Inside Google's negotiations with Apple
Welcome to Internal Tech Emails: internal tech industry emails that surface in public records. 🔍 If you haven’t signed up, join 36,000+ others and get the newsletter:
NEW: Sponsor the Internal Tech Emails newsletter, and reach an audience of 36,000+ tech founders, investors, operators, and enthusiasts. Find out more here. 🔍
Inside Google’s negotiations with Apple
From: Joan Braddi
Sent: Wednesday, June 06, 2007 6:19 PM
To: Philip Schiller
Subject: Extension term length
Phil:
In our effort to bridge the gap in term length extension desired by Apple, we wish to propose the following:
- Mac Safari browser - Google as Default search provider- extend term length by 1 yr from current term (until Jan. 2009).
- iPhone search - Google as Default search provider - term 3 yrs or until June 2010.
- Windows Safari browser - Google as Default search provider - test period 1 year from June 2007 or until June 2008.
Google and Apple will work together to figure out how incremental value is measured based on data collected from Windows browser.
Phil - Google is very interested in extending our working relationship with Apple. We could have done this better if we had more time and not just a few days to consider the extension and the added products. This extension gives us another 18 months with our current Mac Safari relationship, adds the iPhone to the scope of the agreement and for a term of 3 yrs from now and gives us both one year to test the Windows browser for Apple users.
Please call me if you have any questions.
Best regards,
Joan
From: Joan Braddi
To: Sergey Brin; Omid Kordestani; Eric Schmidt; Jeff Shardell; Sundar Pichai
Sent: Wed Jun 06 18:24:48 2007
Subject: FW: Extension term length
Fyi what I just sent to Phil. I'll let you know his response.
J
From: Omid Kordestani
Sent: Wednesday, June 06, 2007 6:42PM
To: Joan Braddi; Sergey Brin; Omid Kordestani; Eric Schmidt; Jeff Shardell; Sundar Pichai
Subject: Re: Extension term length
Nice work Joan. Let's hold firm now and not further reward Steve's negotiation tactics. We are of course delaying the addressing of the browser rendering issues Sundar has with them.
Omid
From: Joan Braddi
Sent: Wednesday, June 06, 2007 8:18 PM
To: Omid Kordestani; Joan Braddi; Sergey Brin; Omid Kordestani; Eric Schmidt; Jeff Shardell; Sundar Pichai
Cc: Jonathan Rosenberg
Subject: Apple response to Extension term length
Phil called after reviewing our offer on the extension. He believes the current language in the Safari agmt allows them to put search boxes anywhere and receive the revshare (phone, windows, mac, etc.). What he wants to counter is 2.5 yrs from now for ALL search access points. I told him once again that we were willing to honor their interpretation within the Safari agmt (for which the intention was MAC OS search within Safari and not any access point - but this is what happens with long-term agmts as the market changes) and we would be willing to pay not only for the remainder of that term (next 6 mos) but even a timeframe extension to these access points (which was offered in the email msg below). However, asking us to consider 2+ yrs beyond the current term without the ability to assess performance, incremental value of each offering, nor what other access points Apple plans to deliver during the longer term was a bit unreasonable to assume we would be willing to blindly do such a long extension without the benefit of time, further discussion and data analysis. Phil understands our position and did not fight me on this point.
Told him I would convey his counter but I set his expectations that the offer presented via email was after executive review and collaboration before agreeing to the extensions offered and I did not expect we would change our offer.
Recommendation, we should hold firm. This is their tactic of negotiations and we will be fine either way I believe. If they drop us from default in 6 mos, we will still be selected by a majority of mac users who revolted 2 yrs ago when they heard that Apple may be switching to Yahoo. I also believe the same would be true of their windows version or at the very least we will be one of the selected (if not default) for which we will gain user selection without paying revshare. Mobile - well I don't expect much in the way of search revenue from the iPhone for awhile. Do we expect that many searches? The worst case is they have us for 6 mos to use our search and see the value. If we accept their interpretation of the Safari agmt, they would have to make us the default for all these access points for the next 6 mos anyway.
Joan
From: Jonathan Rosenberg
To: Joan Braddi; Omid Kordestani; Joan Braddi; Sergey Brin; Omid Kordestani; Eric Schmidt; Jeff Shardell; Sundar Pichai
Cc: Jonathan Rosenberg
Sent: Wed Jun 06 20:53:00 2007
Subject: RE: Apple response to Extension term length
I've been staying out of this and leaving the deal to the professional negotiators as is my custom, but to the extent you want another opinion, I would not budge. The truth is that they know that for the most part assessing performance will increasingly reveal that we are being extremely generous. If current market share dynamics and trends continue to play out, our terms will look even more generous ex post. If the don't lock us in for a long time, they can't really continue to negotatie for a lot more than the data reveals they deserve based on any logical business position, so they are just playing brinkmanship here with the launch point as leverage. You guys have been more generous already in duration and terms than I would have been, so I strongly support Joan's position to hold firm.
I believe the iphone will sell close to as well as predicted for exactly ONE quarter and that search revenue will be limited.
Jonathan
On 6/6/07, Sergey Brin wrote:
I agree we should hold firm but I don't think their analysis is as sophisticated as you suggest. Also I'm not sure it will turn out quite that way. But in any case I think they will agree to our offer.
Sergey
From: Sundar Pichai
Sent: Thursday, June 07, 2007 9:44 AM
To: Sergey Brin
Cc: Jonathan Rosenberg; Joan Braddi; Omid Kordestani; Eric Schmidt; Jeff Shardell
Subject: Re: Apple response to Extension term length
Joan,
Not sure whether you will be speaking with Phil today but there is one more thing we should talk to them about. I know we are insisting on default but at the same time I think we should encourage them to have Yahoo as a choice in the pull down or some other easy option. I dont think it is a good user experience nor the optics is great for us to be the only provider in the browser. Sergey, do you agree with this?
We should ask their plans on how they will present this choice. In the past they had mentioned offering two versions of Safari - Google version and Yahoo version. So one concern is they actually position this as two browsers - Safari - Google and Safari-Yahoo in which Google and Yahoo are the default respectively. They are really not making us the default as the user can choose between the two versions but get the rev share per the contract.
So I think it is important to find out how they plan to do this in case we are missing something. Thanks
Sundar
From: Joan Braddi
Sent: Thursday, June 07, 2007 5:13 PM
To: Sundar Pichai; Sergey Brin
Cc: Jonathan Rosenberg; Joan Braddi; Omid Kordestani; Eric Schmidt; Jeff Shardell
Subject: RE: Apple response to Extension term length
I agree Sundar which is why we need more time to think through this request rather than signing up without the benefit of knowledge of how they plan to implement us in these search access points.
Sergey: The meaning behind Steve's request to you is he is trying to sell himself (not internally). We gave them a very generous offer without the ability to run numbers or ask how they plan to implement choice and us as the default. To Sundar's point, it they offer two types of browsers, one with Y and one with Google (even on the Mac side), we are just paying for loyal Google users which means that Apple added no value but insists on receiving 50% of the revenue.
My opinion is to tell Steve our offer yesterday was very generous considering Apple has not discussed fully their plans nor how Google would be placed as default in these other applications to measure benefit to Google. I would hold firm. What Steve is asking is another 2.5 yrs for Mac and iPhone and 18 mos for Windows. I agree with Steve that fences need to be mended but it is Apple who needs to mend the fence. We have acted as partners in good faith and they have not (perhaps ask him for browser collaboration which Steve stopped). Good partners would have given us their plans and time to evaluate before setting a clock for our decision. I would let them try someone else for search if they don’t like our last offer. Again, the mac users are pretty loyal to Google.
Just my opinion. Again, these are negotiating tactics that Steve is famous for to get his terms.
Joan
From: Philip Schiller
Sent: Friday, June 08, 2007 9:16 AM
To: Joan Braddi
Subject: Re: Extension term length
Hi Joan,
We will move forward to extend the deal with the terms you proposed.
I will ask our team to work on a draft amendment. The easiest way that I see to do this is with a [REDACTED] extension to the entire deal and then the additional times just for Mac and iPhone.
Thanks,
Phil
On 6/8/07, Joan Braddi wrote:
Sergey - Look like your email hit the spot. Well done.
Apple has accepted the terms we proposed earlier this week (which were very generous from Google to begin with).
Jeff - can you pls drive the amendment process for this extension?
Joan
From: Sundar Pichai
Sent: Friday, June 08, 2007 10:29 AM
To: Joan Braddi
Cc: Omid Kordestani; Sergey Brin; Jeff Shardell; Eric Schmidt; Jonathan Rosenberg; Marissa Mayer
Subject: Re: FW: Extension term length
This is great - Thanks Sergey, Joan and Omid! I will work with the team to make sure we get good data here on Windows safari and we should re-engage them well in advance before the term expires so that we have more time next round.
Sundar
[This document is from U.S. v. Google (2023).]
Further context from Leah Nylen for Bloomberg: “Braddi negotiated Google’s original 2002 deal with Apple to make its search engine the default on the Mac’s Safari browser. The original agreement contained no money, but the companies amended it in 2005 to add a revenue-share. The deal later expanded to the iPhone in 2007 and the iPad in 2010.” (October 10, 2023)
Previously: Sundar Pichai’s meeting with Tim Cook (December 20, 2018)
Tim Cook on leaks
On Nov 5, 2018, at 6:45 AM, Jeff Williams wrote:
Did we pass something on ‘Thursday to Foxconn. I thought it was Friday. Someone inside both companies is talking to the press.
Begin forwarded message:
From: Steve Dowling
Subject: Nikkei: Apple cancels production boost for budget iPhone XR: sources
Date: November 5, 2018 at 5:57:23 AM PST
From: Priya Balasubramaniam
Date: November 5, 2018 at 6:47:26 AM PST
To: Jeff Williams
Cc: Sabih Khan, Donal Conroy
Jeff
We spoke to Foxconn and Pegatron Friday night- on the call itself we gave no numbers . They would have seen the numbers when MPS published. The team is looking at the accuracy of the numbers and we will ask all OEMs about this article. Will get back to you later today.
Regards
Priya
On Nov 5, 2018, at 6:50 AM, Jeff Williams wrote:
We passed a substantial cut on XR on Friday. The leak is infuriating.
From: Tim Cook
To: Jeff Williams
Date: Mon, 05 Nov 2018 14:54:29 +0000
The leaks will continue until there is a substantial financial penalty.
Sent from my iPad Pro
[This document is from In re Apple Inc. Securities Litigation (2023).]
Further reading from Lauly Li and Cheng Ting-Fang for Nikkei Asia: Apple cancels production boost for budget iPhone XR: sources (November 5, 2018)
Further context: Apple Makes Rare Cut to Sales Guidance (January 2, 2019)
Previously: Tim Cook’s notes for Apple board call (December 17, 2018)
Sponsor Internal Tech Emails
Sponsor the Internal Tech Emails newsletter, and reach an audience of 36,000+ tech founders, investors, operators, and enthusiasts. Find out more here. 🔍