In an antitrust lawsuit filed by the U.S. Department of Justice against Google, Judge Amit Mehta of the United States District Court for the District of Columbia ruled last year that Google illegally maintained monopoly power in the market for general search services and the market for general search text advertising. The court held that Google entered into an anticompetitive deal with Apple and others for the placement of Google’s search engine. That left the question of what remedy to impose for this violation of the Sherman Act.
The phase of the trial to determine the remedy is going on right now. One of the witnesses called to testify was Apple executive Eddy Cue. As the court fashions the remedy, Apple has an interest in continuing to be paid by Google to make Google the default search engine in Safari. Documents filed in that lawsuit reveal that Google paid Apple $20 billion in 2022 to be Safari’s default search engine. (Apple’s revenue for fiscal year 2022 was $394.3 billion, so that was about 5% of Apple’s total revenue and about 25% of the portion of Apple’s revenue for fiscal year 2022 that Apple attributed to “Services.”) When Cue testified, it was no surprise that he favored a remedy that allowed Google to continue paying Apple. For example, he testified that it “just seems crazy to me” that the DOJ argued that the appropriate punishment against Google would be to let Google save money by no longer making these payments to Apple.
Cue also testified that, given how rapidly AI is advancing, the antitrust threat that Google posed in the past is shrinking. For example, he testified that, for the first time in 22 years, Google searches in Safari actually declined last month as more people are running searches using AI tools like ChatGPT.
The portion of Cue’s testimony that particularly interested me—and the reason for today’s post—was his testimony about how things change in the world of technology. Lauren Feiner of The Verge reports that Cue explained the changes in the industry that he had seen so far as follows:
Cue cautioned the judge that tech is not like other industries, and giants often fall even without court intervention. “When I got to Silicon Valley, all of the best companies, or the most successful companies, either don’t exist today or are significantly smaller and less impactful,” Cue said, pointing to companies like HP, Sun Microsystems, and Intel. In the technology field, being an incumbent might not offer the same benefits it does in other markets. “We’re not an oil company, we’re not toothpaste. These are things that are going to last forever,” he said. “You may not need an iPhone 10 years from now.”
The idea that you may not “need” an iPhone in 10 years does not mean that there will not be an iPhone in ten years for those who prefer to use a smartphone. But it does mean that somethiing better would be available to use instead of an iPhone. We’ve seen this story in the past, even just in the context of Apple. The iPod debuted in 2001 and it went on to become widely regarded as the device that saved Apple, not only because of the revenue that Apple saw from the incredibly high number of iPod sales, but also because people who became fans of the iPod would often consider and then purchase other Apple products, like an Apple computer. This was called the iPod halo effect. But despite the success of the iPod, when the iPhone was introduced in 2007, the iPod became just one of many apps on the device. From that day forward, you no longer needed an iPod to have a great way to play music on a portable device.
So what did Eddy Cue have in mind when he testified that you may not need an iPhone ten years from now? It’s an interesting question that I’ve been thinking about since last week. I’m a big fan of my Apple Vision Pro, and so I think—and hope—that Apple will be selling a similar device ten years from now that is much lighter and much less expensive. Just a few days ago, Mark Gurman of Bloomberg reported that Apple is making progress on a new computer chip that will allow Apple to make something as powerful as the Apple Vision Pro that will fit in a pair of smart glasses that are similar to the Ray-Ban Meta smart glasses, which look like this:
Perhaps Cue was thinking of something like this, which would include a “virtual” iPhone-like device that you would see through the glasses but that nobody else would be able to see. (That would certainly be useful for privacy.) Or maybe he had something else in mind that I’m just not creative enough to think about right now. Some of the original devices created by companies to incorporate something like an iPod into a smartphone certainly exhibited a lack of creativity, most notably the ROKR developed by Motorola, which was released in 2005 and looked like the other mobile phones already in the market and nothing like the iPhone that Apple would release two years later:
I look forward to the day when we have something even better than the iPhone that will cause me to no longer need an iPhone. I’ll mark my calendar for the year 2025 to come up with a new name for this website.