Google will pay $3 billion to remain top search provider on iOS

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Amount will bolster Apple's services business.
Photo: Google

Google could pay Apple as much as $3 billion this year in order to remain the default search engine on iOS devices, a new report claims.

The claim comes from Bernstein analyst A.M. Sacconaghi Jr. If true, it would represent a sizable increase from the $1 billion that Apple was paid by Google for the same reason back in 2014.

“Court documents indicate that Google paid Apple $1 billion in 2014, and we estimate that total Google payments to Apple in FY 17 may approach $3 billion,” Sacconaghi Jr. said. “Given that Google payments are nearly all profit for Apple, 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.”

Right now, around half of Google’s mobile search revenue comes from Apple devices. Nonetheless, Sacconaghi Jr. notes that Google could try and cut back on its licensing fees to Apple if it believes that its search engine is popular enough that Apple wouldn’t consider going with another option instead. While Google is far and away the leader in the search industry right now, trying to shortchange Apple could be a high risk option for Google, given that other search engines like as Yahoo have previously vied for Apple’s business.

If Apple does receive an amount approaching $3 billion from Google it would be a big win for Apple’s services business, which makes up an ever-increasing part of Apple’s revenue. Services have become such an important revenue stream for Apple in recent years that Apple recently updated its official business strategy to add the term “services.”

With iTunes, the App Store, iCloud, Apple Pay and Apple Music all bringing in money, Apple’s services alone are the size of a Fortune 100 company.

Source: CNBC