Why Does Google Have to Pay $3 Billion to Apple

Prayank

Google is undoubtedly the top search engine of the internet-land and in order to maintain that status the company is paying its top competitors, Apple, a hefty $3 billion this year.

Apple Data Center China
Source: Shutterstock

Following the rise of Android OS, Google locked horns with Apple in the mobile phone market and is largely coming out on top as far as sales are concerned.

But in order to stay the default search engine on Apple’s iPhone and not to lose their spot to other services like Spotlight Search, Siri and Bing, the search engine giant might pay $3 billion.

In 2014, the Cupertino-based tech titan received $1 billion from Google as traffic acquisition costs (TAC) to remain the default search engine.

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.”

The analyst also pointed out that this potential deal will account for over 5 percent of Apple’s total operating profits for FY 2017.

Google accounts for 95 percent of mobile search traffic in the US.

The analyst also mentioned that while Google might be back out of signing the deal if it’s too confident about being irreplaceable as the default search engine, Apple’s iOS devices account for 50 percent of the Google’s mobile revenue and that might force the search engine giant to reconsider.

Last week, it was reported that Apple’s tenth anniversary iPhone 8 might propel the company’s market cap to the north of $1 trillion and can help it sustain that too.

Apple’s third quarter results which were announced recently suggest that the stock momentum has added $56 billion to the company’s market cap.

Apple posted $45.4 billion in revenues for the third quarter with a seven percent year on year growth.

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Prayank

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Prayank

Bike enthusiast, traveller, ManUtd follower, army brat, word-smith; Delhi University, Asian College of Journalism, Cardiff University alumnus; a journalist breathing tech these days.