Google pays Apple $3bn a year to keep its search engine on the iPhone
Google has reportedly paid Apple $3bn (£2.3bn) to remain as the default search engine on the iPhone.
A report from analyst firm Bernstein found that the search engine giant has increased its payments to Apple. It was paying just $1bn three years ago.
Google’s licensing fees make up a significant part of the revenue generated by Apple’s fast-growing services business according to Bernstein analyst Toni Sacconaghi.
“Court documents indicate that Google paid Apple $1bn in 2014 and we estimate that total Google payments to Apple in FY 17 may approach $3bn,” he said.
“Given that Google payments are nearly all profit for Apple, Google alone may account for 5 per cent of Apple’s total operating profits this year and may account for 25 per cent of total company OP growth over the last two years.”
Sacconaghi suggested that Google may consider abandoning the payments in future if it believes that Apple would opt to keep using its services anyway due to user demand.
Currently, iPhone users can choose to use either Google, Bing, Yahoo or DuckDuckGo as their default search provider on Safari for iOS. Many users never alter these settings and opt to keep the default, which is currently Google.
The £3bn payment is an indication of just how valuable iPhone users are to Google and the level of revenue that they generate for the company.
The two companies have battled in the past over competing services. In 2012, Apple abandoned Google Maps on its mobile devices in favour of its own in-house Apple Maps software.
Google was given no prior warning and scrambled to make its own app for the platform, a process that took several months.
In the meantime, iPhone users were obliged to use Apple Maps which was widely criticised upon release for having incomplete or incorrect cartography and a comparative dearth of local information.
Google Maps is one of the most downloaded iOS apps to this day, along with YouTube - also owned and operated by Google.