Image: Apple

The average Apple user probably doesn’t put much thought into Google being the default search engine for iOS, but there is actually an exceptional amount of money involved.

As pointed out in a report shared by veteran Apple journalist and podcaster Philip Elmer-DeWitt, Google has been paying Apple billions for the privilege of keeping users glued to its search engine on iOS. More specifically, Google is estimated to have paid Apple $10 billion in FY 2020 to keep its search engine as the default on the popular mobile OS.

What’s crazy is that this amount is actually set to get even higher. According to a recent note to clients shared by Elmer-DeWitt, Google is expected to pay Apple as much as $15 billion in FY 21 to keep its search engine as the default on iOS. This is expected to contribute “an amazing ~850 bps to Services growth YoY, and amount to ~9 percent of company gross profits.”

Analyst Toni Sacconaghi suggests that Google is happy to pay this amount to ensure that it isn’t outbid by Microsoft, which is presumably keen on exposing more Apple users to its own search engine. Bing was launched 12 years ago but has struggled to come anywhere near the dominance of Google’s search engine.

Google’s payments to Apple are estimated to reach as high as $20 billion in FY 22.

Image: Apple 3.0

We see two potential risks to GOOG’s payments to AAPL: (1) regulatory risk, which we believe is real, but likely years away; we see a potential 4-5 percent impact to Apple’s gross profits from an adverse ruling; & (2) that Google chooses to stop paying Apple to be the default search engine altogether, or looks to renegotiate terms and pay less. We have noted in prior research that GOOG is likely paying to ensure Microsoft doesn’t outbid it. That said, with payments likely to approach $18 – $20B in FY 22, it not implausible that Google could revisit its strategy.

Source: Apple 3.0

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4 Comments

  1. Now that’s kind of interesting and a literal shit ton of money to boot. 15 BILLION dollars to remain the default search engine across all apple devices for 1 year…

    I mean yea there are a TON of apple devices… but how much ‘internal’ money are they paying to keep google the default search engine on Pixel devices or Android devices?

  2. Apple…..hmmm…thought you guys were going with the whole privacy thing. I guess until someone waves some money under your noses.

  3. Its very smart of apple, its basically getting the ad revenue with no effort. Im sure its worth it for Google, though I don’t see it too much but whatever… At this day and age, a search engine shouldn’t be so much of a lift for a very large company like apple, so of couse google will pay. Im sure the day is coming.. Apple search is surely coming, it will start ad free, then evolve in google2.

  4. [QUOTE=”Uvilla, post: 40363, member: 397″]
    Its very smart of apple, its basically getting the ad revenue with no effort. Im sure its worth it for Google, though I don’t see it too much but whatever… At this day and age, a search engine shouldn’t be so much of a lift for a very large company like apple, so of couse google will pay. Im sure the day is coming.. Apple search is surely coming, it will start ad free, then evolve in google2.
    [/QUOTE]

    Apple has to realize how much revenue they are generating for Google if Google is willing to pay 15 billion dollars for 1 year a search engine default. I think the only reason Apple hasn’t taken over thst is due to contractual obligation.

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