Apple likely to demand US$3bn for Google to remain default search engine on iPhone, iPad

But an expert says Google might back away from Apple.

google to pay apple 3 billion usd
Google is currently the default search engine on iPhone and iPad Reuters

Google is getting 50 per cent of its annual revenues for mobile search from Apple. If the search giant wants to retain its position and earnings from Apple, it has to succumb to the iPhone maker's foreseen multi-billion dollar demands.

Latest report from a research and brokerage firm reveals Apple might be asking Google a huge amount of money to the tune of US$3bn to remain as the default search engine on iPhone and iPad devices. In Bernstein's investor note released on Monday, the Cupertino, California-based iPhone maker is believed to receive approximately US$3bn this year from Google on condition.

"Court documents indicate that Google paid Apple $1B in 2014, and we estimate that total Google payments to Apple in FY 17 may approach $3B", says Bernstein analyst A.M. Sacconaghi Jr.

According to Bernstein, Google's license obligations make up largely of Apple's service business. Year after year, Apple has been doubling its net profits from its services, which is touted to become as huge as a Fortune 500 firm.

"Given that Google payments are nearly 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", stresses Sacconaghi.

However, the expert's analysis sees a negative impact if Apple will impose the exact condition on Google. The search giant might withdraw from Apple devices' and avoid licensing fees if it deems necessary. Google search is the most popular search engine.

This article was first published on August 15, 2017