Apple believed to rake in over $1 billion yearly from Google search referrals

Posted:
in iPad edited January 2014
Apple's tangled relationship with Google is also a profitable one for the iPhone maker, as one analyst estimates Apple pulls in $1 billion in pure profit from a search agreement between the two companies.

In a recent report from Morgan Stanley titled "The Next Google is Google," analyst Scott Devitt estimates that Google pays Apple roughly $1 billion per year in order to position its search engine as the default option on iOS devices.

iMacs
Morgan Stanley chart estimating Google's Traffic Acquisition Costs via Business Insider


Such an agreement would remain beneficial to both Apple and Google, despite the growing complications brewing between the two firms.

The sum of $1 billion per year is almost a rounding error for Apple, which pulled in $13 billion in profit last quarter, but it would represent a pure profit stream for the Cupertino company, one acquired with little effort on Apple's part.

For Google, which pulled in $2.89 billion in profits for the last quarter, the billion dollar agreement amounts to a traffic acquisition cost: about $250 million per quarter in order to keep a massive mobile platform reliant on Google search by default. Google is also largely reliant upon iOS for mobile revenue, earning 80 percent of its ad revenue from 2008 to 2011 from iOS devices.

This isn't the first time a billion dollar estimate has emerged regarding iOS and Google. In March of last year, an analyst at Macquarie posited largely the same thing, with an additional estimate of roughly $300 million in profit for Google from the arrangement. In 2010, rumors emerged that Google was paying Apple more than $100 million in a revenue sharing deal in order to retain the default search spot on the iPHone.

Google, the world's largest search engine, is already known to pay other companies in order to keep Google search the default option. In addition to Apple, Devitt estimates that Google will pay $300 million to Mozilla ? makers of the Firefox web browser and Firefox mobile operating system ? in order to keep Google as the default search on that group's products.
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Comments

  • Reply 1 of 34
    froodfrood Posts: 771member


    Google makes money by building great stuff for Apple.  Apple makes money by Google making great stuff for Apple's great products.    YAY!!


     


    Can't we all just be friends?

  • Reply 2 of 34
    solipsismxsolipsismx Posts: 19,566member
    frood wrote: »
    Google makes money by building great stuff for Apple.  Apple makes money by Google making great stuff for Apple's great products.    YAY!!

    Can't we all just be friends?

    So now Apple makes nothing that Google uses to profit from? Lets look at iOS and Android. Only one of those has netted a profit for Google.
  • Reply 3 of 34
    dasanman69dasanman69 Posts: 12,980member
    solipsismx wrote: »
    So now Apple makes nothing that Google uses to profit from? Lets look at iOS and Android. Only one of those has netted a profit for Google.

    I think that's what he was trying to get at.
  • Reply 4 of 34
    solipsismxsolipsismx Posts: 19,566member
    dasanman69 wrote: »
    I think that's what he was trying to get at.

    In both statements he said that Google makes great stuff for Apple so to me it reads as my query suggests.
  • Reply 5 of 34
    kdarlingkdarling Posts: 1,640member
    Interesting.

    Other analysts have suggested that Google pays a high ad revenue share rate to Apple.

    This analyst claims instead that Google is paying Apple a flat rate of ~$3.30 per iOS device to be the default search engine in mobile Safari.

    Sounds like everyone's still guessing.
  • Reply 6 of 34
    dasanman69dasanman69 Posts: 12,980member
    solipsismx wrote: »
    In both statements he said that Google makes great stuff for Apple so to me it reads as my query suggests.

    But he did say 'Apple products' which is something Apple makes, of which Google uses to make money as well as Apple. He just did a bad job wording it.
  • Reply 7 of 34
    Android is winning /s
  • Reply 8 of 34
    $1B is not a rounding error to any company
  • Reply 9 of 34

    Quote:

    Originally Posted by ifij775 View Post



    $1B is not a rounding error to any company


     


    It is a rounding error. It's roughly 1/60th the profit and 1/200th the gross.

  • Reply 10 of 34
    joshajosha Posts: 901member

    Quote:

    Originally Posted by Lord Amhran View Post



    Android is winning /s


    Yes android is definitely winning the spyware war.


    Imagine that;  everything an android user does is spied on by Google !

  • Reply 11 of 34
    It is a rounding error. It's roughly 1/60th the profit and 1/200th the gross.

    $1b is apple's entire r&d spending in 2011.
  • Reply 12 of 34
    solipsismxsolipsismx Posts: 19,566member
    It is a rounding error. It's roughly 1/60th the profit and 1/200th the gross.

    Wouldn't that be net profit and therefore be about 2% of their entire company's profit last year? That doesn't sound like a rounding error to me.


    1000
  • Reply 13 of 34
    froodfrood Posts: 771member

    Quote:

    Originally Posted by SolipsismX View Post





    So now Apple makes nothing that Google uses to profit from? Lets look at iOS and Android. Only one of those has netted a profit for Google.


     


    Sorry if I was confusing.  Don't read too much into it.  I think Apple makes great products.  I think Google makes incredibly good products too (along with some downright goofy stuff).


     


    I think Google making stuff for Apple is great for Apple users (they can always choose to use something else if they don't like it).  Not only is it good for users- but it is profitable.  For both Google and for Apple.


     


    Sometimes fighting just for the sake of fighting isn't the best solution.

  • Reply 14 of 34
    solipsismxsolipsismx Posts: 19,566member
    @ Dave MacLachlan,

    I was editing an image of the actual card in Preview when I was looking for the most appropriate font to use for Monopoly cards when I stumbled upon a site that generates images with your text.

    [LIST]
    [*] http://www.images-graphics-pics.com/signs/games/monopoly/card.asp
    [/LIST]

    My only complaint is how small the images are.
  • Reply 15 of 34


  • Reply 16 of 34

    Quote:

    Originally Posted by mdriftmeyer View Post


     


    It is a rounding error. It's roughly 1/60th the profit and 1/200th the gross.



    Apple's income statements are rounded to the nearest $1M, regardless of their percentage of revenue or profit.

  • Reply 17 of 34
    solipsismxsolipsismx Posts: 19,566member
    ifij775 wrote: »
    Apple's income statements are rounded to the nearest $1M, regardless of their percentage of revenue or profit.

    Isn't it to the $10 million since it would be something like $13.24 billion in profit?
  • Reply 18 of 34

    Quote:

    Originally Posted by SolipsismX View Post




    Quote:

    Originally Posted by ifij775 View Post



    Apple's income statements are rounded to the nearest $1M, regardless of their percentage of revenue or profit.




    Isn't it to the $10 million since it would be something like $13.24 billion in profit?


    Apple presents all of its official financials in millions (for dollar figures) and thousands (for units sold).

  • Reply 19 of 34
    hftshfts Posts: 386member
    frood wrote: »
    Google makes money by building great stuff for Apple.  Apple makes money by Google making great stuff for Apple's great products.    YAY!!

    Can't we all just be friends?

    No because google is pure evil
  • Reply 20 of 34
    hftshfts Posts: 386member
    I am somewhat disappointed in Apple.
    If thermonuclear means google to remain as one of the default search engines on iDevices, then we have an extreme case of a contradiction.
    Apple can easily absorb the lost revenue in the short term and then perhaps (if conditions are ripe) get into search themselves.
    Just like they did with Maps. Perhaps time will tell.
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