 Apple's search engine for Spotlight, the App Store and TV app. Source: Mark Gurman For years, Apple Inc. pondered building a search engine that could replace Google as the preferred option on its devices. The argument: Search is one of the most used tools on smartphones, tablets and computers — and Apple's modus operandi has long been to own the core technologies underlying its products. There are also billions of dollars at stake. Right now, Apple gets a cut of Google's search ad revenue, a commission that has brought in roughly $8 billion annually in recent years. But imagine if Apple could keep more of that money. If the company successfully deployed its own search engine, it could potentially create a revenue stream about the size of the Apple Watch, assuming it can sell advertising and search slots at the same price as Google. The probability of that happening is a long shot, but — even if Apple can't quite match Google — the company could probably create more revenue by bringing search in-house. Apple knows this. That's one reason why it's been tinkering with search technology for years. The work has its benefits, even if the company doesn't launch a Google rival: Apple can improve its non-web search capabilities, and it could serve as a frightening bargaining chip in pricing negotiations with Google. Google may be dominant in search, but the company still needs Apple and its billions of users. As long as their agreement is in place, Apple has an incentive to steer its customers toward Google. The more Apple promotes Google search, the more money Apple makes. As a person involved in the deal has told me, aligning the incentives of Apple and Google was a big part of the agreement. Apple could send all its customers to the DuckDuckGo search engine if it wanted to, but that would just hurt Apple. But if the iPhone maker's internal search technology ever gets into tiptop shape, Apple could theoretically offer customers a more integrated and private solution compared with Google. The public has already gotten a glimpse of what this could look like. The company built its own search engines for services like the App Store, Maps, Apple TV and News. John Giannandrea, a former Google executive who now oversees machine learning and AI at Apple, has a giant search team under him. Over the past few years, his group developed a next-generation search engine for Apple's apps codenamed "Pegasus." That technology, which more accurately surfaces results, is already available in some Apple apps, but will soon be coming to more, including the App Store itself. But the best evidence of Apple's search efforts can be seen in Spotlight, which helps users find things across their devices. A couple of iOS and macOS versions ago, Apple started adding web search results to this tool, pointing users directly to sites that might answer their questions. During different points in time, those results were powered by either Microsoft Corp.'s Bing or Alphabet Inc.'s Google. Siri also uses that technology to offer up web results.  Spotlight searches on a Mac. Source: Mark Gurman/Bloomberg Giannandrea's team is now looking to more deeply integrate Apple's search features into the iOS and macOS experience — and potentially bolster the technology with its new generative AI tools. A few years ago, Apple introduced a web crawler called Applebot. Like crawlers from Google and Microsoft, this system scours the internet to index websites for future search results. It essentially exists to find sites that it can provide to users in Siri and Spotlight. Apple also has its own advertising technology team, which will be helpful if its search ambitions grow. That group runs the search ad functions in the App Store, delivers ads to Apple News and the stocks and weather apps, and negotiates the advertising deals for streaming sports. That group already has many of the skills and salespeople needed to become the start of an advertising group for web search. To be clear, the technology at the heart of Spotlight and app searches is limited compared with what Google can do. But it does provide the underpinnings if Apple ever wanted to release a full search engine. AI also gives Apple a potential opening. The company's machine learning team has been seeking new engineers to work on search technologies, and Apple has made acquisitions that could lay the groundwork for a search engine. In 2019, it bought Laserlike, an AI-based search engine founded by former Google employees. Many of its leaders have since returned to Google, but the team still operates at Apple. One acquisition Apple could have made but didn't was Bing. I reported this past week that Microsoft tried to spin off Bing and sell it to Apple in order to make it the default search engine on the iPhone and other devices. Eddy Cue, Apple's senior vice president of services, balked at the deal. Cue has said that Apple sees no need to make its own search engine because Google's offering is the best. But that argument, while possibly true, is probably more about defending Google from government enforcement. If the US determines that Google has violated antitrust law, the company's deal with Apple could be broken up — and cost Cue's services division billions of dollars. In the long run, Google may be the best option until Apple thinks it has a better mousetrap. Apple already designs its own chips, operates an App Store, sells music online, offers video and gaming services, and has an in-house maps app that competes with Google. The only thing missing is a full-blown Apple search engine. And while one won't be launched anytime soon, it may be closer than you think.  The Meta Quest 3. Photographer: David Paul Morris/Bloomberg Meta launches Quest 3 and new Ray-Ban glasses ahead of Apple's Vision Pro. The Quest 3 is finally arriving, alongside the second-generation version of Meta Platforms Inc.'s Ray-Ban "smart glasses." The Quest 3 is a pivot from prior versions of Meta's headsets. Instead of focusing on the metaverse and virtual reality, Meta sees the new device as a tool for productivity, gaming and mixed reality — the melding of VR with augmented reality. It even has a mode to transition between VR and AR, which relies on passthrough cameras to show the world around you. If that last feature sounds familiar, it's no wonder. Apple's Vision Pro uses a similar approach, and Meta is clearly gearing up to challenge that device when the iPhone maker releases it early next year. I've used the Quest 3 for a decent amount of time and found the graphics performance, display resolution and gaming capabilities to far exceed prior Meta models. While the price is up $200 from the Quest 2, it's still a seventh of the price of the Vision Pro. The Vision Pro probably isn't going to be seven times better, but I still think these devices play in different leagues of the same market. The new glasses, meanwhile, should fare better than the original model — Ray-Ban Stories, which launched in 2021 — but they aren't going to transform the wearables industry. For one, they aren't really smart glasses in the sense most people expect: something with augmented reality. The product focuses instead on letting you take pictures and video, listen to audio (which is actually terrific), and make calls. The ability to livestream video to Instagram from the glasses (via a phone) is a nice touch, but it'll be two years until a version of this product is able to handle AR.  The Peloton Bike. Photographer: Ezra Shaw/Getty Images Peloton reaches deal with Lululemon on content and athletic gear. This past week the two companies announced a five-year partnership that will see Peloton become Lululemon's fitness content provider. They're also launching co-branded clothing. For Peloton, the deal is a pure win: The company will get to push its content to Lululemon's customer base, with the videos appearing on Lululemon's Mirror device and the companion app, as well as Lululemon's free app. For Lululemon, the pact appears to be a way out of the $500 million hole the company dug itself into when it acquired the Mirror business at the height of the pandemic. The Mirror is a $995 Tonal-like device that might have been more popular if we had all remained in lockdown, but has been a flop for Lululemon. So the yogawear company is discontinuing the device, along with its $39-a-month subscription plan (current customers can keep it), and will cease to make fitness content. Instead, Peloton video will run on existing Mirrors and in the companion app. It's hard to say why Lululemon bothered with a content deal for a product that it's phasing out, but the agreement may serve as a solace to customers who shelled out a fair bit of money for the device and its subscription. Lululemon is also swapping the content on its free app for Peloton workouts and will shutter its $12.99 digital-only subscription. Customers will be steered toward Peloton's digital-only app instead.  Apple's iPhone 15 Pro Max on sale in China. Source: Bloomberg Apple customers complain about iPhone 15 Pro overheating and FineWoven cases. Whenever a major iPhone upgrade launches, there are typically at least a few complaints right out of the gate. This year, two sources of ire are the environmentally friendly FineWoven cases and the device overheating for some consumers. Let's start with the cases: I think Apple ceasing production of leather and shifting toward more sustainable products is a worthy move. But the execution was awful: The new cases scratch and pick up dirt easily. If you need a reason not to buy one, just go to your local Apple store and check out the floor models. I'd bet that Apple will discontinue FineWoven by the end of next year and take another shot at replacing leather. On to overheating. This is an issue I have been experiencing with my own iPhone 15 Pro Max. It's been most noticeable when gaming, building new shortcuts in the Shortcuts app and while on phone calls. I've even been alerted that my phone needs to pause charging for a little bit to cool down. That's not something I saw on my prior iPhone. On Saturday, Apple blamed the issue on software, saying there is an iOS 17 bug and that apps like Instagram, Uber and the Asphalt 9 car racing game have been overloading the iPhone's chip. It says an update to iOS 17 is in the works, while Instagram has already fixed its bug (other developers are working on similar changes). It also blamed the phone getting overworked out of the box during the intensive setup and data restore process. Importantly, the company denied that the new titanium frame and USB-C charging are to blame. In fact, it said that the titanium design dissipates heat better than prior stainless steel models. The company also said it won't need to throttle the A17 Pro chip in the upcoming software update to mitigate the problem. In the grand scheme of things, neither issue is a crisis for Apple. The FineWoven cases are optional, can be easily returned or exchanged, and the accessory marketplace for iPhone 15 add-ons is already plentiful. The heat problem also isn't the end of the world, is clearly not affecting all users and Apple seems confident the issue will blow over with a software fixes and time.  Google Pixel Fold. Photographer: David Paul Morris/Bloomberg Oct. 4: Google's Pixel 8 and Pixel Watch 2 event. In case the recent Apple and Amazon.com Inc. product launches weren't enough, Google has its own showcase planned for New York City this week. Stay tuned for the second-generation Pixel Watch, Fitbit-related announcements and, of course, the Pixel 8 and Pixel 8 Pro phones. Leaked plans for the Pixel 8 include a new design for the camera bar on the back, a third-generation custom Google chip and AI features for photography. Q: What's new in the latest iOS and watchOS betas?
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