Updated from 6:20 a.m. to include additional comments from Altimeter Group analyst throughout the story.
SAN DIEGO, CALIF. (TheStreet) -- Google (GOOG) - Get Report (GOOGL) - Get Report , which has seen its share of the U.S. search market already decline after being replaced in the Firefox web browser three months ago, is facing an even bigger threat should Apple (AAPL) - Get Report also oust it from the iconic computer maker's widely used Safari browser.
Google slipped to a 74.8% share of the U.S. search market on desktop computers and tablets in January, while Yahoo! (YHOO) grew its slice to 10.9%, according to StatCounter, which analyzes search referrals of three million websites. The shift came after Yahoo replaced Google as the default search engine of Mozilla's Firefox web browser.
"What we've seen with Firefox on the desktop ... has really caused a shift that hasn't happened before," StatCounter founder Aodhan Cullen said. "This is the first time we've seen something that has actually moved the needle, and given Yahoo! share and taken share away from Google."
This suggests an even bigger loss to Google -- "significant" to use Cullen's word -- if Apple decides not to renew its search contract with Google, which is said to expire early this year.
"Apple and Google and clearly rival companies in several areas, and I think it's entirely possible that ... Safari could replace Google in the very near-term feature as the default search engine," Altimeter Group analyst Rebecca Lieb said.
The value or exact structure of Apple's Safari search deal with Google is unknown, but a Nomura analyst estimated in a January research note that Google is poised to collect $8.8 billion in gross mobile search revenue from Apple this year.
Both Yahoo! and Microsoft (MSFT) - Get Report are actively pitching Apple to take over the coveted contract, according to news outlet TheInformation. And Yahoo! chief executive Marissa Mayer candidly admitted to shareholders that she really wants the deal.
"The Safari platform is basically one of the premiere search engines in the world, if not the premiere search engine in the world. We are definitely in the search distribution business ... and anyone who is in that business needs to be interested in the Safari deal," Mayer said during Yahoo!'s December quarter earnings conference call with investors. "The Safari users are among the most engaged and lucrative users in the world and it's something that we would really like to be able to provide."
At stake is the prized Safari audience on Apple iPhones and iPads, an audience that in the U.S. accounts for 69% of all tablet users and 50% of all mobile users, Cullen said. Also ripe for the taking are mobile search advertising dollars, which will top desktop search ads for the first time this year. Research firm eMarketer estimates that U.S. search ad spending on mobile will total nearly $13 billion in 2015, up from $9 billion in 2014. In contrast, spending on desktop search ads is expected to fall to $12.3 billion in 2015, down from roughly $13.6 billion in 2014.
"Google really does get the lion's share of mobile search referrals," Cathy Boyle, eMarketer senior mobile analyst, said. "If they were to lose that relationship with Apple, and no longer be the engine behind Safari, they stand to lose a significant portion of that share."
Google doesn't break out mobile revenue, but executives emphasized the positive impact of mobile search during the company's fourth quarter earnings call. Google reported adjusted earnings of $6.88 per share, weaker than the expected $7.11 a share on revenue of $18.1 billion for the quarter.
"We continued to see great traction with our established mobile advertising products," Google Interim Chief Business Officer Omid Kordestani told analysts, highlighting mobile advertising revenue from YouTube, which grew 100% year-over-year. "We are very pleased with the traction we are having and how mobile monetization is performing."
One alternative view on the browser battle, however, is that Google could weasel its way back into Safari if users manually swap out Apple's chosen search engine and replace it with one of their own choosing. "Google has become a brand of almost unsurpassed value," Lieb said, "and users are very loyal to Google."
Google would surely encourage Apple users to make its search engine the default one on their iPhones and iPads. If Google is successful with such a strategy, it could have minimal effect should Apple cut its ties with the search giant.
"Our users continue ... to find Google, on whichever platform, whichever browser, and that's really what we've focused on doing," Google Chief Financial Officer Patrick Pichette said during a conference call on the Safari deal. "The second piece is the way to win this in the long-term, right, it's very simple. You just make wonderful products. And when you make wonderful products that are magical, people will find them."
Marketing firm Merkle observed this browser-switching behavior in its fourth quarter digital-marketing report. For example, Yahoo!'s share of paid clicks in the Firefox browser has been declining since the second week of December, the firm reported. "While the initial rollout saw Yahoo!'s share [of Firefox paid clicks] rise to a peak of 43% on December 10th, that figure was just 36% by December's end," the report said.
StatCounter's findings tell a bit of a different story. In analyzing just Firefox usage, StatCounter found that Yahoo!'s search share for the browser grew to 28.3% in January from nearly 10% in November, while Google's share fell to 63.9% in January from approximately 82% in November.
"When we removed Firefox usage from the U.S. search data, Yahoo!'s gains and Google's losses were erased," Cullen said in the blog post detailing StatCounter's findings.
Either way, Apple is in the driver's seat and seemingly has no allegiance to Google or Yahoo! Apple previously replaced Google Maps with its own Maps app, stopped including Google's YouTube as a default app, and dumped Yahoo! in favor of the Weather Channel for weather data. Even Microsoft's (MSFT) - Get Report Bing search engine, now powering Apple's Siri and Spotlight searches, seems like a viable contender.
Search is about to get a whole lot more interesting.
--Written by Jennifer Van Grove in San Diego, Calif.
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