Should Apple get into the search engine biz?
Should Apple get into the search engine biz?
A look at Apple, Search engines and what Apple should do.
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Jon Henshaw wrote an article on Apple potentially launching their own search engine. In the article he points to several things : Changes in spotlight searches on iOS/iPadOS, Increase in applebot (Apple’s web crawler) traffic, hiring search engineers (though these positions seem unrelated)
Notwithstanding if his rumor is even true, I think there are two interesting questions that come out of this:
Should Apple be in the search business?
Should they build or buy a search engine?
Should Apple be in the search business?
Google is rumored to have paid Apple $12B to be the default search engine on safari in 2019. Once can only imagine that the price keeps going up as this was about $9B in 2018. Google however probably makes a lot more in revenue from being the default search engine. One report pegs it at $25B which means that they definitely make a lot of money
Control over the experience
Having Google as the default search engine without question enhances the quality of the experience on an iPhone. Obviously it’s not white-label so you know it is Google. Assuming that were not the case the quality of results would still be obvious. Trust me, I know. I use bing on safari and DuckDuckGo on Chrome (both on iOS) and yes indeed the results are superior. Having said that Apple has drastically improved Apple Maps and while search is a different beast, they can definitely become good “enough” but is that worth it? I think a good iPhone experience is having the best search results -- and only Google can do that today. However Apple being Apple wants to own that too! Google though would welcome a “strong”, rich new search competitor since they could also point to Apple as a strong competitor in antitrust cases.
Distraction for Apple and search engines business models are horizontal.
Is the distraction of building a search engine too much for Apple to handle? Absolutely not. But the real question is what is the benefit? Are they going to get into ads? It's definitely possible but still a distraction that is years of work -- unless they are “good enough”. Also search engines exist to serve all types of users on all platforms (Apple is starting to get there with Apple music now being available on Android)
Extension of the Apple Search Ads
Another possible reason is for them to extend Search Ad’s which is now a $2B business. This is Apple at its finest utilizing their App Store real estate. In case you can’t recall what these are the below is an example (you can do both branded and unbranded keyword bids)
Privacy
Apple touts privacy as their key advantage. Assuming they don’t sell data how would this make sense for them $ wise? Where will they make the additional revenue from?
EU Regulatory Pressure
There is regulatory pressure given the pre-installations and the fact of the matter is no other search engine can afford to pay Apple the money to be the default. Apple’s existing arrangements with Google create a significant barrier to entry and expansion for rivals affecting competition between search engines on mobiles. Can’t prevent Google from creating their own search engine though!
Google could play hardball in future.
Google and Apple are frenemies. No secret there. Imagine a future in which Google doesn’t need Apple anymore (hard to imagine today, I get it) and Google refuses to pay Apple for the “privilege” of being the default search engine. What happens to Apple then? Should they scramble?
Voice+Text Search
My understanding is that voice and text search are completely different beasts in a different context so being able to do one means nothing in the other (though Siri has improved it still lags Alexa and Google Home) Spotlight Search, which is accessed from the top of the iPhone homepage, is not as visible or widely used for web search compared with browsers or dedicated search apps (e.g., Google). But there’s a potentially more integrated experience where Siri results, Spotlight Search and the Safari browser default search become more unified on the back end if not in the UI.
Acquisition targets for Apple Search : Should they build or buy a search engine?
The current search engine market share is shown below (From Statcounter)
Google, of course, can’t be acquired. It's likely that MSFT won't sell Bing either so that leaves Yahoo, DuckDuckGo, and Ecosia. Ecosia and DuckDuckGo are both privacy focused. There are also new search companies such as Neeva but they are too early on in the game. For a whole list of search engines see the search engine wiki page. DuckDuckGo’s privacy policy in fact is only 2 lines long
DuckDuckGo does not collect or share personal information. That is our privacy policy in a nutshell. The rest of this page tries to explain why you should care.
DuckDuckGo and Ecosia are small companies, and obviously they can’t spend like Google can. They can slowly improve over time but that is gonna take long. If Apple acquires either (or even both!!) then they can start to invest in making these search engines better while at the same time continuing to extract rent from Google until they’re ready to pull the rug (there are likely Antitrust concerns here so it's unlikely that they can do this I think. Especially as the default option)
Given Apple’s large balance sheet acquiring a search engine is not an issue but what they do with it quickly becomes a problem. This also applies to them building their own search engine. Siri for example is not on any operating systems except for iOS, macOS, watchOS, and tvOS. Siri (had it been executed better than Alexa and Google Home) could have been a wonderful differentiator for the Apple *OS* operating system. For Apple Music for example it makes sense to exist cross platform because, well the music is the same. For search engines the dynamic is slightly different. You want to be cross platform, on any OS, preferably as the default since more searches you have, the better you can learn, and optimize the results based on what people click. But imagine this: Mozilla gets $400-$450MM each year from Google to be the default search engine for Firefox so they have to be making way more than that from ads revenue on Mozilla which is ~4% market share
From Statcounter:
85% of browser search engines are accounted for which Apple can’t buy/already owns (Chrome, Safari, Edge). Leaving about 15% of Browser Market Share that Apple can “buy” their way into. A simplified way to think about this (and this IS back of the envelope and not meant to be accurate and there are lots of nuances which I have NOT considered) is the total revenue from pure search engine ads on Google and not on “Google Network Member’s properties (Google Network Members' properties consist of revenues generated primarily on Google Network Members' properties participating in AdMob, AdSense, and Google Ad Manager) is ~$98B (see 10k below). This means that approximately each % share of ownership of the default browser search engine is worth ~1.16B (at least in 2019). So this means that Google earns ~$20B from Safari (being the default search engine) but pays them $12B.
At the end of it, assuming that Apple is super successful they’ll make a few billion dollars a year from Apple Search. Definitely not a good use of their time.
My final take on this is that Apple should definitely not build a search engine. They could acquire one as a “backup” (Ecosia or DuckDuckGo) or a bargaining chip against Google albeit a very very weak one since Search Engines are (mostly) winner take all markets. Furthermore there is always Bing and Yahoo who’d be quite happy to service Apple’s Safari but of course at a way lower revenue than Google pays today (Bing makes ~7-8B from Search advertising and Yahoo is likely smaller give the market share)
Side Note : I wrote “mostly” above for Winner Take All Markets as one of the key things to consider for a WTA market is that is there demand for differentiated platform functionality (ie do different people want different things from a search engine). I think this is starting to become true with Neeva being a paid search engine that prioritizes “privacy, user experience and simplicity” and Kiddle for Kids. So apparently search is starting to serve different use cases but it’s minuscule for now.
Thank you for reading. Stay Safe. Be well!