According to Techmeme, Apple will reportedly pay Google around $1 billion per year for access to Gemini AI to power the new Siri. This comes as Qualcomm reports Q4 revenue up 10% to $11.27 billion versus $10.79 billion estimates, with handset revenue jumping 14% to $6.96 billion. The Apple-Google AI deal is particularly striking given that Google already pays Apple approximately $20 billion annually for search engine placement on iOS devices. Meanwhile, Apple’s arrangement with OpenAI for ChatGPT integration involves no payment from Apple to OpenAI. The deal terms suggest Apple maintains significant negotiating power in these partnerships despite its AI shortcomings.
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The stunning power imbalance
Here’s the thing that blows my mind about this arrangement. Google has reportedly invested over $100 billion in developing Gemini over the past eight years. And now they’re essentially renting it out to Apple for roughly 1% of that investment annually? Meanwhile, Apple collects twenty times that amount from Google just for search placement. It’s like paying your landlord $20,000 per year while they pay you $1,000 annually to use your lawnmower. The math just doesn’t add up in Google’s favor.
But wait, there’s more. Apple doesn’t pay OpenAI anything for ChatGPT integration, as Mark Gurman noted. So Google gets $1 billion while OpenAI gets… exposure? That’s what you call leverage. Apple basically walked into these negotiations holding all the cards despite being years behind in AI development.
What Google actually gets here
So why would Google agree to what seems like a terrible deal? Scale and distribution. Getting Gemini integrated into Siri means potentially hundreds of millions of new users overnight. As Ben Bajarin pointed out, distribution matters in AI perhaps more than in any previous tech wave. But still – $1 billion feels like pocket change compared to what Google’s paying Apple for search.
Think about it from Google’s perspective. They’re essentially paying $19 billion net to Apple annually when you subtract the AI payment from the search payment. That’s an insane flow of money between two supposed competitors. It makes you wonder who’s really dependent on whom in this relationship.
The broader market implications
This deal reveals something important about the current AI landscape. As Six Sigma Capital observed, Apple scored “the deal of the year” if these terms hold. It shows that even in the AI gold rush, distribution and platform control still trump pure technology development. Google built the better AI, but Apple controls the users.
For consumers, this means we’re likely to see more of these awkward partnerships between tech giants. Companies that own the platforms can essentially rent AI capabilities rather than building them from scratch. That saves them billions in R&D while still being able to claim “AI-powered” features. It’s smart business, but it raises questions about innovation and competition long-term.
The real question is whether this arrangement is sustainable. Can Google really continue paying Apple $20 billion while receiving pennies on the dollar for its AI investments? Or will we eventually see these relationships renegotiated as AI becomes more central to the user experience? My guess is this is just the opening bid in what will become a much more complex dance between platform owners and AI developers.
