The era of search dominated by Google may be coming to an end.

Author: Wall Street Journal

On Wednesday, during U.S. stock trading, Alphabet, Google's parent company, saw its stock price plummet, with losses quickly expanding to over 9% at one point. Apple's stock also turned negative, with intraday losses exceeding 2%. The declines of Google and Apple caused the broader U.S. stock market to drop, with the Nasdaq 100 turning negative after having risen 1% in after-hours trading the previous day.

In terms of news, Apple is "actively considering" a major overhaul of its Safari browser on its devices, focusing on an AI-driven search engine. This decision could potentially end the long-standing partnership between Apple and Google, triggering significant changes across the industry and posing a serious challenge to Google's dominance in the search field. The era of search dominated by Google may be coming to an end.

On Wednesday, Alphabet's stock closed down nearly 7.3%, ending at $151.38.

Eddy Cue, Apple's Senior Vice President of Internet Software and Services, revealed this information while testifying in the U.S. Department of Justice's antitrust lawsuit against Alphabet.

The core of the DOJ's lawsuit is an agreement between Apple and Google valued at approximately $20 billion per year, which makes Google the default search engine on Apple devices. If the lawsuit is successful, it could force the two tech giants to terminate their partnership, disrupting the long-standing operation of devices like the iPhone.

AI Search Entry

The acceptance of AI among consumers is also continuously increasing. Eddy Cue pointed out that the search volume on the Safari browser saw a decline for the first time in April this year, attributing this to users turning to AI.

Eddy Cue expressed his belief that AI search providers, including OpenAI, Perplexity, and Anthropic, will ultimately replace traditional search engines like Google. He believes Apple will incorporate these providers into Safari's options in the future:

"We will add them to the list, but they may not become the default option. These products still need further improvement."

"Before AI emerged, I thought other search options were unreliable. Now I see greater potential because new players are addressing this issue in different ways."

Currently, Apple offers OpenAI's ChatGPT as an option in Siri, with an agreement allowing Apple to include other AI providers in its operating system, including its own.

Before ChatGPT was selected as part of "Apple Intelligence" in iOS 18 last year, Apple also conducted a "pitch" with Google. Cue stated that Google provided a list of terms at that time, "many of which Apple could not accept, and these terms do not exist in the agreement with OpenAI."

Cue mentioned that Apple has also explored Anthropic, Perplexity, China's DeepSeek, and Grok from Elon Musk's xAI. Cue specifically noted that Apple has had some discussions with Perplexity. Additionally, Cue expects to incorporate Google's AI search product Gemini later this year.

Cue pointed out that AI search engines need to improve their search indexing to truly enhance performance. However, even if these improvements cannot be quickly realized, some of their other features are already "strong enough to make users willing to switch." Regarding the transition from traditional search to AI search, Cue stated, "Now that capital is abundant and the players are large, I see no reason why this transition won't happen."

Cue also mentioned that large language models will continue to improve, further encouraging users to change their usage habits.

Review of Old Partnerships

Despite this, Cue still believes that Google should continue as the default search engine for Safari and admitted that he has lost sleep over concerns about losing the revenue share from this agreement. He stated that the current agreement between Apple and Google regarding regular search still has the best financial terms.

Last year, Apple and Google expanded their partnership by integrating Google Lens into the latest iPhone's "Visual Intelligence" feature, allowing users to take photos and analyze images using Google's AI.

Cue also mentioned that Apple's agreement with Microsoft's Bing has recently been modified to a yearly renewal format. Bing is a non-default option in Safari.

Cue stated in court that the pace of technological change is so rapid that in a few years, people may no longer use the devices we have today:

"In ten years, you might not even need an iPhone, although that sounds crazy. True competition only arises when technology undergoes transformation. Technological change creates opportunities. AI is a new technological transformation that is creating new opportunities for new entrants."

How the Market Interprets This?

Media analysis suggests that this significant change is highly meaningful for the iPhone and Apple, which have over 2 billion active devices. Since the launch of the first iPhone in 2007, users have relied on Google's search engine to access the internet. Now, users are entering a new search era dominated by multiple AI companies.

The market views Eddy Cue's testimony as a signal of the challenges facing both Alphabet and Apple, as they may have to abandon this lucrative arrangement. This also explains why, on Wednesday, in addition to Google's sharp decline, Apple's stock also saw a drop of over 2% at one point.

Apple's own AI technology has lagged behind its peers. The company does not yet have its own AI search engine and has been forced to delay significant upgrades to Siri, which were originally planned to utilize users' personal data to assist with query tasks. Apple is set to hold its annual developer conference on June 9, where it plans to unveil an improved version of its AI platform "Apple Intelligence."

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