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Google is paying Apple a shocking amount of money for iPhone presence: Report
- According to a new report, Google could be paying Apple anywhere between $18 billion to $20 billion a year to remain the “dominant search engine in the iPhone.”
- Apple completely controls the iPhone, which estimatedly generates over $60 billion in advertising revenues.
- If regulators take a hard stance, this agreement between Google and Apple may not be sticking around for too long.
Google and Apple are competitors in many areas, primarily facing each other in the iOS vs Android debate. But the companies also contribute to each other’s balance sheets more directly. We already know that Google pays Apple to be the default search engine on iPhones. But as it turns out, it pays a lot of money for this.
According to The Register, citing a report from analyst firm Bernstein, Google pays Apple anywhere between $18 billion to $20 billion a year to remain the “dominant search engine in the iPhone.” This comment was made in the context of an Information Services Agreement (ISA) between Apple and Google that the US Department of Justice is investigating in an antitrust suit against Google.
The report mentions that there is a possibility that the federal court will rule against Google and force it to terminate its search deal with Apple. This deal is said to account for 14-16% of Apple’s annual operating profits. Google’s financial reports mention that it pays out 22% of its total ad revenue on traffic acquisition costs. Of this 22%, Apple is said to likely receive 40% (which calculates to be 8.8% of Google’s total ad revenue) by Bernstein. Google generated $222.47 billion in revenue from advertising in 2022, which puts Apple’s incoming receipts at about $19.5 billion in 2022.
The numerical figure for the ISA varies depending on who you ask. The Department of Justice believes Apple gets about $10 billion from the ISA with Google, but the report notes that this number comes from external sources.
Apple controls the iPhone, and the report further notes that it generates over $60 billion in advertising revenues. So both companies could still be getting a sweet deal out of it despite the astronomical commission. If the federal court rules against Google and forces the ISA to be terminated, Apple could get the opportunity to onboard other search engines like Microsoft’s Bing and even launch its own. However, there is still a long way to go for the court’s decision.