Google could pay Apple up to $3B to hold default search status on iPhones

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AppleInsiderAppleInsider
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Google could end up paying Apple as much as $3 billion this year to remain the default search engine on iPhones and iPads, an analyst estimated on Monday.




"Court documents indicate that Google paid Apple $1B in 2014, and we estimate that total Google payments to Apple in FY 17 may approach $3B," Bernstein analyst A.M. Sacconaghi Jr. said in an investor memo published on Monday, seen by CNBC.

He argued that Google payments may represent a large chunk of Apple's services business -- which Apple has been touting as the size of a Fortune 100 company -- and as much as 5 percent of Apple's total operating profits this year. Apple's conventional services income stems from things like iTunes, Apple Music, iCloud, and the App Store.

Apple and Google are effectively locked together, according to Sacconaghi. Google is the world's most popular search engine, and could theoretically call Apple's bluff, stop payments, and remain a default search option. Sacconaghi noted however that iOS devices may generate half of Google's search revenue, something it's unlikely to risk.

The analyst has assigned Apple stock an "outperform" rating with a $175 price target. On Monday shares closed at $159.85, not far from an all-time high of $160.08.
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Comments

  • Reply 1 of 39
    maestro64maestro64 Posts: 5,043member
    As Apple installed base of phones, in the hands of people who actually spend money, google has to pay more to maintain access. But My default is no longer Google, so they pay Apple to have access to me, but really do not have access. I love the irony of this.
    doozydozenlostkiwibaconstangRacerhomieXmacseekercornchip[Deleted User]decoderingbadmonkpscooter63
     14Likes 0Dislikes 0Informatives
  • Reply 2 of 39
    lkrupplkrupp Posts: 10,557member
    But iOS has such a minuscule worldwide market share vs Android. It’s almost as if iOS doesn’t even exist. Why would Google even care?
    watto_cobra
     1Like 0Dislikes 0Informatives
  • Reply 3 of 39
    Rayz2016rayz2016 Posts: 6,957member
    lkrupp said:
    But iOS has such a minuscule worldwide market share vs Android. It’s almost as if iOS doesn’t even exist. Why would Google even care?
    Because it's not the size of your user base; it's the quality. 
    doozydozenRacerhomieXcornchipjbdragonwatto_cobra
     5Likes 0Dislikes 0Informatives
  • Reply 4 of 39
    MacPromacpro Posts: 19,873member
    lkrupp said:
    But iOS has such a minuscule worldwide market share vs Android. It’s almost as if iOS doesn’t even exist. Why would Google even care?
    ROFL, 'as if iOS doesn't even exist'  too funny, $815 Billion and counting  and the anti-Apple folks would tell you Apple is risky as it's all too dependent on iPhones, which in case you haven't noticed run iOS. So I suspect iOS exists big time.  You know the odd thing is as I travel I hardly ever see an Android device.  Sit in most US airports and it's a sea of glowing Apples on Mac laptops and iPhones and iPads wall to wall.  It's as if Android doesn't even exist. ;)
    edited August 2017
    RacerhomieXjbdragonjony0watto_cobra
     4Likes 0Dislikes 0Informatives
  • Reply 5 of 39
    SpamSandwichspamsandwich Posts: 33,407member
    Since Apple is concerned with privacy and they don't really need the money, they should make DuckDuckGo the default.
    doozydozenlostkiwibaconstangRacerhomieXmacseekerfotoformat[Deleted User]decoderingpscooter63jony0
     12Likes 0Dislikes 0Informatives
  • Reply 6 of 39
    kevin keekevin kee Posts: 1,289member
    MacPro said:
    lkrupp said:
    But iOS has such a minuscule worldwide market share vs Android. It’s almost as if iOS doesn’t even exist. Why would Google even care?
    ROFL, 'as if iOS doesn't even exist'  too funny, $815 Billion and counting  and the anti-Apple folks would tell you Apple is risky as it's all too dependent on iPhones, which in case you haven't noticed run iOS. So I suspect iOS exists big time.  You know the odd thing is as I travel I hardly ever see an Android device.  Sit in most US airports and it's a sea of glowing Apples on Mac laptops and iPhones and iPads wall to wall.  It's as if Android doesn't even exist. ;)
    Not that I care, but I've seen it's the opposite in Asian countries. Meanwhile, it's a mixed bag in Australia/NZ and Europe. 

    On the topic: there is no harm for Apple to include Google in their search engine as long as it also offers the alternatives.
     0Likes 0Dislikes 0Informatives
  • Reply 7 of 39
    gmgravytraingmgravytrain Posts: 889member
    MacPro said:
    lkrupp said:
    But iOS has such a minuscule worldwide market share vs Android. It’s almost as if iOS doesn’t even exist. Why would Google even care?
    ROFL, 'as if iOS doesn't even exist'  too funny, $815 Billion and counting  and the anti-Apple folks would tell you Apple is risky as it's all too dependent on iPhones, which in case you haven't noticed run iOS. So I suspect iOS exists big time.  You know the odd thing is as I travel I hardly ever see an Android device.  Sit in most US airports and it's a sea of glowing Apples on Mac laptops and iPhones and iPads wall to wall.  It's as if Android doesn't even exist. ;)
    C'mon. Apple is always being dissed by Wall Street and the news media as constantly losing market share to Android OS on a daily basis. Google is laughing so hard at iPhone's sickly 2% market share in India and unbelievably Apple is going to continue losing market share to Android OS in India. All Wall Street ever talks about is the iPhone's dwindling market share leading to the ruination of Apple. It's downright sickening listening to that BS day in and day out. So, yes, I'm a bit surprised Google is paying money to Apple when Wall Street is saying iOS doesn't even matter and its days are numbered. It's Google that has that fat P/E equating future revenue growth and not Apple. I still wish Apple would acquire DuckDuckGo and if Google wants to keep paying Apple at that point, then maybe Apple does have some edge Wall Street is deliberately ignoring.
    watto_cobra
     1Like 0Dislikes 0Informatives
  • Reply 8 of 39
    baconstangbaconstang Posts: 1,178member
    Switched my iPhone and my Macs to DDG a couple of years ago.   
    I still have Google in my 'Favorites' bar at the top of Safari if I need it.

    But please keep paying them!
    RacerhomieXcornchiplolliverwatto_cobra
     4Likes 0Dislikes 0Informatives
  • Reply 9 of 39
    RacerhomieXracerhomiex Posts: 95unconfirmed, member
    After the Google Incident and all the Gems that are coming out,I am never using Google Search
    potatoleeksouplolliverwatto_cobra
     3Likes 0Dislikes 0Informatives
  • Reply 10 of 39
    gatorguygatorguy Posts: 24,722member
    DilirX said:
    After the Google Incident and all the Gems that are coming out,I am never using Google Search
    ?
    What's the Google Incident and the Gems? I'm sure it wasn't good but no idea what you're referring to. 
    [Deleted User]
     1Like 0Dislikes 0Informatives
  • Reply 11 of 39
    tyler82tyler82 Posts: 1,114member
    When I buy a new device I immediately switch the default search to DuckDuckGo. Almost 2 years of using it exclusively as my search tool and it gets everything done I need it to.
    macseekercornchiplolliverwatto_cobra
     4Likes 0Dislikes 0Informatives
  • Reply 12 of 39
    Herbivore2herbivore2 Posts: 367member
    The biggest issue for Alphabet isn't the possibility of Apple removing Google as the default search. The issue that keeps them up at night is making Bing the default engine. 

    I am convinced that the primary difference between Google and Bing isn't the actual algorithm. It has more to do with the data generated by the users. And Google has large amounts of data where Bing does not. However, remove Google from iOS and put Bing on it and the market dynamics will change VERY quickly. 

    Google has been fortunate that there isn't a lot of love between Microsoft and Apple either. These days I don't bother with Google search at all. DuckDuckGo is pretty good. And for professional people, Bing is actually the best. Yelp, TripAdvisor, Amazon and Apple's own maps app, serve nearly all of my needs. I haven't done a single Google search in nearly 3 years. 

    If Alphabet doesn't want to see Bing gain serious marketshare, they will continue to pay Apple and pay them handsomely. Apple doesn't need Google. The converse is absolutely not true. 
    mike54pscooter63potatoleeksouplolliverwatto_cobra
     5Likes 0Dislikes 0Informatives
  • Reply 13 of 39
    jd_in_sbjd_in_sb Posts: 1,600member
    MacPro said:
    lkrupp said:
    But iOS has such a minuscule worldwide market share vs Android. It’s almost as if iOS doesn’t even exist. Why would Google even care?
    ROFL, 'as if iOS doesn't even exist'  too funny, $815 Billion and counting  and the anti-Apple folks would tell you Apple is risky as it's all too dependent on iPhones, which in case you haven't noticed run iOS. So I suspect iOS exists big time.  You know the odd thing is as I travel I hardly ever see an Android device.  Sit in most US airports and it's a sea of glowing Apples on Mac laptops and iPhones and iPads wall to wall.  It's as if Android doesn't even exist. ;)
    You changed topic. The commenter was talking about world wide unit marketshare and you replied with revenue and personal sightings at airports. Not the same thing.  If you stick to the commenter's topic of smartphone unit marketshare vs Android it is undeniable that the iPhone's 0.06% unit marketshare is relatively small. If the topic is instead changed to revenue of course the iPhone is dominant and lkrupp knows that.
    edited August 2017
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  • Reply 14 of 39
    DCJ0001dcj0001 Posts: 63member
    lkrupp said:
    But iOS has such a minuscule worldwide market share vs Android. It’s almost as if iOS doesn’t even exist. Why would Google even care?
    Did you read the article?

    "iOS devices may generate half of Google's search revenue, something it's unlikely to risk."
     0Likes 0Dislikes 0Informatives
  • Reply 15 of 39
    DCJ0001dcj0001 Posts: 63member
    gmgravytrain said:
    MacPro said:
    lkrupp said:
    But iOS has such a minuscule worldwide market share vs Android. It’s almost as if iOS doesn’t even exist. Why would Google even care?
    ROFL, 'as if iOS doesn't even exist'  too funny, $815 Billion and counting  and the anti-Apple folks would tell you Apple is risky as it's all too dependent on iPhones, which in case you haven't noticed run iOS. So I suspect iOS exists big time.  You know the odd thing is as I travel I hardly ever see an Android device.  Sit in most US airports and it's a sea of glowing Apples on Mac laptops and iPhones and iPads wall to wall.  It's as if Android doesn't even exist. ;)
    C'mon. Apple is always being dissed by Wall Street and the news media as constantly losing market share to Android OS on a daily basis. Google is laughing so hard at iPhone's sickly 2% market share in India and unbelievably Apple is going to continue losing market share to Android OS in India. All Wall Street ever talks about is the iPhone's dwindling market share leading to the ruination of Apple. It's downright sickening listening to that BS day in and day out. So, yes, I'm a bit surprised Google is paying money to Apple when Wall Street is saying iOS doesn't even matter and its days are numbered. It's Google that has that fat P/E equating future revenue growth and not Apple. I still wish Apple would acquire DuckDuckGo and if Google wants to keep paying Apple at that point, then maybe Apple does have some edge Wall Street is deliberately ignoring.
    Once in a while, Wall Street talks about Apple's 90%+ share of smartphone profits, $260 billion of cash, and $800+ billion valuation. 
    uniscapewatto_cobra
     2Likes 0Dislikes 0Informatives
  • Reply 16 of 39
    Appleishappleish Posts: 747member
    lkrupp said:
    But iOS has such a minuscule worldwide market share vs Android. It’s almost as if iOS doesn’t even exist. Why would Google even care?
    iPhone users are famously more likely to buy things than Android users. Also consume much more online content than Android users. Most Android users have them because they are cheap. Google is the largest advertising company in the world (and little else). Their real customers, advertisers, know that iPhone users are Far more valuable than Android users.
    baconstangwatto_cobra
     2Likes 0Dislikes 0Informatives
  • Reply 17 of 39
    wigbywigby Posts: 692member
    gatorguy said:
    DilirX said:
    After the Google Incident and all the Gems that are coming out,I am never using Google Search
    ?
    What's the Google Incident and the Gems? I'm sure it wasn't good but no idea what you're referring to. 
    I'm assuming the infamous memo/manifesto written by the He-Man Women Hater's Club president.
     0Likes 0Dislikes 0Informatives
  • Reply 18 of 39
    rotateleftbyterotateleftbyte Posts: 1,633member
    MacPro said:
      Sit in most US airports and it's a sea of glowing Apples on Mac laptops and iPhones and iPads wall to wall.  It's as if Androd doesn't even exist. ;)
    OTOH, in other parts of the world

    Sit in most NON US airports and it's a sea of cheapo Windows laptops and low cost Android Phones/Phablets wall to wall.  It's as if Apple doesn't even exist.

    I had one person say to me in one Asian Airport as I waited for my flight to HK earlier this year,
    "You still use Apple? You westerners are so behind the times."

    Different places and different experiences.
    mike54
     1Like 0Dislikes 0Informatives
  • Reply 19 of 39
    arthurbaarthurba Posts: 156member
    I run a small IT company and we recently stopped google advertising.  Purely by coincidenc - google then demoted our place in their non-paid search results.  Which clued me in to the fact that all their results are now in fact paid advertising- and rarely the 'best' result at all.  So I switched to using Duck Duck Go for my searching and the results are almost always better (though a few times I've had to resort to dial up google search manually to satisfy my conscience that I haven't missed something...).
    rotateleftbytemike54cyberzombiepotatoleeksoupwatto_cobra
     4Likes 0Dislikes 1Informative
  • Reply 20 of 39
    anantksundaramanantksundaram Posts: 20,413member
    $3B? That's a steal for Google. It is, by far, the most valuable screen real estate in the world. A substantial part (almost 90%) of Google's $650B valuation comes from search, a massive proportion if that from mobile, and perhaps more than half of mobile from iOS. 

    I can't believe that Apple is giving it away. 
    edited August 2017
    potatoleeksoup
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