Why the Google and Apple AI tie-up fell short?

Alphabet declined to address questions about a possible AI partnership with Apple to power Siri, offering only limited remarks during its earnings call. The silence highlights the strategic sensitivity around AI monetisation and how such a deal could reshape Google’s core search-driven business.

Alphabet declined to answer questions related to a potential AI deal between Google and Apple. An analyst asked how the tech company was thinking about AI partnerships, such as a potential agreement with Apple to power AI for Siri, but the company completely sidestepped the question.

However, this decision tells us something – Alphabet isn't ready to talk about how this partnership will impact its core business, which is increasingly focused on AI.

Over the past few years, the relationship between Google and Apple has been mutually beneficial. Documents from the Department of Justice's lawsuit against Apple revealed that under their search partnership, Google paid the iPhone maker $20 billion to make its search engine the default on Apple devices. In return, Google gained access to Apple's massive customer base – the iPhone maker announced last quarter that it has 2.5 billion active devices globally, giving you an idea of ​​its sheer size.

The cost of Apple's latest AI deal is reportedly around $1 billion annually for Apple, but the additional benefits Google stands to gain aren't as immediately obvious as with search. In Google Search, consumers see links to advertisers' websites at the top of their search results. Ads in AI mode, which could form the basis of Google's search business in the future, are currently in an "experimental" phase.

The company first announced last May that it would bring ads to AI mode, Google Search's chatbot-style interface, but in these tests, the ads are being shown below or integrated within the chatbot's responses. Google is also testing agentic shopping, including a 'Shop with AI mode,' to provide consumers with product-related questions a seamless checkout experience through the AI ​​interface. Meanwhile, Google's AI rival Anthropic is targeting advertising-supported AI with its upcoming Super Bowl ad, challenging the business model being pursued by ChatGPT creator OpenAI and Google.

Overall, the Apple Siri deal received minimal mention during Alphabet's earnings call on Wednesday. Sundar Pichai simply said he was pleased that Apple's "preferred cloud provider" would be helping to develop the next generation of Apple's foundation models based on Gemini technology. Google's Chief Business Officer Philipp Schindler used almost the exact same words when referring to Apple.