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BizReport : Search Marketing : March 13, 2015

Expert: What could happen if Google, Apple split

There is a rumor floating about that Apple and Google could be facing a split; Google's engine has been the default for Apple's Safari browser for quite some time. However, some experts believe that Yahoo or Bing could be taking over that contract in the near future. If that happens, what does that mean for the search space?

by Kristina Knight

Kristina: Why is Google's most profitable traffic, user searches on via desktop declining?

Jamie Hill, Chairman & CEO, adMarketplace: Desktop searches on provide the most profitable traffic because Google doesn't have to pay margin on owned-and-operated properties, and therefore keeps 100% of the profits. However, user search is fragmenting - with users relying on mobile and tablet devices to do much of what they once did on desktop.

Yet, while user trends point to a decline in desktop usage, Google doesn't differentiate between mobile and desktop on their annual reports for owned and operated properties. So we don't know the extent of desktop decline specific to Google.

Kristina: Why is user search behavior shifting away from Google's desktop?

Jamie: User search is shifting away from desktop in general. How many people actually use a desktop at home? Even including laptops as desktops, a significant portion of leisure-time Internet browsing occurs on phones and tablets. Desktop search is declining because it is no longer the primary source of Internet access, and user searches are spread out between a variety of devices.

Kristina: Why are advertisers / publishers losing faith in Google?
Jamie: Advertisers and publishers are losing trust. Google isn't transparent with data and pricing. It is a black box. Advertisers still believe Google can perform well, but they do not believe that Google has their best interests in mind. They do not believe that their data is secure, and they do not believe they are getting the best value for their spend (for advertisers) or the fairest payments for their traffic (publishers). No one is going to stop buying from, or selling to, Google. However, many advertisers and publishers are looking for another option.

Kristina: How will Google's loss of browser contracts affect them going into 2015?

Jamie: Google lost its Mozilla contract in November of 2014, and it is a toss up that they will be able to keep the Safari contract, which expires in early 2015.

The Apple contract will be a major revenue hit for Google, especially on mobile. Losing Safari on desktop is not a big deal. However, losing Safari on mobile could be catastrophic. In the U.S., Apple iOS controls 40% of mobile market share and 70% of the tablet market share. If Google loses the Safari browser contract, they could lose close to half of their mobile revenue over night.

Of course, this drop-off may be temporary. The current contract makes Google the default browser for Safari, but the loss of the contract will not stop users from going into Safari and manually adjusting the default browser.

The loss of the Mozilla contract affected Google's desktop revenue far more than the Apple contract will. However, Mozilla only commands less than 10% of the total browser market, so Google losing Mozilla is not a huge revenue disaster, but may indicate the beginning of a trend away from Google.

Kristina: How will customer loyalty (specifically Apple) affect Google's search market share?

Jamie: Customer loyalty to Apple won't affect Google's search market because consumers aren't thinking about who provides the default browser search when they choose to buy a phone. Apple is a hardware company, and no one is going to stop buying iPhones as a result of any search contract, so Google is the only company that will take a revenue hit from this.

Customer loyalty to Google may mitigate the damage if Google and Safari split. Loyal Google users will have the option to manually change their default browser back to Google, and many may do this. It's impossible to predict how many users will switch back to Google. As such, projected revenue losses range from hundreds of millions to several billion. If users to switch back manually, Google will be paying Apple a lot less for that loyal traffic, since it will not have to pay a default browser revenue-share.

Tags: adMarketplace, Apple, Google, Google Apple split, search marketing

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