It’s no secret that Apple and Google have a massive financial deal that secures Google’s position as the default search engine on Apple devices. In a new note to investors from financial adviser Toni Sacconaghi de Bernstein, the analyst says Google’s payment to Apple to maintain the status quo could reach $15 billion in 2021, up from $10 billion last year.
First reported by Ped30, Sacconaghi’s memo estimates that Google’s payments to Apple could continue to rise year-over-year and approach $18-20 billion in 2022. Bernstein’s analyst bases his figures on public records from Apple as well as a bottom-up analysis of Google’s traffic acquisition costs.
Google’s deal with Apple in the search and advertising markets has been in place for more than a decade, but Google’s search engine dominance has come under increasing scrutiny in recent years, Bernstein analysts believe the deal could face regulatory risk.
Additionally, both Yahoo and Microsoft have been keen to strike a deal with Apple to overthrow Google as the default search engine on iOS devices, and analysts suggest Google’s huge payments to Apple are being made to ensure that Microsoft is not outbidding.
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 on Apple’s gross earnings following an unfavorable decision; & (2) whether Google chooses to stop paying Apple to be the default search engine, or seek to renegotiate terms and pay less. We’ve noted in previous research that GOOG likely pays to ensure Microsoft doesn’t outbid. That said, with payouts likely to approach $18-20 billion in FY22, it’s not unlikely that Google might revise its strategy.
Last year, the US Department of Justice filed an antitrust lawsuit against Google, saying the Mountain View-based company used anticompetitive and exclusionary practices in the search and advertising markets to maintain a monopoly. illegal. One of the major complaints against Google is its agreement with Apple that allows Google to be the default search engine on Apple’s Safari browser and other search tools.
Last year, Sacconaghi argued that Apple should buy a search engine to put pressure on Google. Sacconaghi’s reasoning was that Apple didn’t have many alternatives to Google, its only leverage being an exchange with Bing. However, the analyst also warned that such a move could trigger regulatory scrutiny that could ultimately block the acquisition, putting Apple in a worse position than before.
Speculation mounted in 2020 that Apple was planning to launch its own search engine, after increased activity was noted from its web crawler, but the rise was later attributed to Apple’s efforts to improve Siri and Spotlight search results, and the rumor has come so far. to nothing.