Google to Pay Apple $ 15bn to Stay as Default Engine
September 20, 2021
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by Stephen Kanyi

For years Google and Microsoft have been in stiff competition with each other to place their search engines as the default on both iOS and macOS. Now the competition seems to have reached fever pitch as reports from Bernstein analysts indicate that Google is willing to part with a whopping $15 billion this year to win.

As it stands today, Google is still the default search engine on Safari browser on Macs and iPhones. It is also the default engine on Siri search results and on Spotlight searches on the Mac.

The report from Sacconaghi indicates that Google is willing to be paying about $15 billion in 2021 to maintain this placement. This figure is expected to go to a whopping $20 billion next year.

This will be quite a significant increase on the $10 billion paid last year and is also almost an exponential increase on the $3 billion paid in 2017.

Also noteworthy is the fact this payout will contribute to just less than 15% of Apple’s revenue. Quite a significant sum if you ask me, considering the two are actual rivals in some markets.

Now you might be wondering if this whole venture is worth it. Well, from Google’s perspective, it’s all to protect its sacred cow: the ad business.

We first have to recognize how important search is to Google’s bottom line. $15 billion represents just 12% of their Search Revenue and 8.5% of overall advertising revenue.

Most importantly however is the fact that approximately 65 – 75% of Google’s ad revenue is generated from iOS devices. These numbers put into perspective how important Apple is to Google’s business. While Google and its parent company Alphabet may have invested in ventures such as Waymo. Google Cloud and even AI via the famous DeepMind, it is ads that keep them afloat. In fact, many of these ‘side’ ventures are yet to turn a profit.

Considering this, it’s no wonder Google are so protective of their status as the default engine on iOS devices. And the benefits from Apple do not end there. As Jagadeesh J briefly explains in a short LinkedIn post, the pay-out to Apple will give Google “uninterrupted intent data of the users who bring then two-thirds of the revenue.”

It is like, we pay 50 cents to $1 for 1k impression to the Data Management Platform (DMP) when using them while the actual CPM will be $3 – $5
Google is just paying for the data.
And ~10% of the potential revenue is a sweet deal.

Such impressive profits have been the fuel for an almost decade long battle between Google and Microsoft’s Bing.  Bing was briefly the default search engine on iOS and macOS for five years starting in 2012. They however lost out to Google in 2017 who has remained the default engine since then. One can only imagine the impact of this loss on Microsoft’s bottom line.

Also, as explained by Jagadeesh, the payment “stops Apple from coming up with something to prevent Google from taking user intent data like what it did to Facebook.”

Moreover, due to the current anti-trust sentiment going around US courtrooms, Google faces regulatory risks that might force Apple to deny Google or even Microsoft the privilege of being Apple’s default search engine.

And, who knows, Apple may desire a piece of the ad revenue pie and build a search engine themselves. For now, and the immediate future however, we expect Google to fork ridiculous amounts of cash to protect their business.

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