Will shift to mobile change balance of power between Apple and Google?

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[Commentary] Apple executives said they were dropping the use of Google Maps in favor of an open mapping product. Ben Schachter, an analyst at Macquarie, wrote a note to clients asking of Apple: "What if it takes a bigger step?" What if, in other words, Apple ditched Google as the default provider of search on its Safari browser.

This is where we see how their relationship is more complicated than it first appears. Many users assume Apple uses Google's search engine because it's the best. But while neither company likes to talk about it, Google pays Apple a significant amount of money to be the default search engine on Apple's browser. Indeed, Google in 2011 paid about $1.5 billion in total on such distribution deals last year to companies like Apple and Mozilla (which makes the Firefox browser) and MySpace. Schachter estimated that $1 billion of that goes to Apple, but the truth is that no one knows. In fact, Google has successfully fought the U.S. Securities and Exchange Commission, which wanted the company to release information on the number of such deals as well as whether each deal made money. Google has acknowledged that it loses money on some of these deals.

The nature of such agreements appears to be at the heart of a subpoena that Bloomberg News reported the Federal Trade Commission had served to Apple last week as part of its antitrust investigation of Google. But even without knowing the payment figure, Schachter says one thing is clear: Apple's products have become an increasingly important source of search traffic to Apple. So if Apple maintains its dominance of tablets in the coming years and more computing shifts to mobile, does it gain even more leverage over Google?


Will shift to mobile change balance of power between Apple and Google?