![Google search payment | Search engine on iPhone](https://9to5mac.com/wp-content/uploads/sites/6/2023/10/Google-search-payment.jpg?quality=82&strip=all&w=1500)
The Google search payment – the annual amount Google pays to Apple in return for being the default search engine in Safari – reportedly makes up 14-16% of the Cupertino company’s total profits.
With that payment now threatened by the antitrust case against Google, Bernstein analysts look at what that could mean for Apple …
Recap on the Google search payment
When you do a search in the combined URL/search bar on any Apple device, the default search engine will be used. Unless you have manually changed it, that search engine is Google.
The traffic from searches on iPhones, iPads, and Macs is worth a huge sum of money to Google, as that’s what allows it to display relevant ads alongside search results. To keep that traffic and money flowing, Google pays Apple an undisclosed sum each year for maintaining its default search engine status.
The antitrust case against Google
That payment is at risk thanks to a DOJ antitrust case arguing that the arrangement is illegal, as it makes it impossible for other search engines to compete on a level playing field.
The Department of Justice argues that Google’s primary motivation for the massive payment is to ensure that Apple doesn’t create its own, competing search engine. If that ever happened, it could be the biggest threat to Google’s search dominance ever faced by the company.
Payment estimated to make up 14-16% of AAPL profits
The amount Google pays to Apple has mostly been a closely guarded secret – and so far that hasn’t changed as a result of the court case.
We got a glimpse into this arrangement way back in 2014, when a court case revealed the sum to be $1B, which at the time comprised a percentage of the revenue generated – apparently 34%. Since then, the sum is believed to have steadily increased. In 2017, it was estimated at $3B; in 2018, $9B; in 2020, $10B; and $15B in 2021.
The Register reports that Bernstein has repeated its earlier estimate that the sum is likely now in the $18-20B range. Given that this payment is essentially pure profit, the analyst says that this equates to 14-16% of Apple’s annual operating profits.
What happens if Google loses the antitrust case?
There is a significant chance that Google will lose the case, and that the annual payment to Apple will be banned.
But Bernstein says this shouldn’t hit Apple too hard.
“Importantly, Google is on trial, not Apple, and Apple could (in theory) partner with another search engine to be the default (and/or retain the agreement with Google outside the US),” the report states. “One more likely scenario is that Apple offers a choice screen. We note that Apple controls access to its installed base, which generates ~$60B + in advertising revenues, and accordingly, we believe that Apple would continue to command a commission (in the 25-30 percent range) for providing access to those search advertising revenues.
The report also suggests that Apple could instead launch its own search engine.
9to5Mac’s Take
Top comment by Ofer
Apple could absolutely create a search engine that respects user privacy while still generating income. I don’t see why that option is dismissed.
Bernstein’s estimate is likely in the right ballpark, and we’d also agree that Apple has a range of options should the payment be ruled illegal in the US. The financial impact probably wouldn’t be as dramatic as some have suggested.
However, it seems extremely unlikely that Apple would create its own search engine. The only way to replace the huge payments it receives at present would be by essentially mirroring Google’s business model, which is heavily based on capturing user data to serve personalized ads.
This would be in complete contradiction to the company’s stance on privacy, and Apple CEO Tim Cook has in the past quoted the aphorism – indirectly referencing Google and Meta – that if you’re not the customer, you’re the product.
Photo: Solen Feyissa/Unsplash
FTC: We use income earning auto affiliate links. More.
![](https://9to5mac.com/wp-content/uploads/sites/6/2023/10/iB_NativeBanner_AresMag_750x150.jpg?quality=82&strip=all)
Comments