In a significant move that could reshape the online search landscape, Apple is planning to integrate artificial intelligence (AI) search options, including OpenAI and Perplexity, into its Safari browser. This development threatens Google’s long-standing position as the default search engine on Apple devices, a status for which Google pays approximately $20 billion annually.
According to a report by Reuters, Apple’s intentions became clear during a recent U.S. Department of Justice antitrust trial against Google. Eddy Cue, Apple’s Senior Vice President, testified that the company is actively considering a redesign of the Safari browser to incorporate AI search tools. This shift comes as Safari has experienced its first decline in search volume in years, as users increasingly turn to AI-driven search tools.
Following the news of Apple’s potential changes, Alphabet, Google’s parent company, saw its stock plummet by 7.3%, wiping out about $150 billion in market capitalization. Apple’s stock also took a slight hit, dropping by 1.1%.
“For the first time in many years, search volume on Safari has recorded a decline,” Cue remarked during his testimony. He attributed this trend to users shifting from traditional keyword searches to engaging directly with AI chatbots, such as ChatGPT, for more nuanced responses.
In response to Apple’s plans, Google remains confident. The tech giant stated that overall searches across its ecosystem continue to grow, bolstered by features like voice and image search, which are driving query traffic. However, analysts view the changes in user behavior as a sign that the search market is entering a new competitive phase, with AI technology taking center stage.
Currently, Google pays Apple around $20 billion each year to maintain its status as the default search engine on Safari. This relationship is crucial, as it represents about 36% of Google’s search ad revenue from Safari, according to analysts’ estimates. The U.S. Department of Justice has proposed measures that could disrupt this arrangement, including prohibiting Google from paying for its default search engine status, which could significantly alter the dynamics of online search.
Gil Luria, an analyst at DA Davidson, commented on the potential fallout for Google: “Losing the default position on Apple would be a major blow, even without further interventions. If viable alternatives emerge, advertising budgets could shift significantly away from Google.”
In anticipation of these changes, Google has launched an AI mode on its search page and expanded its AI Overview feature to over 100 countries, integrating advertising into this new format to retain users and increase revenue. CEO Sundar Pichai mentioned during an antitrust trial last month that Google is negotiating with Apple to integrate its Gemini AI technology into new iPhone models, a strategy designed to fortify Google’s position within Apple’s ecosystem.
As Apple explores partnerships with leading AI developers like OpenAI and Perplexity, it is clear that the company views AI as a pivotal technology shift. In addition to the potential integration of these AI search tools, Cue hinted that Apple might offer multiple AI search options within Safari, allowing users to choose from various alternatives.
Despite concerns that current AI tools can sometimes produce inaccurate or fabricated information, Apple appears willing to embrace this risk if it aligns with user preferences for convenience and innovative interaction methods. The integration of AI into search functions reflects a broader trend in technology, where traditional search engines face increasing competition from AI-driven platforms.
The immediate market reaction to Cue’s testimony underscores the significance of the default search engine status in Apple’s ecosystem for Google’s dominance in search. Google’s stock experienced a nearly 9% drop following the news, illustrating investor apprehension about the potential ramifications of losing this lucrative deal.
While it remains uncertain whether Apple will completely eliminate Google from its search options, analysts speculate that a transition to using Gemini as the default search engine through a similar agreement could be in the cards. Regardless of the outcome, it is evident that AI is redefining how users access information, presenting substantial challenges to traditional search engines.
OpenAI has reported that its web search feature now handles over 1 billion searches per week, with 400 million active users, highlighting the competitive landscape Google must navigate. As AI technologies continue to evolve, the implications for both Apple and Google are profound, signaling a potential shift in the balance of power in the online search market.
