Google pays Apple $3bn to remain default search engine on iOS devices

Bruno Cirelli
Agosto 16, 2017

Samsung has already been receiving an undisclosed amount of commission fees from Google, which has been capitalizing on advertising income from various default Android apps, including the Google search engine, from the early days of the Galaxy smartphone, according to a Samsung spokesman.

Talking to CNBC, Bernstein analyst A. M. Sacconaghi Jr. said, "Court documents indicate that Google paid Apple $1 billion in 2014, and we estimate that total Google payments to Apple in FY 2017 may approach $3 billion". This would prove a good profit for Apple's services business. Google licensing fee make up a large bulk of Apple's services business.

Apple's iOS devices contribute about 50 per cent to Google's mobile search revenue, Sacconaghi noted. That's up from the $1 billion fee that the iPhone maker charged in 2014, as court documents revealed past year. Google is increasing the fee because it does not want to cancel the license. "Given that Google payments are almost all profit for Apple, Google alone may account for 5% of Apple's total operating profits this year, and may account for 25% of total company OP growth over the last two years".

Bernstein points out that the whatever money Google pays Apple is likely all profit - a pretty great deal for Apple and a strong sign of the importance of the iPhone ecosystem.

The analyst also says that services segment has emerged as an important part of Apple's business. Apple's services revenue has increased about $2.4 billion in last two or three years. The licensing fees are about $500 million which shows that 25% of profit is coming from this licensing sector.

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