Google pays $1 billion to Apple for being the default search engine

Do you know how much it takes to be the default search engine in Apple’s web browser Safari (and iOS devices)? Do you? Yea you do, you just read it in the title, its $1 billion. I am not behind this ‘finding’ but an Analyst Ben Schachter said this in a note on Friday Morning as reported by Business Insider. The news of Apple shifting away from Google Maps came out yesterday and this finding was written in response to that news. What if Apple moves away from Google Search as well? Schachter reports that Google Searches on Apple devices resulted in $1.3 billion in gross revenue. He also believes that Google has a 75% traffic acquisition cost associated with that revenue. As a result Google only gets $335 million in net revenue. According to the current search market and technologies, Apple can’t move away from Google and if it does it might affect Apple more than it could affect Google because then Apple would have to rely on other search engines like Bing from Microsoft and Yahoo which is more or less also from Microsoft. But this is prediction of the short term period, in the long term it could hurt Google’s search business as Apple products are taking over the world with iPhone dominating the Smartphone market, iPad dominating the tablet market and if Mac has a better market share in the coming time, it could really put Google in a position to lose the search engine market totally and that would be the time where the company would be willing to pay more than $1 billion to save itself.

Business Insider reports the breakdown from Schachter on how he got to his number:

Deeper look at the financial impact – We know that Apple TAC is accounted for in the Google.com TAC line item reported each quarter by Google. For 2011, Google reported ~$1.5bn in total Google.com TAC. For modelling purposes, we assume that Apple represented ~66% of this TAC (though we acknowledge that this could be high), or $1bn. At a 75% TAC rate, this means that Google generated ~$1.3bn in gross search revenue through default search placement on Apple devices. In other words, this $1.3bn of search revenue ($335m net search revenue) in 2011 is at risk if Apple moves away from Google. $335m represented ~1% of net Google.com search revenue. Notably, mobile/Apple revenue is among its fastest growing revenue drivers.

Source: Business Insider

Advertisements

Leave a Reply so we can Thank you

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: