Alphabet declined to answer a question about Google and Apple’s AI deals to one investor during its fourth-quarter earnings call on Wednesday. Instead of answering an analyst’s question about how the tech giant was thinking about AI partnerships, such as its partnership with Apple to power Siri’s AI, the question was completely ignored.
But this decision tells us something. Alphabet is not ready to talk about how the partnership will impact its core business, which is increasingly focused on AI.
For many years, the relationship between Google and Apple has been mutually beneficial. The search partnership between the two companies resulted in the search giant paying the iPhone maker $20 billion to be the default search engine on Apple devices, according to filings in the Justice Department’s lawsuit against the search giant. As a result, Google now has access to Apple’s huge customer base. The iPhone maker announced last quarter that it had 2.5 billion active devices worldwide. To give you an idea of the scale.
The latest Apple AI deal is rumored to cost Apple about $1 billion a year, but the rewards beyond that aren’t as readily apparent for Google as they are for search. In Google Search, consumers see a link to the advertiser’s website at the top of the search results. AI-mode advertising could one day represent the future of Google’s search business, but for now it’s still an “experiment.”
The company first announced last May that it would introduce ads to Google Search’s chatbot-style interface, AI mode, and these tests have confirmed that ad placements will be placed below or integrated into chatbot responses. Google is also experimenting with agent shopping, such as the Shop with AI mode, to direct consumers with product-related inquiries from an AI interface to a seamless checkout experience.
Meanwhile, Google’s AI competitor Anthropic is taking aim at ad-supported AI with an upcoming Super Bowl ad, challenging the business model employed by ChatGPT maker OpenAI and Google.
How this will play out in the long term is still an open question, and clearly an open question at this point.
Overall, the Apple Siri deal was barely mentioned in Alphabet’s earnings call on Wednesday. Sundar Pichai said only that he is happy that Apple is the “preferred cloud provider” and will work with him to develop “the next generation of Apple foundation models based on Gemini technology.” Google’s chief business officer Philip Schindler used the exact same word when referring to Apple.
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