue upside but would carry far higher costs.
Another possibility is that Apple is developing a limited set of search functions to run within iCloud, Apple TV+, Apple News and other Apple services. This could help cut some of the costs it pays Google for supporting Siri, while giving itself the skill set to expand its search efforts if and when it needs to.
That day might come if regulators force Apple to change the way default search providers are offered to users, which could take a lot of value out of its current arrangement with Google.
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