Google’s payments to Apple may reach nearly $20 billion next year.
What you need to know
- A new investment note from Bernstein analyst Toni Sacconaghi claims Google may pay nearly $15 billion to be the default search engine on Apple devices in FY 2021.
- Google is believed to have paid $10 billion to dominate search on iPhones and other Apple devices last year.
- The note suggests Google is paying so much money to ensure “Microsoft doesn’t outbid it.”
As per a new research note by Bernstein analyst Toni Sacconaghi, Google might pay nearly $15 billion to Apple this year to continue dominating search on Apple products (via Ped30). The figure is based on “recent disclosures in Apple’s public filings and a bottom-up analysis of Google’s TAC (traffic acquisition costs) payments.”
In October last year, the Justice Department alleged that Google had paid Apple between $8 to $12 billion to clinch the default search status on iPhones and other Apple devices.
Sacconaghi believes that Google is likely paying more to “ensure Microsoft doesn’t outbid it.” However, there is a small possibility of Google revisiting its strategy soon, as payments might approach between $18 to $20 billion in 2022. It may choose to renegotiate terms with Apple to pay a lower fee. There’s also the risk of regulators blocking similar deals between the two companies, but it is apparently unlikely to happen anytime soon. If such a ruling comes to pass, Sacconaghi expects a “potential 4-5% impact to Apple’s gross profits.”
During a roundtable discussion earlier this year, Apple’s senior director of global privacy, Jane Horvath was asked why the company uses Google as the default search engine on iOS. Horvath responded by saying Apple supports Google as it is the most popular search engine, but users can easily change to DuckDuckGo, Ecosia, and other alternatives.
A coalition of 38 states filed an antitrust lawsuit against Google in December for “unlawfully restraining trade and maintaining monopoly in general search services.” The lawsuit further alleged that Google’s practices have harmed consumers, advertisers, and “the competitive process itself.” Except for China and Europe, Google is also the default search engine on most Android devices — including the best cheap Android phones.