During its fourth-quarter earnings call on Wednesday, Alphabet notably sidestepped an investor's pointed inquiry regarding Google's artificial intelligence collaboration with Apple. An analyst's question, probing the tech giant's strategic approach to AI partnerships, specifically referencing the agreement to power Siri's AI capabilities, received no direct response.
This deliberate silence offers a significant insight: Alphabet appears unprepared to publicly discuss the potential ramifications of this partnership on its core business, which is increasingly centered on AI development and integration.
Historically, the relationship between Google and Apple has proven mutually advantageous. Their long-standing search partnership, as revealed in Department of Justice lawsuit filings, involved Google compensating Apple with an estimated $20 billion to maintain its position as the default search engine across Apple devices. This arrangement, in turn, granted Google access to Apple's vast user base, which the iPhone maker recently announced stands at an impressive 2.5 billion active devices globally.
The latest AI collaboration with Apple is reportedly valued at approximately $1 billion per year from Apple's side. However, Google's immediate financial gains from this new venture are less apparent compared to the established search partnership. In traditional Google Search, advertisements are prominently displayed at the top of search results. In contrast, ads within "AI Mode"—a potential future iteration of Google's search business—are currently in an experimental phase.
Google had initially announced in May of last year its intention to integrate advertisements into AI Mode, its chatbot-style search interface. Current tests show these ads either placed below or seamlessly woven into the chatbot's responses. Furthermore, Google is exploring "agentic shopping" through initiatives like "Shop with AI Mode," designed to guide consumers from product-related queries within the AI interface directly to a streamlined checkout experience.
In a parallel development, Anthropic, a key AI competitor to Google, is actively challenging the ad-supported AI model adopted by both OpenAI (maker of ChatGPT) and Google. This challenge is notably being amplified through a forthcoming Super Bowl advertisement.
The long-term implications of these interwoven strategies remain an open question, and for the time being, one that Alphabet has chosen not to address publicly.
Overall, the Apple Siri deal garnered minimal attention during Alphabet's earnings call on Wednesday. CEO Sundar Pichai's only comment was an expression of satisfaction that Google serves as Apple’s "preferred cloud provider" and would contribute to developing "the next generation of Apple foundation models based on Gemini technology." Philipp Schindler, Google’s Chief Business Officer, echoed this precise phrasing when referencing Apple.
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