iPhone or Android?

Apple Maps or Google Maps?

Safari or Chrome?

On the surface,

Apple and Google represent the ultimate tech rivalry

but behind the scenes,

executives have maintained

a multi-billion dollar partnership

that benefits them both massively.

- I would describe Apple and Google

as the classic example of frenemies.

On the one hand, they're fierce rivals,

on the other hand, they benefit greatly

from figuring out ways to work together.

- [Narrator] Google pays Apple an estimated 8

to $12 billion a year

or 1/3 of Alphabet's annual profits

to make sure it's the default search engine

on more than a billion Apple devices.

That deal has helped Google dominate the search market.

In recent years, it's accounted for 90 to 95%

of search engine queries in the US.

The deal between the two tech giants

is so powerful that it's at the center

of one of the biggest US government lawsuits

against a public company since the '90s.

So how did two of Silicon Valley's biggest rivals come

to form one of tech's most valuable partnerships?

To understand Apple and Google's frenemy relationship,

you have to go back to the beginning.

- In the early days, they were quite close.

At the time, the CEO of Google was on Apple's board.

It was part of the Silicon Valley club, if you will.

- [Narrator] In 2005, the two companies laid the groundwork

for what would become one of the industry's biggest deals.

Google struck a deal with Apple

to become the default search engine for Safari

on Mac computers.

- As Apple evolved sort of the relationship,

in 2007 when the iPhone came out,

Google was then the default search for the iPhone,

Safari browser and has really just grown

and grown from that point.

- So Steve, I've had the privilege of joining the board

and there's a lot of relationships between the boards

and I thought if we just sort of merged the companies,

we could call them Applegoo.

- As it became clear that Google was going

to be more than just a search engine,

that it wanted to grow

and that Apple was going to be a rival,

that became an issue.

- [Narrator] In 2008, Google directly

challenged Apple's business

with the launch of its Android operating system.

The next year, Google CEO Eric Schmidt resigned

from Apple's board.

Since then, both companies have expanded

into each other's businesses

with Google launching Android phones

and Apple launching services like the App Store

and Siri, which was originally powered

by Microsoft's Bing, not Google.

- Search Wikipedia for Neil Armstrong.

(beeping)

- [Siri] Searching for Neil Armstrong.

- [Narrator] It wasn't until 2017

that Apple switched from Bing to Google

for its search results on Siri

and Spotlight, the Mac search function.

That renewed deal between Apple and Google came

at a good time for both companies.

Google was facing competition

from Facebook's fast-growing mobile ad revenue

and it's new deal with Apple put its search results

and ads on more than a billion Apple devices.

Now up to half of Google searches come

from Apple devices.

- When you open up your iPhone,

and go to Safari and write something

that you wanna search for, boom,

you're going to Google.

And that's a lot of value.

- [Narrator] For Apple, the deal

has benefited its business twofold.

First, it got more consistent search results

across Safari, Siri and Spotlight.

But perhaps more importantly,

the money it gets from Google's ad revenue makes up 15

to 20% of Apple's annual profits.

That's helped fund Apple's ambitions

to grow its services unit,

which has driven growth for the company

over the past few years.

- Apple is like a store.

It's selling its shelf space,

that premo shelf space.

And so when you go into a store

and you see those candy bars right there

at the register, that's the place to be

if you're selling candy bars.

And so for Google, they're in that default spot.

- [Narrator] Now all of that money

and search traffic could be at risk

because of this lawsuit.

In October, the US Department of Justice sued Google

over antitrust concerns.

The government is alleging that Google

is a monopoly gatekeeper for the internet

and it says that harms customers,

advertisers and competing tech companies.

One way the Justice Department says

Google maintains its dominance

is through exclusive business deals,

like through its partnership with Apple.

According to the lawsuit,

some people at Google called the prospect

of losing its default status on Apple devices code red.

Google representatives said they weren't aware

of the code red language used in the lawsuit

and neither Apple or Google have officially disclosed

the exact value of the deal

or commented on the Justice Department's eight

to $12 billion projection.

In a recent interview,

the Journal's personal tech columnist, Joanna Stern,

asked Google's former CEO about the deal.

- There was ultimately a deal

that I did not personally negotiate

but it was a lucrative deal for Apple.

But important to say

that with respect to Google,

and with respect to use of Google search on Apple phones,

it is extremely easy to switch

to another provider.

- [Narrator] Google has denied

the Justice Department's allegations

and said it plans to challenge the lawsuit.

Its chief legal officer said

the lawsuit wouldn't help consumers

and that its relationship with Apple is customary.

Apple hasn't officially commented on the lawsuit.

So what happens if the Justice Department is successful

in its case?

- This could drag out for many years.

This is an interesting situation.

In some ways, if the DoJ is successful,

one of the companies that might be harmed the most here

is Apple given the fact

that they perhaps had 15 or 20% of their profit coming

from this relationship.

- [Narrator] Of course, there are other search engines

out there, like Bing, DuckDuckGo, Baidu and Yandex

but none of them even come close

to Google's dominance.

Some financial analysts say

that if anyone can give Google a run for its money,

it's Apple, and the antitrust lawsuit

might just be the push Apple needs

to divorce itself from Google.

- We don't know exactly where Apple is going

with its future plans here.

Some have speculated

that potentially this would be a good reason

for Apple to develop its own search engine.

Others have said potentially they might buy a search engine

to beef up that capability.

One of the things we know about Apple

over the years is that it likes to own its core competencies

so it could control those worlds.

And so that's always kind of hanging

in the background.

- [Narrator] Apple hasn't responded

to requests for comment on plans

to create or purchase its own search engine.

Still, a breakup of this multi-billion partnership

between Apple and Google

could deal a financial blow to two

of the world's biggest companies.

And however this relationship plays out

in the future has the potential

to shape the way billions of people use the internet.

- [Tim] As we see Congress and regulators debate the power

of tech, this lawsuit is just yet another example

of kind of that public debate

about their role in our future and in our society.

(dramatic music)