4.1 C
New York
Saturday, February 24, 2024

Buy now

spot_img

Google Is Paying Apple Up To $20B A Year To Be The Default Search On iPhones!

Google reportedly shells out a staggering $18 billion to $20 billion annually to ensure its search engine remains the primary choice on Apple‘s iPhones. The payments under the deal between Google and Apple constitute 14-16% of Apple’s yearly operating profits, which a financial analyst believes could be in jeopardy.

The U.S. Antitrust Lawsuit

Online magazine The Register reports that Bernstein, a firm that guides institutional investors on investment decisions, recently released a report delving into the potential repercussions for Apple stemming from the ongoing antitrust lawsuit the U.S. Department of Justice (DoJ) has initiated against Google. The lawsuit accuses Google of monopolizing search and search advertising.

A focal point of the case, which commenced last month, is the Information Services Agreement (ISA) between Apple and Google. This agreement is being spotlighted in the trial as a prime instance of anticompetitive conduct.

Doing The Calculation

Bernstein’s report stated, “There’s a potential that the courts could rule against Google, compelling it to end its search agreement with Apple.” The firm estimates that the ISA translates to annual payments ranging from $18B to $20B from Google to Apple, which constitutes 14-16% of Apple’s yearly operating profits.

While Apple remains tight-lipped about the specifics within its Services division, Google discloses the funds it transfers to Apple as part of its traffic acquisition costs (TAC) to distribution partners. Bernstein‘s analysis suggests that Google spends 22% of its total ad revenue on TAC, with Apple likely pocketing around 40% of that amount.

The DoJ, during the trial, estimated that Apple garners approximately $10 billion from its ISA with Google.

Alternative Scenarios

The verdict in the Google antitrust case isn’t expected anytime soon, with predictions pointing towards 2024. This will likely be followed by an extended appeals process. However, the financial implications for Apple are not anticipated to be severe.

The report emphasizes that while Google is the one on trial, Apple could potentially collaborate with another search engine or maintain its agreement with Google outside the US. A probable outcome could see Apple presenting users with a choice screen. Given that Apple controls access to its user base, which generates an estimated $60B+ in ad revenues, it’s believed that Apple would continue to demand a commission (around 25-30%) for granting access to those search ad revenues.

Furthermore, the introduction of a choice screen might pave the way for Apple to introduce its own search engine. This action, however, might currently attract regulatory scrutiny, as suggested by the Bernstein report.

Related Articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisement -spot_img

Latest Articles