Eshu Marneedi

Mark Gurman, Leah Nylen, and Stephanie Lai, reporting for Bloomberg:

Apple Inc. 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…

“We will add them to the list — they probably won’t be the default,” he said, indicating that they still need to improve. Cue specifically said the company has had some discussions with Perplexity.

“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.”

There are multiple points to Cue’s words here:

• Cue ultimately intended for his testimony to prove that Google faces competition on iOS, and that artificial intelligence search engines complicate the dynamic, thus negating any anticompetitive effects of the deal. I’m skeptical that argument will work. It sounds like a joke. “This deal does nothing, so you should ignore it and let us get our $20 billion.” Convincing!

• Implicitly, Cue is describing a future for iOS where more search engines will be added to Safari, but he also rules out the possibility that Safari allows any developer to set their search engine as the default. When someone types a query into the “Smart Search” field in Safari, it creates a URL with custom parameters. For example, if I typed “hello” into Safari with Google as my default search engine, Safari would just navigate to the URL https://www.google.com/search?q=hello, perhaps with some tracking parameters to let Google know Safari is the referrer. Apple could let any developer expose their own parameters to Safari to extend this to any search engine (like Kagi), but if Cue is to be believed, it probably doesn’t have any plan to because it makes a small commission on the current search engines’ revenue¹.

• Cue seems disinterested in describing how Apple would handle a scenario where its search deal with Google is thrown away. There was no mention of choice screens.

Bloomberg’s framing of the new search engines as a “revamp” is disingenuous. From Cue’s testimony, Apple seems to be in talks with Perplexity to add it to the model picker, presumably with some revenue-sharing agreement like it has with DuckDuckGo, Bing, and Yahoo. This is, however, different from a potential deal to integrate Gemini, Claude, and any other models into Siri and Apple Intelligence’s Writing Tools suite, which Sundar Pichai, Google’s chief executive, is eager to do. I presume Cue is weary of discussing those potential deals in court because the judge might shut them down, too. While OpenAI didn’t pay Apple anything to be placed in iOS (and vice versa), I think Apple would demand something from Google, or perhaps the opposite. Google is a very different company from OpenAI.

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.”

Cue said that, in order to improve, the AI players would need to enhance their search indexes. But, even if that doesn’t happen quickly, they have other features that are “so much better that people will switch.”

Of course Cue would be the one to say this, as Apple’s services chief, but I just don’t buy it. Where is this magical AI supposed to run — in thin air? The iPhone is a hardware product and AI — large language models or whatever comes out in 10 years — is software. Apple must make great hardware to run great software, per Alan Kay, the computer scientist Steve Jobs quoted onstage during the evergreen 2007 iPhone introduction keynote. Maybe Cue imagines people will run AI on their Apple Watches or some other wearable device in the distant future, but those will never replace the smartphone. Nothing will ever beat a large screen in everyone’s pocket.

Cue is correct to assert that AI caused a major shakeup in the search engine and software industry. He should know that because Apple is arguably the only laggard in the industry — Apple Intelligence, which Cue is partially responsible for, is genuinely some of the worst software Apple has shipped in years. But the reason Apple is even floated as a possible entrant in the race to AI is because of the iPhone, a piece of hardware over a billion people carry with them everywhere. Jobs was right to plan iOS and the iPhone together — software and hardware in Apple products are inseparable, and the iPhone is Apple’s most important hardware product. The iPhone isn’t going anywhere.

Some pundits have brushed off Cue’s words as speculation, which is naïve. If this company is sending senior executives to spitball in court, it really does deserve some of its employees going to jail for criminal contempt. I think Apple is done lying to judges and this is indicative of some real conversations happening at Apple. Tim Cook, Apple’s chief executive, is eager to find a way to close his stint at Apple out with a bang, and it appears his sights are set on augmented reality, beginning with Apple Vision Pro and eventually extending with some form of AR glasses powered by AI. That’s a long shot, and even if it succeeds, it won’t replace the iPhone. There’s something incredibly attractive to humans about being lost in a screen that just isn’t possible with any other form of auxiliary technology. Pocket computers are the future of AI.

For a real-life testament to this, just look at the App Store’s Top Apps page. ChatGPT is the first app on the list. While Apple the company and its software division is losing the race to AI, the iPhone is winning. People are downloading the ChatGPT app and subscribing to the $20 monthly ChatGPT Plus tier, giving 30 percent to Apple on every purchase without Apple lifting a finger. The most powerful AI-powered device in the world is the iPhone (or maybe the Google Pixel).