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If Google loses the antitrust case, the deal might not hold.
Image credit: Koshiro K, Shutterstock
Google is definitely the most popular search engine and most users don't think about why you find it everywhere you go. While it is comfortable to use, there is big money at play as well.
According to Bernstein's financial analysts, Google pays $18 billion to $20 billion to Apple every year to make sure its search is default on Apple's devices.
This information has emerged in the middle of a civil antitrust suit between the Department of Justice (DoJ) and Google. The tech giant is accused of monopolizing search and search advertising.
The deal between the two companies is an important piece that could make Google lose the case and likely sever the agreement.
"We believe there is a possibility that federal courts rule against Google and force it to terminate its search deal with Apple," Bernstein told The Register. "We estimate that the ISA is worth $18B-20B in annual payments from Google to Apple, accounting for 14-16 percent of Apple's annual operating profits."
Apple is not the only target for Google; it also has similar contracts with Samsung and Mozilla – all the more ammo for DoJ.
Bernstein has used information from both Apple's and Google's documents and mentioned that Google reports the money sent to Apple under its traffic acquisition costs to distribution partners. It pays out 22% of total ad revenue on TAC, and Apple likely receives around 40% of this, according to analysts.
While losing this deal would not be nice for Google, Apple could always find another partner to advertise its search.
"One more likely scenario is that Apple offers a choice screen. We note that Apple controls access to its installed base, which generates ~$60B + in advertising revenues, and accordingly, we believe that Apple would continue to command a commission (in the 25-30 percent range) for providing access to those search advertising revenues."
More importantly, breaking this agreement would most likely result in new search engines from several companies, and Apple would probably use this opportunity first.
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