Apple’s AI Search Strategy in Safari Challenges Google’s Dominance

Apple’s intention to integrate AI-driven search functionalities into its Safari browser poses a significant threat to Google, which heavily depends on iPhone users for its advertising revenue.

This announcement caused Alphabet, Google’s parent company, to see a decline in stock value, closing down 7.3%, which resulted in a loss of approximately $150 billion in market capitalization.

According to a source familiar with the situation, Apple is “actively considering” a redesign of Safari, as indicated by Apple executive Eddy Cue during his testimony in an antitrust case about Google’s preeminence in online search.

Cue revealed that the volume of searches on Safari dropped for the first time last month due to users increasingly opting for AI alternatives. As a result, Apple’s stock saw a 1.1% decrease.

In response, Google claimed that it continues to experience growth in search queries, including those originating from Apple’s devices and platforms, as mentioned in a statement on the company’s blog.

“Users are recognizing that Google Search is becoming more helpful for a wider range of queries, and they’re using it for new functions and in innovative ways,” the statement read.

Google highlighted its voice and visual search capabilities as key factors contributing to the uptick in overall search activities. However, it remains unclear if Cue was using the same criteria when discussing different search types.

Nevertheless, Cue’s statements indicate that a major transformation in the search landscape may be on the horizon, jeopardizing Google’s stronghold in search—a primary hub for advertisers that is now facing scrutiny from U.S. antitrust regulators who have filed two significant lawsuits against the tech giant.

Currently, Google retains the status of the default search engine on Apple’s browser, a highly sought-after position that reportedly costs Apple around $20 billion annually. This amount constitutes approximately 36% of the search ad revenue generated through Safari, according to analysts.

The U.S. Justice Department has suggested banning Google from making payments to companies for being the default search engine as part of remedies to dismantle its market dominance.

“If Apple removes Google’s exclusivity, it will have severe implications for the search leader, even without additional measures,” stated DA Davidson analyst Gil Luria.

“A large proportion of advertisers funnel all their search advertising through Google since it essentially operates as a monopoly with nearly 90% market share. If viable alternatives existed for search, advertisers could easily shift a significant part of their budgets away from Google,” Luria added.

However, Google is not without resources.

After being dismissed by some as a minor player in the AI arena following the sensational launch of ChatGPT in late 2022, Google has invested heavily in its AI initiatives, utilizing its extensive data resources.

The tech giant introduced an “AI mode” on its search platform earlier this year to prevent users from migrating to other AI options.

Recently, Google expanded its AI Overviews, which provide summaries at the top of traditional search results, to users in over 100 countries and added advertisements to this feature, increasing search ad revenue.

CEO Sundar Pichai noted in his testimony at an antitrust trial last month that Google anticipates partnering with Apple by mid-year to integrate its Gemini AI technology onto new devices.

On Wednesday, Cue also mentioned that Apple plans to include AI search providers, such as OpenAI and Perplexity AI, as options in the future, according to a report by Bloomberg.

“Apple’s initiative underscores the advancements made by generative search companies like ChatGPT and Perplexity,” remarked Yory Wurmser, principal analyst for advertising, media, and technology at eMarketer.

The significant investment Google makes to maintain its status as the default search engine highlights the importance of these agreements, Wurmser noted.

For example, ChatGPT reported in April that its search feature has seen over 1 billion web searches weekly and boasts more than 400 million active users as of February.