Google reportedly pays Apple an astonishing $3 billion a year in order to maintain its place as the default search engine on iOS.
The licensing fee, which forms part of Apple’s burgeoning Services revenue, is reportedly up from $1 billion just three years ago.
CNBC brings word from a Bernstein analyst, who says the payments are accounting for significant portions of Apple’s profits.
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“Court documents indicate that Google paid Apple $1B in 2014, and we estimate that total Google payments to Apple in FY 17 may approach $3B,” said Bernstein analyst A.M. Sacconaghi Jr..
“Given that Google payments are nearly all profit for Apple, Google alone may account for 5% of Apple’s total operating profits this year, and may account for 25% of total company OP growth over the last two years.”
Does Google need to be paying this?
One might wonder, quite correctly, why Google is forking out such a fortune to ensure it keeps its place as the default search provider.
Would Apple, given the alternatives, ever seek to switch Google out for Bing or Yahoo? Even if it did, how many iOS users would instantly switch back to Google?
Given iOS usage brings in half of Mountain View’s mobile search revenue, it is understandable the firm is unwilling to engage in a game of chicken with Apple.
However, $3 billion is a lot of money to pay to a company that needs your service just as much as you need to be on its.
Would you use the default search setting if Apple ever switched from Google? Tweet us @TrustedReviews.
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Editorial independence
Editorial independence means being able to give an unbiased verdict about a product or company, with the avoidance of conflicts of interest. To ensure this is possible, every member of the editorial staff follows a clear code of conduct.
Professional conduct
We also expect our journalists to follow clear ethical standards in their work. Our staff members must strive for honesty and accuracy in everything they do. We follow the IPSO Editors’ code of practice to underpin these standards.
