Ex-Google Exec Who Followed in Steve Jobs’ Footsteps to be Focused On in Antitrust Case

Two top executives from Apple Inc., services head Eddy Cue and artificial intelligence chief John Giannandrea, will be brought into the spotlight as the US Department of Justice’s trial against Alphabet Inc.’s Google unfolds.

The two men rode vastly different paths to Apple’s leadership, but they are now at the center of a government case alleging Google abused its power in the online search market.

Giannandrea stands out as a former Google executive who sat across from Cue when the companies negotiated their search agreement — a deal now under investigation in a lawsuit. Cue, on the other hand, is a disciple of Steve Jobs and a consummate dealmaker. Testimony expected in the coming days from the two executives will help show whether Google’s search dominance has ultimately stifled competition and limited consumer choice.

Cue, 58, is a veteran of testifying on Apple’s behalf. He played a leading role in the eBook price-fixing trial a decade ago and recently testified in Apple’s lawsuit against Qualcomm Inc.

His time at Apple began in the late 1980s, when Cue was a director overseeing customer support. Over time, he caught the ear of Jobs, the founder of Apple, and became one of his closest friends and colleagues. He also gained a reputation for complex deals and fixing product problems.

Cue oversaw the launch of the original iTunes store in 2003, working with Jobs to get record labels to sell songs individually for 99 cents. He helped broker the first iPhone carrier arrangement with AT&T Inc. in 2007, refining products such as the company’s email and map services.

Today, Cue oversees all of Apple’s main services, including music, iCloud online storage, and the TV streaming platform. He is also at the center of the company’s ongoing negotiations with Hollywood and professional sports leagues as Apple plans to expand its content.

But until 2017, Cue had another important Apple service under her charge: Siri. The Apple team that developed the voice assistant, which included employees working on the iPhone’s search features, was put under Cue’s control in 2012.

Apple and Google had a previous agreement, negotiated in 2003, where Google’s search engine was offered in the Mac’s Safari browser without a paid arrangement. The two companies later added a revenue-sharing element that allowed Apple to earn a percentage—50%—of advertising for searches made through Google’s Safari. This contract lasted for 10 years and reduced the premium to 40% in 2010.

As the deal was about to expire, Apple and Google began renegotiating the terms, and that’s where Cue steps in. The companies entered into an agreement that kept Google as the default search engine on iPhone, iPad, Mac and other Safari web browsers. Apple devices – some of the most valuable pieces of digital real estate.

The agreement does not cover all countries: Safari uses a different default search engine in China, for example. And users can change their preferred search option if they want.

But it has been a lucrative arrangement for both companies. By 2020, the Justice Department said, Google will pay Apple $4 billion to $7 billion annually for slots. Google, on the other hand, earns more than 160 billion dollars a year from searches, more than half of which comes from mobile devices.

This deal was made when Giannandrea was still at Google and served as vice president of search engineering. The Scottish-born executive, now 58, joined the company in 2010 when the search giant bought Metaweb, where Giannandrea was chief technology officer.

During the trial, the Ministry of Justice wants Cue to testify about the negotiations behind the Google agreement and the discussions with alternative search service providers. Giannandrea is expected to discuss the evolution of search at Google as well as Apple’s competing efforts.

Terms of the Google deal have not been disclosed, but revenue sharing is a key part of the deal, according to an executive involved in the latest deal negotiations. The more money Google makes from iPhone searches, the more Apple makes.

This aligned the interests of Apple and Google. If Apple changes the interface to send less traffic to Google, it will get less revenue in return, said the person, who asked not to be identified because the matter was confidential.

The deal is also broad, going beyond just Safari’s search box. It controls Google app on iPhone and Chrome browser on Mac depending on the person. Before the 2017 renegotiation, Apple considered switching to another search service, such as Microsoft Corp.’s Bing. Apple even briefly used Bing to perform web searches in Siri.

But the combination of the price Google paid and the quality of its search results was too good to pass up. Even if Bing gave Apple a better revenue-sharing deal, Microsoft wouldn’t make nearly as much money per search, the person said.

The agreement with Google was followed by years of trouble. The two companies clashed over smartphones and mapping apps, and Jobs believed that the Android operating system was stealing key features from Apple’s iOS.

“Getting this deal done was a big warming of relations after the war between Android and maps,” the person said. “They didn’t continue to spit at each other for the sake of spitting.”

Cue, who faces questioning by regulators and a federal judge, is no stranger to antitrust cases. The Justice Department sued Apple in 2012, alleging it was the “principal leader” of a conspiracy to raise digital book prices and pressure Amazon.com Inc. to abandon its practice of selling bestsellers for $9.99 below cost. Five out of six US book publishers signed “brokerage deals” with Apple, allowing them to set retail prices for e-books – with the iPad maker taking a 30% discount.

The director testified that for two days he had held tough negotiations with the six largest book publishers to establish Apple’s iBookstore before the planned launch of the iPad. Cue said he was unaware that the five CEOs exchanged emails and more than 100 phone calls to coordinate efforts, proving he did not believe the CEOs were working together in negotiations with Apple.

“If they would have talked to each other, I suppose I would have had a much easier time getting these deals done,” Cue said.

The judge in the case found that Apple was committed to price fixing and specifically subpoenaed Cue, saying her testimony was “not credible.”