Why it matters: One of the reasons Apple is making so much money in the Services segment is a billion-dollar deal with Google that keeps on giving, year after year. It’s estimated the latter will pay around $15 billion this year for the privilege of having its search engine remain the default option across the entire Apple ecosystem, but most importantly, iPhones.
By now it’s no secret that Google has been paying a hefty price to be the default search engine on Apple devices. Not only that, but regulators have long been worried about the billion-dollar agreement between the two tech giants as they were probing them for multiple potential antitrust violations.
A new report from analysts at Bernstein reveals just how profitable this arrangement really is for Apple. In 2020 Google’s privilege cost the company $10 billion, and this sum is set to increase to $15 billion, which at first glance seems like a huge jump in a very short amount of time.
As noted in the report, Google is boosting its offer to a level that ensures Microsoft wouldn’t be able to come up with a higher bid, as the latter is just as interested in pushing its Bing search engine to all platforms, especially iOS and Android. After all, Apple did use Bing in the past as the base for Siri’s search on iOS and macOS, before it decided that it needed to offer a more consistent search experience, which is where Google outshines Microsoft’s search engine.
Interestingly, the analysts believe Google’s payments to Apple could also increase in 2022 to anywhere between $18 and $20 billion, which is a testament to how valuable Apple’s ecosystem is for search engine providers.
Last year, the rumor mill spilled several reports that Apple is also making a backup plan in case the deal with Google would ever go sour, possibly even building a search engine of its own. However, it looks like the two companies are perfectly fine with the current arrangement and probably will continue it for as long as regulators will allow it.
Image credit Christine Sandu