Google to Pay Apple $15 billion
When you open up your iPhone’s Safari browser to look up sports scores, you may have noticed that it uses Google’s search engine. If you hop into the settings, you’ll find several you can pick from a long list of popular search engines for your browser to default to; so why is it that Google sits at the top of that list?
Well, it may surprise you to learn that it’s not because it’s the most popular search engine on the planet, or even by mere coincidence. In fact, Google has been paying big bucks to Apple to ensure its search engine is the default one for all Apple devices. Now, according to analysts at Bernstein, Google will have to pay $15 billion to Apple to remain the default search engine on iPhones in 2021.
In 2020, Google paid Apple a total sum of $10 billion for the same deal, and it’s sure to rise to the mentioned $15 billion for 2021. For 2021, that price could rise to $18 billion, with some speculating a sum as high as $20 billion.
The significant year-on-year increase is largely due to stiff competition from Microsoft, which has also shown a readiness to pay out huge figures. Those other search engines in Safari’s list — including Microsoft’s Bing — are all there because they pay Apple lots of money, but to be the out-and-out default search engine for more than 728 million smartphones around the world is apparently worth the billions of dollars Google is paying.
According to Bernstein analyst Toni Sacconagchi, “We see two potential risks to GOOG’s (Google) payments to AAPL (Apple): (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.”