Google paying Apple BEEELLIONS to stay search top dog on iDevices, say analysts

But it could turn off taps at any moment

Google may well pay Apple $3bn in fiscal year 2017 to keep its search engine the default on iOS devices, analysis by Bernstein suggests.

In 2016, while suing Google for copyright infringement, an Oracle lawyer let slip that Google paid Apple $1bn in 2014 to keep its search engine the default in Safari on iPhones.

The new analysis – which is based on third-party market research, Apple's licensing revenues, and how much Google pays for search placement – concludes this number will jump to $3bn for fiscal year 2017.

"Google's willingness to pay Apple for default search access is a testament to iOS's strength," Bernstein's Toni Sacconaghi and Daniel Chen note in their report this week.

The report points out that market research first implies that Google's mobile revenues have tripled from $16bn in 2014 to $50 billion in 2017.

In the past two quarters, Apple's services revenues jumped year-on-year by $2.4bn with possible licensing revenues of at least $500m. That would indicate a $1bn-per-year increase for this year.

The amount Google dishes out to OEMs and carriers for "search placement" is about 2.2 times higher than in the first half of 2014. If Apple had some share, payments could be up in a similar ratio to $2.2bn or more.

All in all, Bernstein believes that the $1bn payment from 2014 could then equate to about $3bn or more for fiscal year 2017.

The analysts also suggest that because "licensing payments from Google are likely nearly all profit" then Google might be making up to 5 per cent of Apple's operating profits. Oh, and also accounting for 25 per cent of operating profit growth in the past three years.

Google and Apple have not responded to a request for comment.

The report notes that the payment might be a "double-edged sword" for Apple. As Apple gets more users, the firm can get more licensing revenue through various advertising-intensive apps.

But the report ends with a warning: "Google could ultimately decide that its search position is sufficiently strong that it no longer needs to pay to be the default browser." ®

Similar topics


Send us news

Other stories you might like