Testimony from Apple executive Eddy Cue during an antitrust case against Alphabet revealed the iPhone maker's active exploration of reshaping Safari. A source familiar with the matter disclosed to Reuters that this revamp includes the addition of AI search providers as alternative options for users in the future. Bloomberg further reported that Cue specifically mentioned OpenAI and Perplexity AI as potential search choices within Safari.
The news of Apple's intentions triggered a notable downturn in Alphabet's stock, with shares plummeting by 7.6%, resulting in a staggering loss of over $150 billion in the company's market capitalization. Interestingly, Apple's stock also experienced a decline following Cue's admission that Safari searches had decreased for the first time last month, attributed to users increasingly adopting AI-driven search methods.
This commentary suggests a potentially imminent and substantial shift in the search paradigm, rather than a distant future scenario. It directly challenges the once seemingly impenetrable moat that has protected Google's dominance in the search business for years.
However, Google is not passively observing this evolving landscape. The tech giant has already introduced an "AI mode" on its search page, an effort to retain its vast user base and prevent migration to alternative AI models. Furthermore, Google CEO Sundar Pichai indicated in previous testimony that the company aims to finalize an agreement with Apple by mid-year to integrate its Gemini AI technology into new iPhones.
The current arrangement sees Google as the default search engine on Apple's Safari, a highly coveted position for which Google reportedly pays Apple approximately $20 billion annually. Analysts estimate that this accounts for roughly 36% of Google's search advertising revenue generated through the Safari browser.
D.A. Davidson analyst Gil Luria emphasized the potential severity of Apple relinquishing this exclusivity. "The loss of exclusivity at Apple should have very severe consequences for Google even if there are no further measures," Luria stated.
He further elaborated on the broader implications for the advertising market: "Many advertisers have all of their search advertising with Google because it is practically a monopoly with almost 90% share. If there were other viable alternatives for search, many advertisers could move much of their ad budgets away from Google."
Apple's strategic foray into AI-powered search within Safari signifies a pivotal moment in the competitive dynamics of the search industry. By offering users more choices and embracing the burgeoning capabilities of AI, Apple is directly challenging Google's core business model.
While Google is actively responding with its own AI integrations, the potential erosion of its default status on a major platform like Safari presents a significant hurdle that could reshape the future of search and online advertising. The coming months will be crucial in observing how this evolving competition unfolds and the ultimate impact on the dominance of the current search giant.