Being the Default Search on iPhone Costs Google a Whopping Amount of Money
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For a company not really focused on search engines, Apple collects a huge amount of cash because of them each year. And all that cash comes courtesy of its rival Google.
In a note to investors this week, global asset management firm Bernstein stated that it believes Google will pay Apple $3 billion this year to remain as the default search option on iOS devices. So every iPhone or iPad sold will be set to use Google for search unless users take the time to pick an alternative. The majority never do.
Google only paid $1 billion for being default search back in 2014, so the cost has tripled, but then mobile as a sector continues to grow. According to Statista, Apple sold 169 million iPhones worldwide in 2014. In 2015 that increased to 231 million and remained higher in 2016 at 211 million.
According to Bernstein analyst A.M. Sacconaghi Jr., the payment Google makes to Apple is almost pure profit for Apple, and that, "Google alone may account for 5 percent of Apple's total operating profits this year, and may account for 25 percent of total company OP growth over the last two years."
With iOS devices accounting for 50 percent of Google's mobile search revenue, it seems unlikely the company will decide to stop paying Apple. However, in the future Google may take a chance, decide not to pay and see what Apple does. It may be the case that Apple continues to use Google as default search because it is so popular.
The licensing deal is viewed as a win for both companies. Apple gets a nice chunk of cash for setting a default, while Google benefits greatly from the search revenue generated on iOS. And let's not forget, Google's revenue last year was close to $90 billion -- $3 billion is small change.