The fact that Google pays Apple to be the default search engine on the iPhone, iPad, and Mac has been known for a long time now, and the tech giant pays a hefty sum for this “favor''. A new report from Bernstein analysts states that the fee will increase by $5 billion this year.
It was estimated that in 2020 Google paid Apple $10 billion to keep its search engine as the default one, and for 2021 it is estimated that the price tag will grow to $15 billion. This information was first spotted by Ped30 in an investor note. The note also states that the hefty price tag will grow even more in 2022, reaching $18 to $20 billion. This information is based on “disclosures in Apple’s public filings as well as a bottom-up analysis of Google’s TAC payments.”
"We have noted in prior research that Google is likely paying to ensure Microsoft doesn’t outbid it.” — Analyst Toni Sacconaghi
According to Bernstein analyst Toni Sacconaghi, Google is pouring billions of dollars into Apple in order to ensure Microsoft won’t outbid it. If so, this could make the iPhone’s native search engine Microsoft Bing.
Apple is striving to increase its revenue from Services, which also accounts Google's fee. According to 9to5Mac, the Cupertino company wanted to proof its investors that it can be profitable not only by selling hardware.
Sacconaghi says that there are two potential risks to the increase in price. The first one is a regulatory risk, which means that Google might lose its license to operate. Even so, he states that this is probably years away.
The second and more probable risk is Google choosing not to pay the high amount anymore. This could mean Google renegotiating the price with Apple in order to pay less, or refuse to pay altogether. If so, Apple will have a tough choice to make. Does it go with Microsoft at the risk of potentially losing market share, as plenty of people won’t like this decision, or does it offer a lower rate to Google, so it keeps its services revenue high? This is a choice that the company might soon have to make.