It’s no secret that Apple and Google have a sizeable monetary deal that guarantees Google’s position as the default search engine on Apple devices. In a new investment note from financial adviser Bernstein, Toni Sacconaghi, the analyst claims that Google’s payment to Apple to maintain the status quo could reach $ 15 billion in 2021, compared to $ 10 billion ‘last year.
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First reported by Ped30, Sacconaghi’s note estimates that Google’s payments to Apple could continue to increase each year and approach $ 18-20 billion in 2022. Bernstein’s analyst bases his numbers on Apple’s public records as well as in a bottom-up analysis of Google’s traffic acquisition costs.
Google’s deal with Apple in the search and advertising markets has been in place for more than a decade, but with Google’s dominance of search engines under increasing control in recent years, Bernstein analysts believe the deal could face regulatory risk.
In addition, Yahoo and Microsoft have been interested in entering into an agreement with Apple to overthrow Google as the default search engine on iOS devices, and analysts suggest that huge payments from Google to Apple are made to ensure that Microsoft does not. superi.
We see two potential risks for GOOG payments to AAPL: (1) regulatory risk, which we believe is real, but probably in years; we see a potential 4-5% impact on Apple’s gross profits from an adverse ruling; & (2) that Google decides to stop paying Apple to make it the default search engine, or seeks to renegotiate the terms and pay less. In previous research, we’ve noticed that GOOG is likely to pay to ensure that Microsoft doesn’t overdo it. That said, with payments likely to approach $ 18 million to $ 20 million in fiscal 22, it’s not unlikely that Google will be able to rethink its strategy.
Last year, the U.S. Department of Justice filed an antitrust lawsuit against Google, claiming that the Mountain View-based company has used anti-competitive and exclusive practices in search and advertising markets to maintain an illegal monopoly. One of the main complaints against Google is its agreement with Apple, which allows Google to be the default search engine for Apple’s Safari browser and other search tools.
Last year, Sacconaghi argued that Apple should buy a search engine directly to pressure Google. Sacconaghi’s reasoning was that Apple didn’t have many alternatives to Google, as its only leverage was to switch to Bing. However, the analyst also warned that this move could trigger regulatory oversight that could eventually block the acquisition, placing Apple in a worse position than before.
In 2020, it was speculated that Apple was planning to launch its own search engine, after the web crawler noticed increased activity, but the recovery was later reduced to Apple’s efforts to improve search results for Siri and Spotlight, and the rumor has so far come to nothing.