Google is expected to shell out three times as much as it did in 2014 to remain the default search engines on Apple’s popular smartphone and tablet products.
According to a research note from financial firm Bernstein, Google’s payout is anticipated to hit around $3 billion this year, nearly triple the $1 billion it paid Apple in 2014. Bernstein Analyst A.M. Sacconaghi Jr. indicated these funds could make up as much as five percent of Apple’s operating profits this year.
The figure might actually be higher, though, if older reports about the revenue split between the two companies still hold true, Sacconaghi noted. Service revenue hit an all-time high of $7.3 billion in Apple’s third fiscal quarter.
“We note that press reports have indicated that the revenue share between Apple and Google was at one point 34 percent, which if true and still the case today, would point to much higher than $3 billion in payments from Google to Apple today,” Sacconaghi wrote.
But Google has a good reason to hand over the cash.
Sacconaghi reported iOS devices account for around half of Google’s mobile search revenues. During Alphabet’s second quarter earnings call last month, company CFO Ruth Porat noted Google site revenues were up 20 percent year over year to $18.4 billion thanks to “tremendous” growth in mobile search and YouTube.
Google could walk away from the payment arrangement, but Sacconaghi predicted that won’t happen unless the tech giant is sure Apple would continue to keep its search engine in response to customer demand.