Apple challenges Google with new AI search option in Safari

Apple's move to integrate AI-powered search options into its Safari browser poses a significant threat to Google's advertising revenue, heavily reliant on iPhone users.

This development has led to a sharp decline in shares of Google's parent company, Alphabet, which fell 7.3% erasing approximately $150 billion from its market evaluation valuation.

During testimony at an antitrust hearing regarding Google's market dominance, Apple executive Eddy Cue revealed that searches on Safari decreased for the first time last month as users increasingly turn to AI alternatives, according to the source. Apple stock closed down 1.1%.

Google said that it continued to see growth in the overall number of search queries, including "total queries coming from Apple's devices and platforms," according to a statement posted on the company's blog.

"People are seeing that Google Search is more useful for more of their queries — and they’re accessing it for new things and in new ways," the company wrote.

Google cited voice and visual search features as contributors to total search volume growth. It was unclear whether Cue was using the same basis of comparison in his testimony when analysing types of searches.

Still, the Apple executive's comments suggest that a seismic shift in search is likely underway, threatening Google's dominant search business - a go-to advertising destination for marketers that has now become a target for United States antitrust regulators, which filed two major lawsuits against the company.

Google is the default search engine on Apple's browser, a coveted position for which it pays the iPhone maker roughly $20 billion a year, or about 36% of its search advertising revenue generated through the Safari browser, analysts have estimated.

Banning Google from paying companies to be the default search engine is among the remedies that the US Justice Department has proposed to break up its dominance in online search.

"The loss of exclusivity at Apple should have very severe consequences for Google even if there are no further measures," DA Davidson analyst Gil Luria said.

"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," said Luria.

Google is not defenceless.

Written off as an also-ran in the AI race by critics after ChatGPT's buzzy launch in late 2022, Google has reached into its deep pockets to fund its AI efforts and leverage its vast data trove.

The company introduced an "AI mode" on its search page earlier this year, looking to retain its millions of users from going away to other AI models.

It recently expanded AI Overviews — summaries that appear atop the traditional hyperlinks to relevant webpages on a search query — for users in more than 100 countries, and added advertisements to the feature, boosting Search ad sales.

CEO Sundar Pichai said in testimony at an antitrust trial last month that Google hopes to enter an agreement with Apple by the middle of this year to include its Gemini AI technology on new phones.

Apple's Cue on Wednesday also said the company would add AI search providers, including OpenAI and Perplexity AI, as search options in the future, Bloomberg reported.

"(Apple's plan) also shows how far generative search sites, such as ChatGPT and Perplexity have come," said Yory Wurmser, principal analyst for advertising, media and technology at eMarketer.

That Google is willing to pay tens of billions of dollars to remain the default search engine shows how crucial the agreements are, Wurmser said.

For instance, ChatGPT in April reported seeing over 1 billion weekly web searches for its search feature. It has more than 400 million weekly active users, as of February