Google paid $26.3bn for search default deals in 2021, executive testifies

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A top Google executive on Friday revealed the internet giant paid $26.3bn in 2021 to make its search engine the default on most smartphones and browsers, after a judge forced the company to disclose what it claimed was highly sensitive commercial information.

The disclosure, which came in the US government’s antitrust trial against Google in Washington DC, marked the first time the company has revealed how much it pays to guarantee its search service will get pole position in front of users when they conduct a search.

The default agreements are at the centre of the Department of Justice case, with the government claiming they unfairly shut out rival search engines and enable Google to maintain its search monopoly. The company argues the default payments do not shut out rivals because most internet users choose to make its search engine the default on their devices even when it does not pay for the privilege.

Lawyers for the DoJ said at the start of the trial last month that Google spent more than $10bn a year on the defaults, but most observers had expected the figure to be far higher. Wall Street analysts put the company’s payments to Apple alone at $16bn-$20bn a year, making its search service the first thing users see on the iPhone maker’s Safari browser.

Prabhakar Raghavan, head of search and advertising at Google, disclosed the figure in court on Friday and called it the internet company’s largest single cost, according to Bloomberg. He said the default payments had more than tripled since 2014. Google generated $146.4bn in search advertising revenue last year.

The default payments were the biggest part of the $45.6bn in total traffic acquisition costs that Google paid to other companies in 2021 to carry its search service and help it generate more advertising.

Judge Amit Mehta, who is overseeing the antitrust case, ordered Google to disclose the figure despite the company’s claim that it could hurt future negotiations by alerting other companies to the amounts it was willing to pay.

Mehta has come under fire from Google’s critics for allowing much of the company’s early testimony to be heard behind closed doors, leading him to say that he would seek to have more of the financial details behind the case made public.

Some analysts have warned that if the search company loses in court and is banned from paying for the defaults, it could have the perverse effect of boosting Google’s profits while hurting other tech companies.

According to an estimate by Bank of America analysts, Google is set to pay Apple more than $21bn in the current fiscal year. Barring the payments could take a large bite out of Apple’s services revenue, which amounted to $78bn last year, though it would still be free to sell the default position to other search engines.

The trial, which began last month, is the government’s most consequential antitrust showdown with Big Tech since its case against Microsoft in the 1990s. The court is expected to hear testimony early next week from Google chief executive Sundar Pichai.