14 DAY TRIAL // Google and Apple have been working together on powering the search capabilities on iPhones for nearly a decade, and each year, the Mountain View-based search giant is paying its Cupertino-based rival quite a small fortune as part of this collaboration.
Bernstein analyst Toni Sacconaghi believes there a chance that Google could end up paying more in the next few years, with the figure to almost double in 2022.
Last year, for example, Google most likely paid approximately $10 billion to be the default search engine on iPhones, the analyst says based on an analysis of Google’s TAC (traffic acquisition costs) and Apple’s public filings.
But this year, the search giant is likely to spend no less than $15 billion for the whole thing, while in 2022, the company could end up giving Apple some $20 billion as part of the deal.
iOS 15 coming next month
However, working together in the long term becomes harder and harder for Apple and Google, the analyst says.
“We see two potential risks to GOOG’s payments to AAPL: (1) regulatory risk, which we believe is real, but likely years away; we see a potential 4-5% impact to Apple’s gross profits from an adverse ruling; & (2) that Google chooses to stop paying Apple to be the default search engine altogether, or looks to renegotiate terms and pay less. We have noted in prior research that GOOG is likely paying to ensure Microsoft doesn’t outbid it. That said, with payments likely to approach $18 – $20B in FY 22, it not implausible that Google could revisit its strategy,” he is quoted as saying.
Apple is projected to release iOS 15 next month alongside with the new-generation iPhones. The new OS is already in beta development stage, and developers and public testers can give it a try by downloading the early builds released by Apple.