2025-05-08 18:07:33
Given that Google's stock fell 7.5% yesterday on the testimony of Apple exec Eddy Cue at the remedies portion of Google's search antitrust trial, the company probably had to respond. And so here it is, in full. Google responding to one very specific, particularly damning data point from Cue:
Here's our statement on this morning’s press reports about Search traffic.
We continue to see overall query growth in Search. That includes an increase in total queries coming from Apple’s devices and platforms. More generally, as we enhance Search with new features, 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, whether from browsers or the Google app, using their voice or Google Lens. We’re excited to continue this innovation and look forward to sharing more at Google I/O.
While there is no transcript of what Cue actually said, reading dozens of reports on the matter would seem to paint a pretty clear picture that he noted that search queries fell in the Safari browser for the first time ever last month. "That has never happened in 22 years," is his direct quote many publications are citing.
So how do we square that with Google's response above? In particular, the notion that: "We continue to see overall query growth in Search. That includes an increase in total queries coming from Apple’s devices and platforms."
As I noted yesterday, it seemed entirely possible that Google's search query health was fine overall – something the company keeps insisting, which already isn't a great sign if you have to keep reaffirming that – while Apple's was falling. Apple could be some sort of outlier, or, more likely, perhaps a harbinger of what's to come, thanks to their younger and more affluent user base. As big as the iPhone is, it's still undoubtedly just a slice of Google's overall query volume. Perhaps a sizable one, but also perhaps not sizable enough to shift the entire needle negative. But again, that's why the second part of Google's statement here is key: "That includes an increase in total queries coming from Apple’s devices and platforms."
So is Google saying Eddy Cue is lying? Is Eddy Cue lying? Under oath?!1 I think there's a way, perhaps a few ways, to square this circle.
Again, it's hard to know for sure without the direct transcript, but assuming Cue did simply say that search query volume in Safari fell for the first time last month, you'll note that he's not specifically talking about Google there. But it's basically implied. Because Google is the default – a big part of what this whole trial is about! – it seems safe to assume that nearly all of the overall queries are Google.
Except in one place: China.
Google famously doesn't operate in China and so Chinese users, unless they've broken through the Great Firewall, are not using Google for their queries. They're using Baidu, the default search partner there.
So what portion of the iPhone user base is in China? Let's turn to... ChatGPT for that. As of early 2025, the number seemed to be 17%. And if we assume roughly 1.4B iPhones in use overall, that's about 240M iPhone users in China.
Because Cue (apparently) didn't specify Google searches falling, it's definitely possible that Chinese users are driving an overall query volume drop. So perhaps it's less bad news for Google and far worse news for any of the China-specific search engines. We obviously can't know that for sure from Cue's comments. And it would seem a bit odd to have one country's usage be so different from the rest of the world so as to skew the numbers, but again, it's possible. Perhaps Chinese users are ahead of the curve when it comes to using AI for most queries. That certainly seems possible. But again, at such a volume to move all the data?
One more wrinkle here is that Apple famously/infamously hasn't rolled out Apple Intelligence in China yet. Because they needed a local AI partner – i.e. not OpenAI – there was a delay beyond the delays in the rest of the world in rolling out any AI features (they should be coming soon). Still, the iOS AI integration is probably not what moves the needle here anyway, and Chinese users can obviously download AI apps right now to use. And perhaps they are at a rate far above users in the rest of the world. In fact, maybe they are downloading and thus using AI apps more than they would otherwise because there’s no built-in Apple option? It's possible!
Another possibility: Cue may have just been referring to queries on the iPhone in particular. Again, there's no indication that's the case, but given how big the device is relative to other Apple products, and how vital it is to this case, it's possible he decided to focus in on that product for his comments (without specifying he was doing so).
And perhaps that's why Google, in their statement, very specifically noted "an increase in total queries coming from Apple’s devices and platforms". Maybe there's some wiggle room here in terms of query volume on the iPhone versus the Mac and iPad and every other Apple device. All of which also have Safari.
Perhaps the most likely scenario: the semantics one. That is, while Cue noted that queries within Safari were falling for the first time, and Google noted that queries across Apple devices and platforms were rising, what if the discrepancy is simply in people using other mechanisms to do Google queries on Apple devices?
This resonates with me because this is what I actually do. Most Google queries I perform on the iPhone and iPad are through Firefox Focus, a simple, private browser app made by Mozilla. I prefer it simply because I find it far faster to perform a query (mainly because that's basically all you can do with it), and to a lesser extent because I don't want nor need most of my Google searches saved forever, tied to my account.
Meanwhile, on macOS, I predominantly do Google searches not through Safari, but through my browser of choice: Arc. And while I'm undoubtedly an outlier in this regard, certainly many, if not most, macOS users are running Chrome as their main web browser. You know, the other key element in all of this. As such, any Google searches are going through there, not Safari.
What if it's Safari that's dipping overall and not just the query volume going through it – i.e. the query volume is dipping because the overall usage is dipping? That doesn't seem to be what Cue is suggesting, but again, you could argue it, semantically.
Meanwhile, Google's own statement seems to be suggesting that perhaps people are using other ways outside of Safari to do search, "the Google app, using their voice or Google Lens". Apple, of course, also has a deal to use Lens technology as a part of the Visual Intelligence aspect of Apple Intelligence. But presumably it's not a huge volume driver right now. Are any of these others?
It's worth noting that Cue himself immediately followed his comment about the query volume drop by noting that he believed AI services were eating into it. But without more detail there, it could be just like, well, you know, his opinion, man.
Regardless, the wrinkle here would be less about the drop an more about the change in trend. The fact that this was the first drop ever, again, in 22 years, according to Cue. So either something changed in a major way with user behavior/usage of search within Safari or overall app preferences, including, perhaps, using more AI apps for search, changed last month for some reason. Either way, it seemingly says something!
Again, it's hard to know for sure without more color from Cue. But these are three potential ways to square that circle. And perhaps it's even a mixture of the them.
Still, the high level point remains intact. The market is freaking out because it believes that Google Search is going to be disrupted by AI and Cue's comments were the first real data point indicating it was starting to happen. It may not yet be happening in the way that his comments were interpreted, but that doesn't mean it's not going to happen. The real question is if Google can be the ones to disrupt themselves here. They're clearly working like hell to do just that with Gemini.
A product which, incidentally, should be baked into the iPhone soon.
M.G. Siegler
M.G. Siegler
M.G. Siegler
1 It would not be the first time an Apple executive was accused of lying under outh. It wouldn't even be the first time this month!
2025-05-08 02:50:23
One man has the power to tank the stocks of not one, but two multi-trillion dollar companies in an instant. No, I'm not talking about Donald Trump (for once). I'm talking about Apple SVP Eddy Cue. Here's Mark Gurman, Leah Nylen, and Stephanie Lai reporting for Bloomberg from Google's continually newsworthy antitrust remedies trial:
Apple is “actively looking at” revamping the Safari web browser on its devices to focus on AI-powered search engines, a seismic shift for the industry hastened by the potential end of a longtime partnership with Google.
Eddy Cue, Apple’s senior vice president of services, made the disclosure Wednesday during his testimony in the US Justice Department’s lawsuit against Alphabet Inc. The heart of the dispute is the two companies’ estimated $20 billion-a-year deal that makes Google the default offering for queries in Apple’s browser. The case could force the tech giants to unwind the pact, upending how the iPhone and other devices have long operated.
Granted, this statement is certainly somewhat political in nature and is definitely not unbiased, as it's Cue who has been the one trying to allow Apple to intervene in Google's own case to help ensure their insanely lucrative Safari search payments remain intact in some way. And he's been failing at that. And Google hasn't exactly been helpful. So option B is to blow up Google's future on the witness stand, I guess.
And I mean, he may not be wrong!
Beyond that upheaval, AI is already making gains with consumers. Cue noted that searches on Safari dipped for the first time last month, which he attributed to people using AI. Cue said he believes that AI search providers, including OpenAI, Perplexity AI Inc. and Anthropic PBC, will eventually replace standard search engines like Alphabet’s Google. He said he believes Apple will bring those options to Safari in the future.
Uh. That one little aside is massive news. It's is perhaps one of the most damning statistics ever shared about the future of Google Search. While Google itself continues to insist that everything is fine, the reality is that a partner like Apple, at lower volumes than Google itself, not to mention a likely more affluent and slightly younger user base, may see such impacts first.
And well... here we are.
“Prior to AI, my feeling around this was, none of the others were valid choices,” Cue said. “I think today there is much greater potential because there are new entrants attacking the problem in a different way.”
That feels like a message aimed at Google. Get back in line, or else. But also potentially to Wall Street: don't worry, we'll be fine without the Google deal (if it comes to that).
Interesting that Cue specifically singles out Perplexity as one of the options they've been talking to, as I've been writing for a while that such a partnership undoubtedly makes a lot of sense as it helps with both AI and search in particular.
Still, it sounds like Apple has also looked at Anthropic – also no surprise given the reports about a potential tie-up for coding capabilities – and Google's own Gemini, as has been widely reported and basically confirmed to be coming soon by Sundar Pichai during the same trial. More surprising are DeepSeek, then again, Apple is one of the few Big Tech players that has no issues with operating in China, unless it involves tariffs (well, or AI). And xAI. Apple and Elon Musk have a long, contentions history. Including more recently around Apple's integration of ChatGPT specifically.
Before ChatGPT was chosen last year as part of Apple Intelligence in iOS 18, there was a “bake-off” with Google, Cue said. He said Google had provided a term sheet that “had a lot of things Apple wouldn’t agree to and didn’t agree to with OpenAI.”
This sounds potentially dumb on Google's part, given, you know, all of the above, but who knows what those terms actually were...
Technology is changing fast enough that people may not even use the same devices in a few years, Cue said. “You may not need an iPhone 10 years from now as crazy as it sounds,” he said. “The only way you truly have true competition is when you have technology shifts. Technology shifts create these opportunities. AI is a new technology shift, and it’s creating new opportunities for new entrants.”
This comment is obviously going to get headlines on its own – Apple Exec: The iPhone is Doomed – but I read this more as someone making an almost off-handed comment about the theoretical future of AI. And actually, it seems more directed at the court to maybe take it easy on Google with these remedies – you know, such as maybe not ending their default search agreements. Because the market will do its thing in the end.
I agree with Cue about the technology shifts and his implied point about what will actually disrupt Google (again, he wants to get across the point that it will happen naturally, without the need for remedies that also perhaps hurt Apple). And all of this has the added benefit of downplaying Apple's own dominance in the current market with the iPhone. That might be coming up again soon.
Still, I would bet a lot of money that we still have iPhones in 10 years. Maybe we can talk about 20. Maybe.
But more generally, my my god man. In one testimony Cue managed to get headlines for suggesting both the end of Google Search and the end of the iPhone! And the stocks of both companies are acting accordingly!1
Lastly, I enjoyed Cue revealing that he's "lost sleep" over the potential end of the Google Search revenue arrangement with Apple. Which sort of undercuts his other points above. But also seems honest. I do imagine the potential of losing $20B+ in nearly pure profit overnight would keep you up at night.
One more thing: Cue went on to say that even if they didn't get the $20B+ a year, Apple would still make Google the default search engine because they want to get their customers the best experience. To that I say, oh really?
Update May 8, 2025: Google has now responded to Cue's remarks, noting that they're not seeing any did in search query volume -- including, notably, on Apple devices. But there's seemingly some ways to square this circle...
M.G. Siegler
M.G. Siegler
M.G. Siegler
M.G. Siegler
1 Though I would also imagine Wall Street doesn't love the assertion that Apple might swap out Google Search for an AI search product any time soon, as it implies Apple cutting ties with the $20B+ a year payments – pure, meaningful profit for Apple – from Google before a judge even formally makes them.
2025-05-07 20:32:15
It’s one thing to know something is idiotic and customer hostile, it’s another to see it. Such was the case with a single little tweak to Amazon’s Kindle app for iOS. Here’s Andrew Liszewski for The Verge:
Following a ruling on April 30th by the Epic Games v. Apple judge Yvonne Gonzalez Rogers, Apple can no longer collect a 27 percent commission on purchases made outside of apps or restrict how developers can direct users to alternate payment options. Apple has appealed the decision, but is also complying with it in the interim, prompting several companies to announce app updates making it easier for users to pay for subscriptions and services. That now includes Amazon’s iOS Kindle app. Contrary to prior limitations, there is now a prominent orange “Get book” button on Kindle app’s book listings.
That’s it. That’s the change. A single button. And not even really a designed one. It’s just a big rectangle. It is Amazon orange, so that must have taken an additional 40 seconds to implement. “Get book”. That’s it. That’s the feature.
It sounds like I’m making fun of Amazon, but really, I’m making fun of Apple. Because while Amazon did make a choice not to include such a button in their app, Apple really gave them no choice. Given the agency model used in this particular category, there was simply no way for Amazon to make the economics work, as John Gruber noted yesterday. Even raising prices would just send more money to the publishers — and to Apple.
It’s a ridiculous situation, but it has been a ridiculous situation for 15+ years now. Steve Jobs famously didn’t set up the App Store to be a profit driver for Apple, instead hoping to break-even, or maybe a little better. But really the model was a value-add to move more iPhones.
And it worked. To the point where the scale of the iPhone quickly turned the App Store into a massive money maker as well. And now it’s a massive part of the Services business for Apple. And because that has become the only reliable form of growth for Apple’s overall business — you can start to see what’s going on here...
Apple should obviously — obviously — have made the change that Judge Gonzalez Rogers just forced upon them, years ago. But why would they? There was money to be made and there was no indication that such stupidity from a pure product perspective was harming iPhone sales. But the worry long ago should have been exactly what happened: that a judge would force changes upon them because the whole situation is so obviously ridiculous. Apple had a chance to dictate their own terms for such changes, but they lost that privilege to prove a point. A point which now is coming back to haunt them: that users are locked into the App Store.
Steve Jobs went with the 30 percent cut because it was simple. It’s what they did with iTunes. And that was working well for everyone. But that itself was derived from video games, dating back to Nintendo making physical cartridges for Hudson Soft when they couldn’t make their own for the NES in the 1980s. Without that need to produce a physical product for a developer, the cut was 10%.
Had the cut been 10% in the App Store from the get-go, some developers undoubtedly still would have complained. When there’s money to be made and margin to be gained, there will always be complaints. But Amazon’s Kindle business, for example, could have actually worked with such a cut.
And that cut should have only applied if you used Apple’s own rails to buy a book in-app. But there should have been — as there is now — a nice, easy way to link out to the web in order to buy directly from Amazon. No Apple cut required. There would still be an overall developer fee — hell, maybe even a “listing fee” to be in the App Store and account for Apple’s IP and help in connecting Amazon to customers. But if you buy something elsewhere, the money (and customer) is yours. In such a world, I would be fine with a requirement to have an in-app option so that Apple could compete for the customer. But they would need to compete. Not capture.
But really, Apple should have done this because it made for a better experience for their users. And to a lesser extent, their developers. Because, if nothing else, they keep the users happy too. It's possible that such a change wouldn't have mattered one lick with regard to iPhone sales in the past decade, as Ben Thompson argues. It's impossible to know, but it's certainly hard to argue with the actual results. But regardless, it would have protected the future of the platform against these current attacks. And ultimately, against developer rot which at some point could lead to user revolt. Everything often looks fine — including sales — until, suddenly, it doesn’t. Just ask BlackBerry.
Nothing stays on top forever, but you could at least put yourself in the best position to keep succeeding. And for Apple, that means offering the best product. Not just the best hardware, the best total package. They used to do that. These days, Apple has been succeeding in spite of their spite.
”Get book” — you idiots.
M.G. Siegler
M.G. Siegler
2025-05-06 16:30:56
2025-05-06 06:03:45
It's not exactly shocking, but it is surprising. OpenAI has effectively laid down their arms in the fight to become a for-profit. Instead, they'll seek to move to a structure they believe will get most of what they wanted out of such a maneuver, without fully maneuvering it.
At least, that's how it sounds right now. I suspect there's going to be a lot of back and forth around all of this in the coming days, weeks, and months. But clearly Sam Altman believes – or wants everyone else to believe – that shifting OpenAI's for-profit arm to a Public Benefit Corporation, while still allowing the non-profit to have effective control over that entity, will square the circle. We'll see.
What's clear is that OpenAI didn't think they were going to win the battle to invert the company and become a full for-profit with a non-profit arm.Elon Musk threw a wrench in this plan, but many others held wrenches here too. As it turns out, there's a lot at stake and a lot of potential stakeholders when you're talking about a $300B non-profit!
Removing the cap on the potential profits that the non-profit would potentially earn one day (lol) seems straightforward enough as that whole structure was silly to begin with. But less straightforward is just about everything else here, most of which isn't stated in OpenAI's blog post on the matter. Will those holding the current rights to future profits be converted into actual equity holders in some way? This article by Cade Metz of The New York Times suggests that may happen:
OpenAI said that it was still negotiating the nonprofit’s stake in the new corporation and that the nonprofit would pick the board members of the new entity.
It implies that the non-profit would hold an equity stake in the new PBC, and that such a stake would give it control. But there's a lot of variables in even just that. Would this non-profit hold 51% of the voting rights? More? Is that the same as the equity structure or would the non-profit be granted some kind of shares with out-sized voting rights? Or if it's straight equity control, might they be diluted below a controlling stake in a future fundraise?
Where does this leave Microsoft? The official blog post cites them once:
We made the decision for the nonprofit to stay in control after hearing from civic leaders and having discussions with the offices of the Attorneys General of California and Delaware. We look forward to advancing the details of this plan in continued conversation with them, Microsoft, and our newly appointed nonprofit commissioners.
I'm not sure how much Microsoft loves being named in such a group, as it implies they also have some level of control over OpenAI. But, well, they've given them $13B+ and likely would have been the largest shareholder in the for-profit full conversion. Oh boy, can't wait for their comment on this matter.
We do seemingly have some sense about how SoftBank – OpenAI's new main benefactor – feels about this, as multiple publications clearly asked Altman about that specifically. And he expressed nothing but confidence that not only was Masa Son behind such a move, but that they wouldn't be cutting off the funding spigot, even though they technically could without a full for-profit shift.
What about the other recent investors not named SoftBank? Do any of them ask for their money back? Here, I have to believe that OpenAI's actual metrics remove that risk. They may not be on exactly the ride they signed up for, but it's still one hell of a ride.
Will the actual states at the center of all of this – Delaware and California – be okay with this move? Can they even do anything about it if effective control is not changing? Is that sort of the point of all of this? So. Many. Questions.
It was just a few hours ago that I was writing about the possibility of Microsoft being on the verge of getting a large equity stake in OpenAI, and trying to piece together what that could look like:
I've also tried to do the math there previously, but it's harder because OpenAI is still a startup – albeit one valued at $300B – and doesn't have to file disclosures. And while Microsoft does, because of the even more unique structure of the OpenAI deal, they don't have to disclose their holdings in the company. Again, technically right now, they hold no equity. But they also don't even have a stake with as clear of a path to convert into equity, such as a convertible note.
At the same time, it seems like one way the conversion will play out is to treat these previous "profit share" investments as de-facto convertible notes. But it's even more tricky because Microsoft as well as OpenAI undoubtedly don't want such rights to convert into equity where Microsoft owns a controlling share of the company. OpenAI doesn't want that for obvious reasons. But for Microsoft, it would be a potential regulatory nightmare if that were to happen.
So my quick-and-dirty math guess has been that Microsoft ends up owning something around 33% of OpenAI if/when they convert. This is all even more muddled because of the non-profit which will still not only exist, but will hold a large portion of that equity as well in such a conversion – perhaps close to Microsoft's amount. At 33%, Microsoft's stake would be worth a nice and clean $100B. But even at 25%, it's worth $75B. With these numbers in mind, it's rather mind-boggling that Microsoft seemingly keeps working against OpenAI. Or, at the very least, is hedging like crazy – including, internally – and making life harder for the startup. Then again, maybe that will help paint a smoother regulatory picture if/when the conversion happens. "Even though we own a massive stake in the category leader in AI, we're still competing, see!"
Muddled indeed. Not only does the non-profit still exist, they still control the entity – which again, is actually good news for Microsoft, it seems. But is that good news for OpenAI? And will it allow them to raise the potential "trillions" that Altman cites going forward? Nobody knows.
Reading this, I certainly don't get the sense that OpenAI itself is fully confident in all of this – hence the seemingly out-of-the-blue blog post on the matter backtracking from the previously confident stance on the matter.
The first line of Altman's blog post is the only one I can cite with confidence: "OpenAI is not a normal company and never will be."
Update May 6, 2025: Well, it didn't take long for some reporting to dig up how Microsoft thinks about all of this. More analysis of this below...
M.G. Siegler
2025-05-05 23:19:35
Well, one big internal change around Apple and AI didn't take long...
Apple is teaming up with startup Anthropic on a new “vibe-coding” software platform that will use artificial intelligence to write, edit and test code on behalf of programmers.
The system is a new version of Xcode, Apple’s programming software, that will integrate Anthropic’s Claude Sonnet model, according to people with knowledge of the matter. Apple will roll out the software internally and hasn’t yet decided whether to launch it publicly, said the people, who asked not to be identified because the initiative hasn’t been announced.
This seems like exactly the type of thing they might want to announce at a certain developer-focused conference in June... Then again, we're only weeks away and presumably Apple won't have enough time to fully integrate the functionality by then (hence why it's perhaps internal-only, for now). Do they dare risk pre-announcing something again? After all:
Last year, Apple announced its own AI-powered coding tool for Xcode called Swift Assist. The company had intended to roll it out in 2024 but never actually shipped it to developers. Internally, engineers have complained that the company’s own system could hallucinate — or make up information — and even slow down app development. The Anthropic partnership is an acknowledgment that Apple could use some outside help, though the two systems could ultimately work together.
Then again, Claude is fairly well tried and tested at this point. And many consider it to be the best model for "vibe coding". And this is a particular problem for Apple right now amongst their developer set. Riffing on this piece by Bryan Irace, I wrote the following back in March:
This feels especially timely given that the dates for WWDC – Apple's developer conference – were just announced. Apple has already taken the hit for postponing at least some of those user-facing AI features until later this year or next (or later), so it will put extra pressure on them to showcase to developers what their AI can do for them. They now have just over two months to polish that narrative – and they have to be extra careful here, because they really can't afford to show things that aren't ready to ship – in the fall, at the latest.
Beyond the consumer AI vaporware, Apple also somehow managed to bungle the roll-out of Swift Assist, shown off at last year's WWDC and still basically nowhere to be seen in the wild. Not great, Tim.
Again, this might give them a relatively straightforward way to rectify the situation. And it continues Apple down a rather interesting path of partnering on AI, rather than trying to go it alone. First, of course, came ChatGPT. And now, it seems, Gemini is closer to launching as well as a part of Apple Intelligence (we'll almost for sure hear more about it at WWDC). An Anthropic partnership on coding makes a lot of sense on the surface, the question is if Claude would also be a part of the more general "world knowledge" Apple Intelligence features – presumably Anthropic would want such a deal alongside the use of Claude for coding?
Then the question shifts back to my old favorite one: what kind of deals might Apple strike for these features and functionality? The OpenAI partnership nearly shifted from free (as in beer) to paid for via an investment before that fell apart. But now there's seemingly some sort of rev share agreement in place? For Google, all you can be sure about is that whatever the deal is, it will not be exclusive! For Anthropic, might there be some sort of investment angle there? Or just straight cash, homey?
One more thing: Another section from my piece back in March suddenly feels a lot different given some recent App Store updates:
You'd think all of this plus the ongoing regulatory pressures would make Apple change their tune. But instead, even though several macro trends were clearly aligning against them years ago, they've largely dug in their heels. They change things when they absolutely must, legally, but usually only the bare minimum that's required by law. And so now we have this increasingly piecemeal system of App Store rules and policies depending on where a user lives and a developer operates. It's completely untenable, but again, it has been for years. Now it's just a mess.
Well, one scathing ruling later and we have some actual change! How about some more, perhaps less forced, at WWDC, Apple?
M.G. Siegler
M.G. Siegler
M.G. Siegler
