Billions in Google revenue could ride on Apple renewing iOS search deal

Posted:
in General Discussion edited March 2015
Google is poised to lose billions in annual revenue if Apple does not renew a deal making Google the default search engine in iOS, according to a new memo by analysts at UBS, which attempts to predict the real-world impact of such a decision.




An existing search deal is due to expire this year, and Google investors are reportedly worried that Apple will reject a new one. In a research note to investors obtained by AppleInsider, UBS estimates that Google will generate $7.8 billion in revenue from its iOS deal this year, or about 10 percent of gross revenue.

Losing that much or more going forward could inflict substantial damage to Google. However, in practice, UBS suggests that at least some people would want to switch back to Google even if it was no longer the default search service.

Assuming a 50 percent "switchback" rate, that would roughly halve the impact on gross revenue, and reduce the net revenue hit to 3 percent, in part because Google would no longer be paying Apple a lump sum.

"We believe this is a much smaller headwind that many investors expect," UBS writes.

Mozilla recently switched the default search engine in Firefox from Google to Yahoo. That helped drop Google's desktop search share in the US below 75 percent, while simultaneously spurring Yahoo numbers.

The two companies have a conflicted relationship, hampered not only by growing competition across segments, but also the aftermath of a long series of lawsuits against Android device makers, first instigated by former Apple Chief Executive Steve Jobs.

Jobs infamously referred to Google's Android operating system as "stolen," and threatened to go to "thermonuclear war" over the matter; his successor, Tim Cook, initially continued the campaign, but has claimed victory in some cases or cooperated in dropping legal action in others.

Apple has several options to choose from if it decides to go with an alternate engine. Apart from Yahoo, it could also go with Microsoft's Bing, which is already in place for Siri queries. If it decides to emphasize privacy and security, it could go with Duck Duck Go, which was added an option for iOS users just last year.
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Comments

  • Reply 1 of 76
    I'd rather see Bing than Yaapoo. Yahoo hurts my eyes.
  • Reply 2 of 76
    revenantrevenant Posts: 496member
    search engines are getting so much better that google's crown may be passed in a few years. i stopped using it a while back- i was tired of seeing the same dang advertisements every single time, or flooded with new ones all about the same friggen thing. just because i googled rolex watches does not mean i need to bombarded with links and images to sellers of the watch.
  • Reply 3 of 76
    SpamSandwichSpamSandwich Posts: 31,087member
    revenant wrote: »
    search engines are getting so much better that google's crown may be passed in a few years. i stopped using it a while back- i was tired of seeing the same dang advertisements every single time, or flooded with new ones all about the same friggen thing. just because i googled rolex watches does not mean i need to bombarded with links and images to sellers of the watch.

    At least Google is aware that their business could disappear in short order, thus the panic moves buying into weather balloon based Internet, robotics companies, self-driving cars... These are all wild bets.
  • Reply 4 of 76
    torusofttorusoft Posts: 51member
    Here's hoping Apple hits Google where it hurts. A line in the sand has been drawn between protecting your privacy and selling it. Google needs to take a nosedive for the sake of democracy and the right to privacy.
  • Reply 5 of 76
    gregnacugregnacu Posts: 29member

    I think making Duck Duck Go the default option would not be such a bad move.  I'd love to see Apple and DDG have a closer relationship.  Apple could even invest in DDG to help see them improve their product.  I like such a move more than the idea of Apple trying to become their own search engine.

     

    I think Google had a tactic where they would invest in a company under conditions that if they were going to be bought out by someone Google would be given the first right to acquire them instead.  Apple could do something like that.  Invest in DDG, keep them independent, but retain the first right to acquire them if Google or Microsoft or Facebook tried to acquire them. Win-win-win.

  • Reply 6 of 76
    hzchzc Posts: 63member
    If Apple changes the default search engine, that's exactly what will change, the default, not my current setting. So to think that every iOS user will be affected and we'd all be scurrying to "switch back" to Google seems extreme. More likely, Google will lose some mobile market share over time.
  • Reply 7 of 76
    woodbinewoodbine Posts: 83member

    Just what's wrong with Google search? I don't get so many ads and I find their search algos work for me. So what if they scrape my data and use that to ad me.

  • Reply 8 of 76
    SpamSandwichSpamSandwich Posts: 31,087member
    I would like the option to change Siri's default search engine. No such option available that I can find.
  • Reply 9 of 76
    charlitunacharlituna Posts: 7,215member
    As I understand it Duck Duck Go is more in line with Apple's mildly militant pro privacy stance so I expect to see it as the default. But Google, Bing and Yahoo will likely be in the choices

    I could also see perhaps Apple creating an aggregate search system. Sends the search to all four, strips out ads, known malware source aites etc and gives a list of all the hits using some kind of system to rank them based off how they rank in the origins sites or such. Could blend in some of the same tools as the current spotlight searches also
  • Reply 10 of 76
    island hermitisland hermit Posts: 6,217member
    Quote:

    Originally Posted by SpamSandwich View Post



    At least Google is aware that their business could disappear in short order, thus the panic moves buying into weather balloon based Internet, robotics companies, self-driving cars... These are all wild bets.

     

    It's obvious that Google has not yet found another area that aligns with their original business model (they had one, right??!!).

  • Reply 11 of 76
    I think Apple should buy Duck Duck Go and make it the default search.
  • Reply 12 of 76
    jbdragonjbdragon Posts: 2,110member

    I like the fact that Google has to pay Apple to be the default search provider.  So I'm fine with that, but I switched to DuckDuckGo after Apple added that option to iOS.  It's really pretty simple to do!!!  It's also now my default on my Window PC's.   Most of the time I get the results I need.  Just with a ton less ads.   Google right now on my PC's is tolerable because I'm using Adblocker and now they're all gone.    Of course if you do a search for a product the right half of the page is blank where it should all be full of ads.   I can't install that on my iOS devices though.   Just the simple fact of Google not tracking every little thing I do is more then a good enough reason to use DuckDuckGo.

  • Reply 13 of 76
    retrogustoretrogusto Posts: 719member

    I hope they allow Google to renew, but at a higher price, and then buy DDG to get a head start in the space themselves for future incorporation into iOS and Mac OS.

  • Reply 14 of 76
    mike1mike1 Posts: 1,884member

    Does anybody really click ads (intentionally) that show up in a search result??? Just sayin'.

  • Reply 15 of 76
    bradipaobradipao Posts: 145member
    gregnacu wrote: »
    Apple could do something like that.  Invest in DDG, keep them independent, but retain the first right to acquire them if Google or Microsoft or Facebook tried to acquire them. Win-win-win.

    In my opinion the value added is in the "database", that is built by the web crawlers. Today there are only a few web crawler engines at planetary level: GoogleBot (US), BingBot (US), Yandex (RU), Baidu (CH). Other famous search engines, like Yahoo and also DDG of course, receive data from them. So, there is no need to purchase DDG, it is much easier to negotiate access to data from MS, just like Yahoo, and to brand it as AppleSearch.
  • Reply 16 of 76
    island hermitisland hermit Posts: 6,217member
    Quote:

    Originally Posted by mike1 View Post

     

    Does anybody really click ads (intentionally) that show up in a search result??? Just sayin'.


     

    I click on them occasionally... as I would imagine a lot of people do. Once in a blue moon an ad pops up about something that interests me.

  • Reply 17 of 76
    disturbiadisturbia Posts: 563member

    Bing, Yahoo, Duck Duck, anything BUT damn google.

    :smokey:

  • Reply 18 of 76
    philboogiephilboogie Posts: 7,438member
    I would like the option to change Siri's default search engine. No such option available that I can find.

    What happens when you ask her to google something?

    mike1 wrote: »
    Does anybody really click ads (intentionally) that show up in a search result??? Just sayin'.

    Many years ago I found out that advertisers pay for user clicks. That was the day I don't click ads but if I really really want to see something I simply type the URL myself. Or I copy it, stripping it of any Google stuff after pasting it in a new tab. That way the advertiser doesn't have to pay for the ad, but their name is still up. For free.
  • Reply 19 of 76
    aduzikaduzik Posts: 94member

    I decided to try Bing on my iPhone about a year ago, and honestly, it works well enough (and has enough less garbage on the results page) that I haven't switched back. I think a lot of Google's search success is momentum at this point. I think it is realistic to think they would lose 50% of iOS users if Apple changes the default.

  • Reply 20 of 76
    afrodriafrodri Posts: 190member
    Quote:

    Originally Posted by sog35 View Post

     

     

    exactly.  I have no idea how Google gets away with charging BILLIONS on search ads when no one clicks on them.


     

    Google AdWords setups offer pay-per-click or pay-per-impression. I think the default and most common is pay-per-click. Lots of people do click on them, hence Google's revenue.

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