Google pays Apple between $18 billion to $20 billion a year to remain the dominant search engine in the iPhone, according to a financial analyst that thinks this deal, and others like it, are now at risk.
“We believe there is a possibility that federal courts rule against Google and force it to terminate its search deal with Apple,” said Bernstein in the report sent to The Register. “We estimate that the ISA is worth $18B-20B in annual payments from Google to Apple, accounting for 14-16 percent of Apple’s annual operating profits.”
Apple gives limited information on the sub-segments in its Services division, yet Google reports the money it sends to Apple under its traffic acquisition costs (TAC) to distribution partners. Bernstein says Google pays out 22 percent of total ad revenue on TAC and estimates Apple likely receives around 40 percent of this.
According to Bernstein’s report, even if Apple does end up losing its billion-dollar monthly income from Google as a result of possibly losing the case, it won’t have a huge economic impact on Apple.
“Importantly, Google is on trial, not Apple, and Apple could (in theory) partner with another search engine to be the default (and/or retain the agreement with Google outside the US),” the report states.
Bernstein also notes that Apple might also end up offering a choice screen for consumers which could open the door for Apple to launch its own search engine as one of the options, something that has been rumored to be an interest of Apple for years.