- The Department of Justice lawsuit against Google filed on Tuesday reported that the tech giant paid Apple roughly $10 billion a year to be the default search option on their devices.
- Tech columnist Jason Aten says that while Google started off as a reliable and competitive search engine, a lot of its success can be drawn back to its mission to become the most convenient option for internet users.
- This same formula worked for Starbucks, which put up stores on practically every block to become the easiest coffee choice for consumers.
- "Once you become the default option for whatever market you compete in, the incentive to be better decreases," Aten writes. "Instead, the incentive is to maintain your position."
- Visit Business Insider's homepage for more stories.
If you've bought a new iPhone in the past few years, you might not think much about the fact that when you open Safari and type in a search the results you get come from Google. Most people use Google to search on the internet anyway — what you got was what you expected. It was familiar.
It was also not an accident.
It's been a poorly-kept secret that Google pays Apple a lot of money for the privilege of being the default search option on iPhones, iPads, and Macs. What we didn't know, but do as a result of the Department of Justice lawsuit against the search giant filed on Tuesday, was just how much Google pays. According to the DOJ, it's roughly $10 billion a year.
Considering that Apple's devices account for half of all of Google's search traffic in the US, according to the lawsuit, it's no wonder the company is willing to pay. The deal is lucrative on both ends: Analysts at AllianceBernstein estimated that Google earns $25 billion annually in gross revenue — or 18% of its ad revenues — from Apple devices, while the DOJ also reported that Apple collects anywhere between $8 billion and $12 billion from Google each year, accounting for 17% and 26% of Apple's services revenue.
Being the default option has benefits. Sure, you can change the search engine in Safari, it isn't even that hard. Even easier, you could simply type in the URL for another search engine.
Except, and this is important, almost no one does.
From the DOJ lawsuit:
"For a general search engine, by far the most effective means of distribution is to be the preset default general search engine for mobile and computer search access points. Even where users can change the default, they rarely do. This leaves the preset default general search engine with de facto exclusivity. As Google itself has recognized, this is particularly true on mobile devices, where defaults are especially sticky."
This is true of search engines and almost everything else about the devices and software we use on a daily basis. That's because — by design — the default settings are the most useful choice for the greatest number of people. It doesn't mean they're the actual best option, just that whoever built the device or the software felt like it would meet the needs of most users.
As a result, most people never change the default settings on any device they use. It's more convenient to just use the default. They don't require you to think about how to use something — you just use it.
In fact, it turns out that convenience is even more of a driving factor for most people than quality in many cases. We may not acknowledge it, but let's be honest, that's why fast food is a thing.
That reality is also why companies work very hard to become the default. They will go through great effort to gain that position. Sometimes it happens because something is easier to use. Sometimes it's because it genuinely offers a better product or experience. Sometimes, they just spend large amounts of money through arrangements like the one between Google and Apple.
The goal is the same — be the most convenient option for the most users and most people won't look elsewhere.
Starbucks, by the way, did the same thing. I like Starbucks coffee, but not because it's the best coffee you can buy. It's because they're everywhere. They also have a convenient app you can use to order what you want in advance, then walk in or drive up to whatever store happens to be on the way and just pick up your coffee. Because there will always be a Starbucks on the way to wherever you're going.
The joke is that there are places where you can stand on a corner and look around and see multiple Starbucks locations on opposite sides of the street. It's a joke, but it's also true. There's also a good chance there's one inside your grocery store.
Google grew, at first, because it was better than other options. It attracted users because its minimalistic design was fast and simple to use. That was a big deal at a time when the speed of your internet connection was still measured in bits per second. It also did a better job of discerning whether a website was a relevant and trustworthy result for whatever a user was searching for.
There's a problem, however. Once you become the default option for whatever market you compete in, the incentive to be better decreases. Instead, the incentive is to maintain your position. Hence the $10 billion each year that Google is reportedly paying Apple.
That $10 billion didn't make Google's search better. It didn't increase the quality of the results you get when you type something into the field at the top of your browser. It just bought the default position.
The Wall Street Journal reported last year that Google's search results aren't nearly as neutral as you might think, in many cases pointing you to other Google properties. Anyone who's noticed the increasing number of ads at the top of the search results page would probably agree it's not a better experience for users.
It's far easier for Google to skip the argument over which search engine is actually the best and simply pay money to be the default. Bing and DuckDuckGo are perfectly good search engines, but neither has better than single digit share of the search market. Even Microsoft, a company worth more than a trillion dollars, hasn't been able to make Bing a real competitor to Google. Google is the default.
It's not exactly the most noble strategy, but it works. Of course, if you don't like that, you could change the default — but you probably won't.
Get the latest Google stock price here.
This is an opinion column. The thoughts expressed are those of the author(s).
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