In technology, disruption can happen slowly and then all at once. Alphabet Inc.’s Google unit is praying for the former right now.
Executives at the company have been racing to stave off a decline to its bread-and-butter search business ever since ChatGPT exploded onto the scene in late 2022. Now Apple Inc., one of Google’s most important partners in that business, has confirmed the search giant’s efforts aren’t working. The company is “actively looking at” revamping the Safari web browser on iPhones and other devices so that instead of offering Google by default, they’ll potentially show other AI tools from firms like OpenAI, Perplexity AI Inc. and Anthropic PBC.
The stunning admission sent Alphabet’s share down more than 8% on Wednesday, and for good reason. It portends not only the potential end of Google’s lucrative marriage with Apple, which has received $20 billion annually for that prime real estate, but also shows the public is moving away from keyword searches to conversational AI and chatbots.
Apple’s senior vice president of services, Eddy Cue, made the revelation during his testimony in the Justice Department’s lawsuit against Alphabet on Wednesday, and he added that Google searches on Safari had declined for the first time in April, something he attributed to the growing use of AI tools. Google started rolling out AI Overviews to search exactly a year ago, and while the effort was fraught with mistakes — such as when it told people to eat rocks — Alphabet Chief Executive Officer Sundar Pichai assured investors in April that AI Overviews was “going very well, with over 1.5 billion users per month.”
Studies until now had also suggested that people were using chatbots like ChatGPT, Anthropic’s Claude or Perplexity as a complement to classic search, not a full replacement. But Cue’s disclosure suggests that the latter might be true and that Google’s efforts to crowbar AI into search aren’t enough. He has little incentive to admit that. Apple’s deal with Google brings in roughly 15% to 20% of its services’ revenue, and Cue even said he’d lost sleep over the possibility of that money going away. That makes his admission all the more remarkable.
All of this raises questions about how rapid any future decline in Google’s money-printing search machine will be and how long it can hold out against the AI upstarts. I have long suspected that AI tools wouldn’t push Google’s market share off a cliff, as Apple’s iPhone did to Nokia, whose reign as global king of the mobile phone industry crashed so rapidly it gave the market whiplash. Google’s position in search always looked far more entrenched. The company has a 90% share of the global market, and the act of using its search engine is so culturally conditioned that the company is a verb.
Also, it has a strong foothold in lucrative searches that people seem likely to continue doing on Google. While about half of all Google searches are carried out to look for information, the other half are where the real money is: navigating to other websites, or commercial and transactional searches, such as when users type in “Nike running shoes” or “buy crypto online.” Those are worth far more and not something users can get from AI chatbots.
Not yet, anyway. Having aggressively moved into web search, some AI upstarts are taking the next step into e-commerce. OpenAI, which now has more than 500 million active users, recently started offering product recommendations with purchase links, and Perplexity has also added shopping features.
A computer scientist at Google once told me that the company long dominated the world’s search market because “people trust us.” But the rest of us who didn’t drink the Kool-Aid know that the other reason is Google’s anticompetitive practices, from placing its own services like Google Shopping high up in search results to paying that $20 billion fee to Apple — hence the Justice Department lawsuit. But maintaining that position and growing consistently have also led to search results that are clogged with ads, sponsored links and SEO spam. For many of us, AI tools are an obvious alternative simply because the quality of Google search has degraded.
Apple’s potential divorce from Google points to the end of an era, but it could also usher in a healthier market with far more players jostling to give us better, personalized answers. That will be painful for Google, but it’s good news for its competitors and billions of users.
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