Google out, Bing in on the iPhone?

According to Business Week, Apple and Microsoft have been negotiating for weeks on a deal that would replace Google as the iPhone's default search engine with Bing. It won't be the end of Google on Apple's touchscreen phone as those who favor the search results from the Mountain View based firm can download a Google app from the App Store. In  December, Microsoft reportedly agreed to pay Verizon Wireless $500 million for a 5 year period in which Bing will be the default search engine on most Verizon phones including the BlackBerry Storm and Storm2. As one might surmise, Verizon phones using Google's open source Android OS-like the DROID and DROID Eris-were not included.

Part of the reason for doing this deal is because with the launch of the Nexus One, Google has gone from a provider of an open source OS to offering phones on its web site in direct competition with Apple. As one person close to the situation said, "Apple and Google know the other is their primary enemy. Microsoft is now apawn in that battle." Also aiming right at Google's heart is Apple's work on managing ad placements on its mobile devices. currently, being the default search engine on the iPhone means ad revenue for Google which shares a portion of the money with Apple. According to AdMob, the iPhone and the iPod are the devices that most mobile viewers watch ads on. To clinch the deal, Microsoft might offer a bigger cut of the ad revenue pie to Apple, or pay them a higher flat rate. Doing the deal would really help Bing which as of November held an 11% share of mobile search vs. a hefty 86% slice for Google. According to someone familiar with the situation, Apple had no problem agreeing to use Google as the iPhone's inaugural search engine in 2007, including a search bar, Google Maps and a special YouTube player that runs faster in order to work on the handset. At the time, it was considered that those Google apps would help spread the popularity of the iPhone, and Google was not seen as a rival at the time.

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source: BusinessWeek