As generative artificially intelligent chat bots looks to supplant traditional link based searches online, Google’s has to contend with another threat from a different vector and it could end up costing Apple $20 billion in the process.
While it’s been an unspoken reality that Google has paid Apple to remain its default mobile search partner, a financial analyst recently published a report for institutional investors putting a price tag on the deal based on the current US Department of Justice’s case against the search giant.
According to The Register, investment analysis firm Bernstein says the Information Services Agreement (ISA) between Apple and Google is worth $18-20B in annual payments from the latter to the former.
Bernstein was able to make their $18-20B summation based on reporting Google does of its traffic acquisition costs (TAC) to distribution partners which inadvertently highlights how much of that outgoing cost is being funneled to Apple. Based on the numbers, “Google pays out 22 percent of total ad revenue on TAC and estimates Apple likely receives around 40 percent of this.”
To put Google’s bill in perspective, the $18-20B paid to Apple could accounts for up to 16% of the company’s annual operating profits.
Aside from putting a scope on the dollar amount exchanged between Google and Apple to corner the smartphone search market, Berstein’s report is relevant to investors because it acts as flare for turbulent investing for Apple stock and the other product providers who have entered into IAS’s with Google depending on the DOJ’s investigation.
While Apple may demand the highest payment from Google, other companies such as Samsung, Mozilla, Motorola, and others also have written and unwritten deals with Google to prioritize its search engine over would-be competitors.
If the DOJ can determine that Google has engaged in anticompetitive behavior leading to the monopolization of search and search advertising, those ISA deals would be in jeopardy, with Apple potentially losing up $20B annually from Google, which in turn, affects investors directly.
