According to a Google executive, the revenue-share payments made by Google to smartphone makers and wireless carriers are necessary for the innovation and support of the Android software ecosystem, which is essential for competing with Apple Inc’s iPhone.
During the US Justice Department’s antitrust trial in Washington, Jamie Rosenberg, who joined the company in 2010, testified that the competition between Google and Apple is fierce.
Rosenberg claims that sharing revenue from search with companies like Samsung and Verizon ensures resources for promoting and maintaining new Android products, including security updates.
He emphasized the importance of having aligned incentives to support the Android ecosystem.
The Justice Department has sued Google for antitrust violations, alleging that the payments to Apple, Samsung, and other companies to be the default search engine has blocked competitors.
The lawyers for the Justice Department sought to discredit Rosenberg’s testimony by arguing that Google could support Android with money derived from the Google Play store, which made over US$12 billion in operating profit in 2021.
Rosenberg explained that manufacturers must sign a mobile app distribution agreement to put Google apps on devices, including search, Chrome, and Play. However, the devices don’t have to have these apps as default choices.
Separate revenue-share deals allow companies to set Google search and Chrome web browser as the default, motivating them to make or sell more Android devices.
Rosenberg admitted that Google doesn’t put any conditions on what the wireless carriers or smartphone manufacturers do with the revenue-share money.
He also noted that Google’s Play Store is a significant source of revenue, and it was essential for Google to do well on search in order to see success on Play.
Rosenberg mentioned Google’s recent changes to its strategy with US wireless carriers, which included lower revenue-share percentages and agreements to incentivize them to sell more Android phones.
The agreements with Samsung have also been renegotiated, indicating a focus on increasing competitiveness with iOS.
However, in Europe, Google’s Android contracts were found to violate the law, so smartphone makers must pay a fee to license Google’s apps. Google separately offers a free license for its search app and Chrome, the web browser where its search engine is the default. However, due to the EU case, Google doesn’t pay search revenue shares in the bloc.
Despite the EU case, internal documents from 2019 revealed that Google still sees the need for such deals to maintain search exclusivity on devices.
– Bloomberg
