Explained: Why Google pays Apple billions of dollars every year – Times of India
Apple and Google are rivals in many spheres of technology. There’s the smartphone operating systems — iOS and Android. There’s Pixel vs the iPhone (well, Google is hardly a rival there). There’s Google Maps vs Apple Maps (well, Apple is hardly a rival there). And so on. Yet, Google every year fills the coffers of Apple by giving it billions of dollars. It’s not a “secret” deal as both companies have been open about it. Here we explain why Google pays Apple and the other nitty-gritty around it.
What’s the whole deal about?
The “key” word — and not the keyword — here is ‘default’. Now that could have negative connotations but for both Apple and Google, it’s overwhelmingly positive. Google pays Apple for its search engine to be the default on Safari browser on the iPhone, iPad and Mac. Not just that, any search — Siri, Chrome, Search app — on Apple devices is by default Google search. Google explained in a blog — incidentally called The Keyword — why Apple chooses to do so. “Apple features Google Search in its Safari browser because they say Google is “the best.” In 2018, in an interview with Axios, Apple CEO Tim Cook said that Google has the best search engine in the market.
When was the deal signed?
Back in 2005, the deal was that Google Search would be the default engine on Safari on Mac devices. It wasn’t supposed to be that big a deal (no pun intended) but two years later, the iPhone was launched and the deal continued. In 2010, the iPad was launched and it just got bigger. The more Apple devices were sold, the value of the deal would have naturally grown exponentially.
How much money does Google give Apple?
Lots and lots of money. So much so that a New York Times report stated that is perhaps the single “single biggest payment that Google makes to anyone.” Further, it roughly accounts for 14 to 21 per cent of Apple’s annual profits. The deal wasn’t a secret but the financials came to light when US regulators starting scrutinising the deal. In 2014, it was revealed that Google paid $1 billion to Apple. It has increased handsomely over the years. According to analysts at Bernstein, Google’s annual payments to Apple will touch $15 billion this year. Next year, it is supposed to hit anywhere between $18 billion to $20 billion.
What does Google get out of it?
There are just too many Apple devices in the world. For Google, by putting its search engine as default on those devices, it means generating a ridiculously high amount of traffic. A report by The New York Times suggests that nearly half of Google’s search traffic comes from Apple devices. Google makes its big bucks from internet advertising. In 2020, it is estimated that Google made close to $104 billion in revenue from “search advertising”. This was 71% of total advertising revenue for Google and 57% of Alphabet — Google’s parent company — revenues. Apple devices ensure that these ads reach the targeted audience. So, it’s totally worth it for Google to pay that sort of sums to one of its rivals.
What does Apple get out of it?
Dollars. Billions of dollars.
Is Google the only company to pay Apple?
No. The arrangement isn’t exclusive at all. Microsoft pays Apple for Bing to appear in the search options as does Yahoo!. Even DuckDuckGo is an option.
Do users have no choice but to use Google search on Apple devices?
No, changing the default search engine on any Apple is really simple. But Google knows that since it dominates the search business not many people would want to switch it. There’s an option though it’s not exercised by a majority and Google perhaps knows it, which is why it continues to pay Apple billions of dollars.