On May 7, Bloomberg reported that $Apple (AAPL.US)$ is actively researching improvements to the Safari browser, hoping to shift to an AI-driven Search Engine. This means that Apple and Google's long-term partnership may come to an end. The news led to $Alphabet-A (GOOGL.US)$ a decline of over 7% in stock prices on Wednesday.
Although Google may face challenges of declining search traffic and pressure on advertising revenue in the short term, in the long run, its user stickiness and business diversification will buffer the impact.
What proportion of Google's overall revenue comes from search revenue generated by Safari?
Google's search advertising revenue and total revenue for the first quarter were 50.7 billion yuan and 90.2 billion yuan, respectively, and the proportion of revenue from the Search Engine is not low, exceeding 50%.
However, Safari is not the only source of traffic. Google has not directly disclosed the revenue contribution from Safari. A reference point is the global market share of the Safari browser.
As of November 2024, the market share of the Safari browser on desktop is 9.13%, and on mobile is 22.89%; its share across all platforms and devices is 18.22%, ranking third among all browsers, below Google's own Chrome browser and Microsoft's Edge browser. Therefore, even if all revenue from Apple is eliminated, the loss may still be relatively limited.
How significant is the impact of AI search on traditional Search Engines?
1. Market share may be eroded.
Even without considering the possibility of Apple and Google pausing their cooperation, Google's market share has dropped from over 90% for a long time to 89.73% by the end of 2024. $Microsoft (MSFT.US)$ Competitors like Bing continue to erode it.
If Apple turns to Bing or other AI-related Search Engines, it could further drive market decentralization. Although Google has also launched the AI tool Gemini, data shows that its global market share as of April 2025 is only 13.5%, lagging behind ChatGPT and Microsoft Copilot.
Secondly, advertising pricing power may be compromised. The CPC (cost per click) of Google search ads has maintained an annual growth of 4-6% over the past five years, but the decline in traffic quality could reverse this trend.
Additionally, the efficiency of user data accumulation may also be impacted. The accuracy of user profiles on iOS devices is 30% higher than on Android systems, and the weakening of these data Assets will affect the precision of ad targeting.
2. However, the trend of declining market share for Google may be very gradual.
Google's search algorithm optimization and data accumulation have created technical barriers, and users are highly dependent on the accuracy of its results. Even if the default engine changes, users may manually switch back or directly visit Google.com. Moreover, large language models need to overcome computational bottlenecks to control response times within 1.2 seconds, while the current delay level is 47% higher than traditional search.
Historical experience shows that when the Firefox browser switched its default engine from Google to Yahoo in 2015, Google's market share dropped from 82% to 63.9% in the short term. However, users then manually switched back, and Yahoo's market share rapidly declined. This indicates that the weakening of users' active choice diminishes the actual impact of default settings, as brand loyalty to Google remains resilient.
Moreover, current AI search tools are better suited for answer-based queries. If Apple introduces third-party AI searches like Perplexity, Anthropic, or ChatGPT, their commercialization capabilities may still struggle to compete with Google, leading advertisers to continue favoring Google.
Financial impact: How will Google compensate for the revenue gap through income diversification?
On one hand, the termination of cooperation allows Google to convert fees payable to Apple into retained profits; if the loss of traffic offsets the cost savings, the impact on Net income may be less than expected.
On the other hand, the diversification of Alphabet-A's advertising revenue is expected to provide a buffer. Even if the growth rate of Alphabet-A's traditional advertising business slows down, the high growth rates of YouTube advertising (Q1 8.9 billion yuan) and cloud business (Q1 12.3 billion, +28%) will offset the negative impact from the slowdown in Search Engine growth. Applications like Google Map and Gmail, which do not rely on Safari browser searches, will also provide a safety net.
In more extreme cases, Alphabet-A may even benefit from this. Since Alphabet-A does not need to share advertising revenue from search traffic "taken back" after contract expiration with Apple, even if there is a decline in search traffic, the revenue Alphabet-A gains from each search may be higher.
Future investors will focus on three dimensions:
First, the depth of integration between Alphabet-A's Gemini and the Apple ecosystem. If a new AI search cooperation agreement can be reached, it may open up incremental space;
Second, the speed at which advertisers are migrating their budgets to AI platforms. Current monitoring shows that the migration rate is less than 5%;
Third, the evolution direction of regulatory policies. The latest position of the U.S. Department of Justice on search agreements will affect the extent of adjustments in cooperation models.
During the window of technological transformation, companies with full-stack AI capabilities and ecosystem synergy will have greater investment value.
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Editor/calvin, rocky
