Google Could Pay Apple $15 Billion to Remain the Default Search Engine in Safari

BY Mahit Huilgol

Published 25 Aug 2021

Apple Google Collaboration

It is well known secret that Google Pays Apple Billions of Dollars every year to remain default search engine on Apple devices. Google Paid a whopping $10 billion in 2020. A new report by analysts at Bernstein suggest that Google’s fee to Apple could increase to $15 billlion in 2021.

The investor note says Google’s payment to Apple could keep on increasing. For instance the fees is likely to increase between $18 billion to $20 billion in 2022. The report is based on data sourced from “disclosures in Apple’s public filings as well as a bottom-up analysis of Google’s TAC (traffic acquisition costs) payments.”

Future Scope of Google-Apple search engine deal

Analysts point out how Google could be trying to outbid Microsoft and will keep doing so in the next few years. However, Google’s deal with Apple could run into two major problems. Firstly, regulatory authorties already have their eyes on the deal. The analysts add that regulatory risk is not imminent and is “likely years away.” Second risk is Google deciding that the deal is not worth the money. Even this scenario is far fetched as Google might not revisit its strategy in the near future.

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.

Our Take

Apple’s decision to offer Google as default search engine on iPhone, Mac and iPad is often criticised. Meanwhile, Apple justifies the deal and brushes aside privacy concerns. Furthermore, Apple highlights how iPhone, and iPad support DuckDuckGo and Ecosia browser.

The search engine deal with Google brings in a significant revenue to Apple’s services segment. The deal is also very important as Apple is trying to diversify its revenue beyond hardware sales. What do you think of Google’s search engine deal? Let us know in the comments below.

[via PED30]