OAKLAND, Calif. — In 2000, just two years after it was founded, Google reached a milestone that would lay the foundation for its dominance over the next 20 years: It became the world’s largest search engine, with an index of more than one billion web pages.The rest of the internet never caught up, and Google’s index just kept on getting bigger. Today, it’s somewhere between 500 billion and 600 billion web pages, according to estimates.Now, as regulators around the world examine ways to curb Google’s power, including a search monopoly case expected from state attorneys general as early as …
On Tuesday, European Union officials led by Ms. Vestager will introduce some of the world’s most far-reaching technology regulations. The rules take aim at so-called gatekeeper platforms, like Amazon, Apple, Facebook and Google, which have an outsize role in the digital economy.Among the expected changes are rules for Facebook, Twitter and YouTube, which is owned by Google, about moderating user-generated content. Other requirements would make companies disclose more about how services like Google’s and Facebook’s digital advertising products worked. The largest companies could be forced to share some data with small rivals. Stiffer competition rules could …
SAN FRANCISCO — Five years ago, Marc Benioff negotiated to sell Salesforce, the software company he co-founded in 1999 and has run ever since, to Microsoft. If the deal had gone through, he would have been richly rewarded — but, in the end, just another employee of the tech colossus.With Tuesday’s news that Salesforce was buying Slack for $27.7 billion, Mr. Benioff did something much more difficult. He is now set to directly compete against Microsoft, one of the world’s most valuable companies, in its own favored territory.Microsoft has been slugging it out with Slack in the pandemic-fueled rush to …
EMERYVILLE, Calif. — Huddled under blankets to brace against the cold, J.B. August and his buddies couldn’t help grinning as the doors of the boarded-up GameStop store finally opened.
The six men, strangers turned friends after camping outside on the sidewalk all night, let out whoops of excitement on Tuesday morning as they finally got inside to buy the boxy yet sleek new Xboxes.
“I’m just treating myself — it’s therapy,” said Mr. August, 35, before triumphantly carrying the device out of the store after 18 hours of waiting. “I never really have time to do anything for myself, so let me just go ahead and make an investment for myself and my peace of mind.”
The gaming craze on display in the Bay Area was echoed around the country this week as video gamers flocked to stores and crashed preorder websites in their rush to buy new video game consoles: Microsoft’s Xbox Series X and Sony’s PlayStation 5.
The release of the devices heralded the beginning of a new generation for video gamers, but in many ways was just an exclamation point on what has already been a huge year in the gaming industry.
With much of the world confined to homes throughout the coronavirus pandemic, many have sought out entertainment for the first time through games on various devices. Hard-core fans are logging more hours on their screens, too.
Gamers worldwide are expected to spend a record $175 billion on software alone in 2020, according to Newzoo, a gaming analytics firm, up from $146 billion a year ago. In the United States, gamers spent $33.7 billion across hardware, accessories and content through September, according to the NPD Group. And Piers Harding-Rolls, a research director at Ampere Analysis, an analytics firm in London, projected that Sony would sell 8.5 million PS5s and Microsoft would sell 6.5 million of the Xbox Series X and the smaller, cheaper Series S through March.
But some Wall Street investors wonder: Are the pandemic-fueled growth and soaring profits of the video game industry — which was already bigger, by sales, than the film and music industries — sustainable after the virus subsides and doors to the outside are flung open again?
When news broke Monday that a Pfizer vaccine candidate had been found to be encouragingly effective in fighting the coronavirus, video game stocks like Activision Blizzard, Electronic Arts and Take-Two Interactive fell along with quarantine mainstays like Zoom and Peloton.
“It’s a concern on the part of a lot of investors that once stay-at-home rules are eased, that these publishers will see less engagement with their games,” said Yung Kim, an entertainment technology analyst for Piper Sandler & Company. “It’s a matter of how people decide to spend their time.”
Interviews with two dozen gamers, livestreamers turned influencers, analysts and company executives, however, found that most in the industry are convinced this is not just a pandemic-related boom.
People who believe gaming newcomers will be loath to drop their devices when concert venues, movie theaters and sports arenas reopen point to what they see as an inherent “stickiness” to their products. Gamers build communities and grow accustomed to socializing with their friends and family over rounds of Fortnite or Among Us, the argument goes, and those bonds only strengthen over time.
“If you look at what teens are doing across America — actually across the globe right now — this is kind of their social currency,” said Jaci Hays, the chief operating officer of FaZe Clan, an e-sports conglomerate whose popular gamers can make six or seven figures a year. “We don’t see it slowing down.”
Nick Kolcheff, a FaZe Clan member who earns a living streaming Fortnite and Call of Duty to the 4.5 million people following his Nickmercs Twitch channel, said the gaming boom had caused an entire generation of children to idolize famous streamers just as they would professional athletes.
“There’s a real commitment, there’s a real addiction,” he said. “After those teeth sink in, it’s kind of hard to bob and weave and get out.”
Mr. Kolcheff declined to say how much money he makes from Twitch, but a recent study by the online lender CashNetUSA estimated that he earns more than $1.7 million annually from the platform.
Twitch itself has had a banner year and now draws nearly 27 million average daily visitors, up from 17.5 million toward the beginning of 2020. The site, which is owned by Amazon, has hired hundreds of people this year, and is seeing nongaming live streams like cooking, travel, music and fitness flourish as well, said its chief operating officer, Sara Clemens.
Ms. Clemens argued that the ecosystem Twitch had built could outlast the pandemic.
“When people have built bonds on Twitch, when communities have formed around creators, those are incredibly durable over time, and so we are optimistic that those will sustain,” she said.
There are reasons for hesitation, however, despite many industry leaders’ rosy forecasts.
Joost van Dreunen, a New York University professor who studies the business of video games, said that if gaming companies felt as optimistic about the industry’s future as they claimed, there would have been a slate of acquisitions and investments over the past several months.
“It’s strange to me that the industry, in this moment of incredible momentum, has failed or refused to use it as tinder to just light a fire,” he said. “Why hasn’t the top brass in the games industry taken more risk?”
Some companies have made moves, as when Microsoft spent $7.5 billion in September to buy ZeniMax Media and its host of game studios. But an overall dearth of acquisitions, Mr. van Dreunen said, provides an opportunity for companies like Google and Amazon to force their way into the market by buying studios themselves.
“If you’re not buying, then aren’t you inevitably also opening the door for these big tech companies to kind of sneak in?” he asked.
But there are other reasons to believe the gaming boom has legs. This week’s console releases, the latest skirmish in a decades-long war between Microsoft and Sony, will most likely juice interest and sales even further.
“These are the sort of ‘comet moments’ that happen every six or seven years, and people reinvest into the ecosystem,” said Jerret West, Xbox’s chief marketing officer. He added that Xbox’s investment in mobile gaming and its Netflix-style subscription game service called Game Pass set it up well for a post-pandemic world.
PlayStation, for its part, has a strong slate of exclusive games that Sony executives believe will keep consumers using its devices beyond the stay-at-home mandates. Other game industry executives have similar high hopes.
And future advances will keep gamers coming back, predicted Eric Lempel, PlayStation’s head of global marketing. “There will be new ways of gaming: We’ve seen in the past few years great innovation in the space, and I think we’ll see even more,” he said.
This holiday season, we are faced with a tough quandary: The new PlayStation and Xbox consoles are arriving. Which should we gift to our loved ones — or to ourselves?
There are plenty of options. Beginning Thursday, Sony will ship two versions of the PlayStation 5: a $500 model that includes a disc drive, and a smaller $400 disc-free version that runs downloaded games. The Xbox — which also comes in two models, the $500 Series X and the $300 Series S — will launch on Tuesday.
There are many types of gamers, so we — Brian X. Chen, a PlayStation loyalist, and Mike Isaac, who grew up playing Xbox — test-drove both consoles in our homes. Earlier this week, we shared our impressions of the Xbox. This review will focus on the PlayStation 5.
BRIAN Hello again, Mike! Let’s forget about Biden vs. Trump for a moment to continue our debate about Xbox vs. PlayStation.
MIKE Is the PS5 the Biden or the Trump in this analogy?
Mmm, you know what? I’ll avoid answering that.
This is the ultimate test for companies like Sony and Microsoft. Sony spent the past seven years on top with a slate of killer games for the PS4, and largely overshadowed the Xbox.
After a few weeks with the new PS5, what do you think? Is this another winner?
BRIAN I’ll start with some disclosures. I’ve owned PlayStations since the first generation and never had an Xbox. But in 2006, I felt burned by the PlayStation 3, which had mostly lame games compared with Xbox 360, so I’ve kept an open mind for this new generation.
With that all said, I think PlayStation 5 is going to win my vote with my wallet this round. What about you?
MIKE I was reluctant to come out strong and stump for Sony, but you’re right. If I were to plunk down 500 bucks on a piece of hardware right now, it would be the PS5. I want to hear what won you over.
BRIAN Let’s start with hardware before we move on to games and the overall experience.
First things first: The PS5 is a behemoth. It’s more than 15 inches tall — that’s roughly four inches taller than the Xbox Series X. So you’ll need to figure out where you’re going to place it. (There’s also an ugly black stand that can be screwed on to keep it more stable, but I didn’t use it.)
In general, I like the console design. It looks curvy and futuristic and reminds me of a concept car.
MIKE Do you remember that computing brand Alienware? They made really expensive, insane computer systems with neon all over them? The company is part of Dell now, but I remember all of their ads in computer magazines I read during my youth. That was my immediate thought out of the box.
BRIAN Definitely, and that’s basically what the PS5 is: a powerful computer devoted to gaming. Similar to the new Xbox, it has a graphics processor that supports ray tracing, a complex rendering process that makes lighting and shadows look more realistic in graphics.
MIKE The graphics are very good. In the launch game we played, Spider-Man: Miles Morales, I could immediately tell how sharp the characters’ faces and landscapes were while playing. Colors popped, like the brilliant neon purples, reds and greens. Each one of Spider-Man’s various suits looked fantastic!
There is one thing I want to call out, though. I had a strange moment with the PS5 controller that struck me as potentially sensitive. It has a microphone built into it. That’s convenient, since you won’t immediately have to buy a separate headset to chat with friends.
But I wasn’t used to it. I had a moment where I was voice-chatting a friend on my iPhone while playing Call of Duty multiplayer, and my partner in the game reminded me that he could hear me! It freaked me out.
BRIAN Oh, man. Don’t carry your controller with you during bathroom breaks.
MIKE Yes, to be fair there’s a button and glowing icon that tells you when it’s on or off. But still, I wasn’t used to it. Learning curve!
BRIAN The controller is pretty nice otherwise. It’s larger and heavier than the previous PlayStation controllers but feels comfortable to hold for long sessions.
MIKE Can I geek out on the storage drive?
MIKE So Sony (and Microsoft) include what’s called a solid-state drive for storing all of your games and apps on the system. It loads games faster than traditional spinning hard-disk drives. It makes an enormous difference. I can’t tell you how much of my life has been whittled away by PS4 loading screens in the past.
BRIAN Tell me about it. Remember Red Dead Redemption 2 loading screens on the PS4?
MIKE Hah, I used to go to the kitchen and make a snack while RDR2 loaded up!
BRIAN With Spider-Man, it took about three seconds for the game to launch, and that is remarkable.
MIKE Yes, 100 percent. I’ve been really into Call of Duty: Warzone for the past few months — it has been my way to hang out with friends online during the pandemic — and the difference between playing it on PS5 compared with the PS4 was enormous.
For one, the solid-state drive meant that loading each session was so fast that often, I was one of the first people present in the level of every new game. And things just felt smoother.
Did you play any other games?
BRIAN I spent lots of time replaying recent PlayStation 4 titles, like Final Fantasy VII Remake and The Last of Us Part II. I also immediately noticed how much smoother those games ran. The frame rates were higher thanks to the beefier graphics processor.
Also very important: The PlayStation 5 was very quiet compared with the PlayStation 4, which had such a loud fan that I always feared that it was going to explode.
This is a good time to bring up backward compatibility — the ability to play games from previous console generations — a major selling point for both consoles.
MIKE Yes! So I’m curious about your thoughts on this.
BRIAN Over all, Microsoft wins here. The PlayStation is backward-compatible with only PlayStation 4 games. The new Xboxes are backward-compatible with games for Xbox One, Xbox 360 and even some games for the original Xbox.
Backward compatibility always sounds nice to have, but in practice, nostalgia is not enough to win me over. I spend more time playing new games than I do revisiting old ones.
MIKE Totally fair. And Microsoft really doesn’t seem to have that much new for us quite yet, right?
BRIAN As we talked about in our Xbox review, we were hamstrung because Microsoft didn’t have much compelling fresh content for us to try. Most of the games we tested were made for Windows PCs or previous generations of Xbox.
On the PlayStation, Spider-Man made a stronger first impression by demonstrating the hardware’s impressive speed and graphics.
Also coming soon to PlayStation is a new God of War game, another popular franchise that is exclusive to PlayStation. Exclusives matter a lot.
MIKE One hundred percent. I am a huge fan of God of War, and I bought the PS4 largely just to play one of its top exclusive franchises, The Last of Us and its sequel, The Last of Us Part II. Sometimes I wait for a year after launch to see what games have come out and how the system fares.
BRIAN The software interface of Xbox also feels inferior. It looks like a cluttered Windows app store. In contrast, the PlayStation interface looks elegant and streamlined.
MIKE Fair. But as far as I’m concerned, it’s still wide-open territory for both Sony and Microsoft to dominate the next-gen system wars. The next year will tell us what games are must-haves and what systems host them.
But the PS5 has won me over early on in the race.
BRIAN Me, too. There are different audiences for each console. Here’s what I think it boils down to: For game enthusiasts who choose only one console, the PlayStation 5 is a safer bet for now. The hardware and software are solid, and the system looks poised to get strong games in Year 1. (If you rarely buy discs, save 100 bucks and get the digital edition, which lacks a disc drive.)
Budget-conscious people and casual gamers will probably gravitate toward the $300 Xbox Series S, which runs games at a lower resolution and can play a plethora of older Xbox titles available for a low cost.
MIKE We’re in agreement. And though the PS5 will put a dent in my wallet, I consider it a form of video-game therapy as the rest of the world is dealing with the whole “elections and the future of democracy” thing.
BRIAN There’s that pandemic, too. I haven’t seen your face in months, but I’m looking forward to seeing your avatar in PlayStation land!
After seven years, the Microsoft Xbox and Sony PlayStation game consoles are getting big upgrades.
The companies are releasing their next-generation consoles just in time for the holiday shopping season. Microsoft will release two models on Tuesday: the Xbox Series X, the $500 version, and the Xbox Series S, its $300 lower-powered sibling. Sony will release its PlayStation 5, which comes in two models for $400 and $500, next Thursday.
So which one will you choose? There are many different types of gamers out there, so we — Brian X. Chen, a longtime PlayStation fan, and Mike Isaac, who grew up playing the Xbox — both tested the new consoles in our homes.
This review focuses on the new Xbox systems. Our review of the PlayStation 5 will follow this week.
BRIAN Hello, Mike. While the country has been tallying up votes for our next president, you and I have been playing video games to help our readers decide which new game console to vote for with their wallets.
For the last generation of consoles, PlayStation 4 was the must-have game device, with more than double the number of sales of the Xbox One. Now people are wondering if it’s the Xbox’s turn to win with its sleek, rectangular Series X and Series S.
What are your impressions so far?
MIKE For quite some time I was an Xbox loyalist. I remember back when I was in high school and the first Halo game came out. It was a must-play game, one of the best shooters of its time. Its success made owning an Xbox a priority.
Now, nearly 20 years later, I don’t have that same feeling with the Xbox Series X and Series S. There’s not an exclusive, Xbox-only game that I’m generally hyped up about, you know?
BRIAN Well, the new Halo game, called Halo Infinite, was supposed to be the big launch title to market these new Xbox systems. It’s a big disappointment that the director of the game stepped down and the project was delayed.
MIKE It’s a huge, noticeable absence, especially when you’re trying to launch a competing product to Sony — whose PlayStation 4 has dominated the market for the past seven years.
I’ll give it this: Hardware-wise, the Series X has many similarities to Sony’s new PlayStation. They both include solid-state drives, a storage technology that loads games faster than traditional spinning hard-disk drives.
BRIAN The new Xboxes and PlayStations also have graphics processors that support “ray tracing,” which is a complex graphics rendering process that makes lighting and shadows look more realistic. That in turn translates to much better graphics.
MIKE The Xbox controller retains the classic shape of what you’re used to with an Xbox, but it is trimmed down and sleeker — a match with the more elegant, minimalist design of the new Xbox models.
But here’s the thing: If the systems are on fairly level footing, technology-wise, it makes the game releases themselves that much more important.
BRIAN I agree. In terms of hardware features compared with the PlayStation, the Xbox is a tiny bit better. The Series X includes about 20 percent more storage for holding downloaded games than the PlayStation 5. The console is a compact tower that will be easier to fit into an entertainment center than the bulky PlayStation 5.
But that edge is negligible without killer games to play. For now, there isn’t anything all that compelling. Launch titles include Assassin’s Creed: Valhalla, Gears Tactics and Yakuza: Like a Dragon, among others. I tried a handful of launch games, and the graphics looked great and the console felt fast, but the games were not appealing to me.
The immediately attractive selling point of the Xbox is the Xbox Game Pass subscription service, which people call the Netflix of gaming. For $10 a month, you get access to dozens of games for current and past Xbox generations, and lots of these titles are excellent. Think Final Fantasy XV, Mass Effect, the Witcher 3 and more.
MIKE Yes, totally. So here’s where I think the Xbox has a real edge: I spent time cycling through just a fraction of the enormous Game Pass library, and it was like taking a stroll through fond memories of older Xbox games I loved, not to mention games that I meant to play but never found the time to.
BRIAN On top of that, the new Xboxes do a remarkable job making the graphics on older games look good on our modern high-definition televisions. Microsoft calls this Smart Delivery: If you buy a game for Xbox One but eventually upgrade to the Xbox Series X, Microsoft will automatically install the version optimized for the Series X.
MIKE Yep. I downloaded Batman: Arkham Knight last night as well as Fallout: New Vegas — two games I hadn’t thought about in years — and had a blast dipping back into them. I could immediately notice an uptick in graphic performance and definition in the Batman game, and the fighting wasn’t jerky or lagging because of poor processor performance.
It made me really consider Game Pass in a new light. Maybe I’d have access to a backlog of older titles, but they could feel newer, faster, better when run on a new piece of hardware like the Series X or Series S.
BRIAN I downloaded Final Fantasy XV, and it looked way better and ran more smoothly, with a higher frame rate, on the Series X than it ever did on my PlayStation 4. I even downloaded titles from 20 years ago, like Final Fantasy IX, and it looked surprisingly good.
MIKE Here’s my question, though: If I’m throwing down anywhere from $300 to $500 on a next-gen console, am I doing that to go play through old games? Or am I thinking more about the games to come?
BRIAN Well, Microsoft told me in a statement that more great games, like Everwild and As Dusk Falls, are on the way. There just was no “wow” factor with this slate of launch titles thanks largely to the Halo postponement.
That said, now is a good time to bring up the differences between the cheaper Xbox and the pricier one.
Most notably, the $500 Series X has higher graphics performance; games can be played in 4K resolution. The $300 Series S can play games in a lower resolution (around 1080P); the cheaper console also has about half the storage of the Series X.
I could immediately tell the difference: I opened Gears 5, a shooter, on both consoles and switched between them on my TV. The graphics in Gears 5 on the Series X were definitely more crisp and detailed.
MIKE Right. I’m curious, though. Should we worry about the lower-priced model becoming technologically irrelevant within a couple years? Basically, have they given any indication that the Series S won’t be able to handle big, graphics-intensive games in the future?
BRIAN I asked Microsoft, and the company said it should be simple for game developers to scale the resolutions for both consoles because they share the same computing architecture.
You can see that Microsoft is aiming for a casual type of gamer with the Series S. Parents, for example, who are looking to save a few bucks and don’t care about having the greatest game tech, will probably get a Series S for their children and load it up with Game Pass titles. That’s a great value.
MIKE Yes, totally fair. And I think that segment of the market is real and important.
BRIAN But console launches set first impressions, and my early impression from this launch is that PlayStation will once again have most of the cool exclusives this generation. So game enthusiasts who choose one console might go for the PlayStation as opposed to the Series X.
MIKE I admit, I think you’ll be proven right.
BRIAN We’ll have more to say about the PlayStation this week — we’re forbidden by Sony from sharing our impressions of that console at this moment thanks to these weird agreements known as review embargoes.
MIKE Looking forward to it. Meanwhile, I’ll start counting the days till the next Halo game is released.
OAKLAND, Calif. — When Tim Cook and Sundar Pichai, the chief executives of Apple and Google, were photographed eating dinner together in 2017 at an upscale Vietnamese restaurant called Tamarine, the picture set off a tabloid-worthy frenzy about the relationship between the two most powerful companies in Silicon Valley.
As the two men sipped red wine at a window table inside the restaurant in Palo Alto, their companies were in tense negotiations to renew one of the most lucrative business deals in history: an agreement to feature Google’s search engine as the preselected choice on Apple’s iPhone and other devices. The updated deal was worth billions of dollars to both companies and cemented their status at the top of the tech industry’s pecking order.
Now, the partnership is in jeopardy. Last Tuesday, the Justice Department filed a landmark lawsuit against Google — the U.S. government’s biggest antitrust case in two decades — and homed in on the alliance as a prime example of what prosecutors say are the company’s illegal tactics to protect its monopoly and choke off competition in web search.
The scrutiny of the pact, which was first inked 15 years ago and has rarely been discussed by either company, has highlighted the special relationship between Silicon Valley’s two most valuable companies — an unlikely union of rivals that regulators say is unfairly preventing smaller companies from flourishing.
“We have this sort of strange term in Silicon Valley: co-opetition,” said Bruce Sewell, Apple’s general counsel from 2009 to 2017. “You have brutal competition, but at the same time, you have necessary cooperation.”
Apple and Google are joined at the hip even though Mr. Cook has said internet advertising, Google’s bread and butter, engages in “surveillance” of consumers and even though Steve Jobs, Apple’s co-founder, once promised “thermonuclear war” on his Silicon Valley neighbor when he learned it was working on a rival to the iPhone.
Apple and Google’s parent company, Alphabet, worth more than $3 trillion combined, do compete on plenty of fronts, like smartphones, digital maps and laptops. But they also know how to make nice when it suits their interests. And few deals have been nicer to both sides of the table than the iPhone search deal.
Nearly half of Google’s search traffic now comes from Apple devices, according to the Justice Department, and the prospect of losing the Apple deal has been described as a “code red” scenario inside the company. When iPhone users search on Google, they see the search ads that drive Google’s business. They can also find their way to other Google products, like YouTube.
A former Google executive, who asked not to be identified because he was not permitted to talk about the deal, said the prospect of losing Apple’s traffic was “terrifying” to the company.
The Justice Department, which is asking for a court injunction preventing Google from entering into deals like the one it made with Apple, argues that the arrangement has unfairly helped make Google, which handles 92 percent of the world’s internet searches, the center of consumers’ online lives.
Online businesses like Yelp and Expedia, as well as companies ranging from noodle shops to news organizations, often complain that Google’s search domination enables it to charge advertising fees when people simply look up their names, as well as to steer consumers toward its own products, like Google Maps. Microsoft, which had its own antitrust battle two decades ago, has told British regulators that if it were the default option on iPhones and iPads, it would make more advertising money for every search on its rival search engine, Bing.
What’s more, competitors like DuckDuckGo, a small search engine that sells itself as a privacy-focused alternative to Google, could never match Google’s tab with Apple.
Apple now receives an estimated $8 billion to $12 billion in annual payments — up from $1 billion a year in 2014 — in exchange for building Google’s search engine into its products. It is probably the single biggest payment that Google makes to anyone and accounts for 14 to 21 percent of Apple’s annual profits. That’s not money Apple would be eager to walk away from.
In fact, Mr. Cook and Mr. Pichai met again in 2018 to discuss how they could increase revenue from search. After the meeting, a senior Apple employee wrote to a Google counterpart that “our vision is that we work as if we are one company,” according to the Justice Department’s complaint.
A forced breakup could mean the loss of easy money to Apple. But it would be a more significant threat to Google, which would have no obvious way to replace the lost traffic. It could also push Apple to acquire or build its own search engine. Within Google, people believe that Apple is one of the few companies in the world that could offer a formidable alternative, according to one former executive. Google has also worried that without the agreement, Apple could make it more difficult for iPhone users to get to the Google search engine.
A spokesman for Apple declined to comment on the partnership, while a Google spokesman pointed to a blog post in which the company defended the relationship.
Even though its bill with Apple keeps going up, Google has said again and again that it dominates internet search because consumers prefer it, not because it is buying customers. The company argues that the Justice Department is painting an incomplete picture; its partnership with Apple, it says, is no different than Coca-Cola paying a supermarket for prominent shelf space.
Other search engines like Microsoft’s Bing also have revenue-sharing agreements with Apple to appear as secondary search options on iPhones, Google says in its defense. It adds that Apple allows people to change their default search engine from Google — though few probably do because people typically don’t tinker with such settings and many prefer Google anyway.
Apple has rarely, if ever, publicly acknowledged its deal with Google, and according to Bernstein Research, has mentioned its so-called licensing revenue in an earnings call for the first time this year.
According to a former senior executive who spoke on the condition of anonymity because of confidentiality contracts, Apple’s leaders have made the same calculation about Google as much of the general public: The utility of its search engine is worth the cost of its invasive practices.
“Their search engine is the best,” Mr. Cook said when asked by Axios in late 2018 why he partnered with a company he also implicitly criticized. He added that Apple had also created ways to blunt Google’s collection of data, such as a private-browsing mode on Apple’s internet browser.
The deal is not limited to searches in Apple’s Safari browser; it extends to virtually all searches done on Apple devices, including with Apple’s virtual assistant, Siri, and on Google’s iPhone app and Chrome browser.
The relationship between the companies has swung from friendly to contentious to today’s “co-opetition.” In the early years of Google, the company’s co-founders, Larry Page and Sergey Brin, saw Mr. Jobs as a mentor, and they would take long walks with him to discuss the future of technology.
In 2005, Apple and Google inked what at the time seemed like a modest deal: Google would be the default search engine on Apple’s Safari browser on Mac computers.
Quickly, Mr. Cook, then still a deputy to Mr. Jobs, saw the arrangement’s lucrative potential, according to another former senior Apple executive who asked not to be named. Google’s payments were pure profit, and all Apple had to do was feature a search engine its users already wanted.
Apple expanded the deal for its big upcoming product: the iPhone. When Mr. Jobs unveiled the iPhone in 2007, he invited Eric Schmidt, Google’s then chief executive, to join him onstage for the first of Apple’s many famous iPhone events.
“If we just sort of merged the two companies, we could just call them AppleGoo,” joked Mr. Schmidt, who was also on Apple’s board of directors. With Google search on the iPhone, he added, “you can actually merge without merging.”
Then the relationship soured. Google had quietly been developing a competitor to the iPhone: smartphone software called Android that any phone maker could use. Mr. Jobs was furious. In 2010, Apple sued a phone maker that used Android. “I’m going to destroy Android,” Mr. Jobs told his biographer, Walter Isaacson. “I will spend my last dying breath if I need to.”
A year later, Apple introduced Siri. Instead of Google underpinning the virtual assistant, it was Microsoft’s Bing.
Yet the companies’ partnership on iPhones continued — too lucrative for either side to blow it up. Apple had arranged the deal to require periodic renegotiations, according to a former senior executive, and each time, it extracted more money from Google.
“You have to be able to maintain those relationships and not burn a bridge,” said Mr. Sewell, Apple’s former general counsel, who declined to discuss specifics of the deal. “At the same time, when you’re negotiating on behalf of your company and you’re trying to get the best deal, then, you know, the gloves come off.”
Around 2017, the deal was up for renewal. Google was facing a squeeze, with clicks on its mobile ads not growing fast enough. Apple was not satisfied with Bing’s performance for Siri. And Mr. Cook had just announced that Apple aimed to double its services revenue to $50 billion by 2020, an ambitious goal that would be possible only with Google’s payments.
By the fall of 2017, Apple announced that Google was now helping Siri answer questions, and Google disclosed that its payments for search traffic had jumped. The company offered an anodyne explanation to part of the reason it was suddenly paying some unnamed company hundreds of millions of dollars more: “changes in partner agreements.”