Google, the most used search engine worldwide, allegedly pays a hefty price to keep its lead. A report from investment analyst Bernstein shows Google pays tens of billions of dollars to remain the default search engine on Apple devices.
Bernstein analyzed the possible pitfalls of an ongoing civil antitrust suit between the Department of Justice and Google. The DOJ claims Google monopolizes searches and related advertisements to hinder competitors, and this analysis does not help its case. The report estimates Google pays Apple $18 to $20 billion a year as part of an Information Services Agreement between the companies, making Google the dominant search engine option on iPhones.
This multi-billion annual payout is a prime example of anticompetitive behavior the DOJ is accusing Google of participating in. During the trial, the DOJ said it thinks Apple collects $10 billion from this agreement, a number derived from sources outside of Google and Apple.
“We believe there is a possibility that federal courts rule against Google and force it to terminate its search deal with Apple,” said Bernstein, according to The Register. “We estimate that the ISA is worth $18 billion to $20 billion in annual payments from Google to Apple, accounting for 14-16% of Apple’s annual operating profits.”
If Google loses this case, the ISA with Apple will be terminated, along with similar deals the company has with Samsung and Mozilla. Berstein says Apple could decide to partner with a different search engine or keep the agreement with Google outside of the U.S., though offering users a choice screen is a more likely scenario.
“We note that Apple controls access to its installed base, which generates [approximately] $60 billion+ 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.”
Another possibility is that Apple could use the choice screen to launch its own search engine option, something Bernstein says “it could likely not do today without raising the eyebrows of regulators.”
The case against Google is still ongoing and likely won’t be decided until next year.
Google was not available for comment.