How much is it worth to be the iPhone’s default search engine?
Somewhere between $US18 and $US20 billion a year. According to a Bernstein analyst, that’s how much Google is paying Apple to keep its top spot, representing roughly 15% of the iPhone maker’s annual operating profits.
Bernstein analysts are looking into Apple’s exposure to the Department of Justice’s antitrust lawsuit against Google, originally reported by The Register. One of the major interest areas of the case is the payments it makes to Apple, classified under the Information Services Agreement (ISA).
“We believe there is a possibility that federal courts [will] rule against Google and force it to terminate its search deal with Apple,” says the Bernstein report.
Google’s Chief Executive Officer Sundar Pichai raised concerns over the bad optics of its Safari deal back in 2007. “I don’t think it is a good user experience nor the optics is great for us to be the only provider in the browser,” said Pichai in emails to co-founders Larry Page and Sergey Brin that were revealed in the case.
The Justice Department’s lead litigator Kenneth Dintzer, estimates Google’s ISA payments to be over $US10 billion, and while the true figure remains confidential, the $US18-$US20 billion estimate assumes a new magnitude. Not to mention what Google is paying to Android for the same prioritization.
Google’s counterargument claims that Google’s competitive advantage is because users prefer the service to rivals, but Dintzer insists that these default settings are powerful, according to Reuters.
While Apple is the recipient of said payments, it is unclear how much they stand to lose in Google’s antitrust case. “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),” says the Bernstein report.