It’s long been known that Google pays Apple a hefty sum every year to ensure that it remains the default search engine on iPhone, iPad, and Mac. Now, a new report from analysts at Bernstein suggests that the payment from Google to Apple may reach $15 billion in 2021, up from $10 billion in 2020.
In the investor note, seen by Ped30, Bernstein analysts are estimating that Google’s payment to Apple will increase to $15 billion in 2021, and to between $18 billion and $20 billion in 2022. The data is based on “disclosures in Apple’s public filings as well as a bottom-up analysis of Google’s TAC (traffic acquisition costs) payments.”
Bernstein analyst Toni Sacconaghi says that Google is likely “paying to ensure Microsoft doesn’t outbid it.” The analysts outline two potential risks for the Google payment to Apple, including regulatory risk and Google simply deciding the deal is no longer worth it:
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% 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.
Apple’s decision to retain Google as the default search engine on iPhone, iPad, and Mac has been met with growing criticism over the years. In an interview earlier this year, Apple’s senior director of global privacy Jane Horvath offered reasoning for the deal, despite privacy concerns:
Right now, Google is the most popular search engine. We do support Google but we also have built-in support for DuckDuckGo, and we recently also rolled out support for Ecosia.
The payment from Google to Apple accounts for a significant amount of Apple’s ever-important Services segment. Apple has put an emphasis on Services over the years to show investors it has other ways to grow revenue and profit beyond hardware sales.
What do you think of Apple’s agreement with Google for the default search engine on iPhone, iPad, and Mac? Let us know down in the comments!
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