If you’re wondering how much does Google pay Apple each year, the answer may surprise you. It’s about $1.5 billion. That’s a hefty sum, and it comes with a Non-compete clause. And while the deal may sound good at first glance, there are a few other factors to consider, too.
$1.5 billion
Apple and Google have an ongoing legal battle over how the search engine works. The Justice Department says Apple is illegally blocking Google search traffic and is violating the law. Google pays Apple $1.5 billion a year in return for the right to control search results. The Justice Department says the deal has a negative impact on the competitiveness of the search engine market and could harm Google’s bottom line.
While the two companies have not made any formal announcements about this deal, analysts have noted that the annual amount may be between $18 billion and $20 billion for FY22. That’s a whopping nine percent of Apple’s gross profit. But Apple has never disclosed the specific amount, so the payments may not be as large as they seem.
Furthermore
While there are dozens of mobile search options, most iPhone users stick to Google. Apple does allow users to choose other search engines in Safari. Other options include Yahoo, Bing, and DuckDuckGo. However, only a fraction of iPhone users alter their default search engine in Safari. The fact that Google is the default search engine on Apple’s devices isn’t accidental – Google wants to stay ahead of competitors.
Apple says it is investing in fraud prevention technology to protect customers. Last year alone, Apple blocked more than 3.3 million potentially fraudulent transactions. By implementing security measures and a secure payment environment, the company has saved its customers around $1.5 billion in potential losses.
Non-compete clause
If Google can’t compete with Apple on the iPhone, should it? That’s a question that the Justice Department is considering in its investigation of the Google-Apple deal. According to the complaint, Apple CEO Tim Cook met secretly with Google CEO Sundar Pichai and agreed to a non-compete clause. This clause requires Google to share its profits with Apple in return for preferential treatment on Apple’s devices. In exchange, Apple pays multibillion-dollars a year to Google. The deal also requires Google to keep its distance from Apple’s competitors, including smaller companies and future competitors.
Apple is obligated to pay Google billions of dollars annually to be the default search engine on Apple’s devices, yet it does not intend to do so. The lawsuit also claims that the anti-competition clause stifles competitors and prevents Apple from acquiring smaller companies. Furthermore, Apple’s monopoly is causing Google to set higher rates for advertising than competitors.
Moreover
Apple and Google are closely linked, and the relationship between the two companies may have been exacerbated by their recent acquisitions. While Apple’s acquisitions have helped Apple become one of the world’s leading companies, the two companies are at odds with one another. Apple’s acquisition of Motorola, for example, has created a major headache for Apple. The two companies have been engaged in acquisitions long before they became headaches for one another.
The UK Competition and Markets Authority has described the Apple-Google deal as a significant obstacle to the growth and entry of competing companies. The Competition and Markets Authority has asked both companies to reconsider their agreement and come up with alternatives that will provide a level playing field for everyone.
Price of default search engine
In a deal that has been under scrutiny by UK regulators, Google is paying Apple to be the default search engine on their mobile devices. The two companies have been in an agreement for years and have paid each other up to $1 billion a year for the privilege. According to the deal, Google gets half of the search engine’s traffic from Apple devices. But the deal isn’t without risk. Other companies, including Microsoft and Yahoo, have expressed interest in replacing Google as the default search engine on iOS devices.
In exchange for retaining its position as the default search engine for Apple devices, Google is expected to pay Apple $15 billion by 2021. But that payment could rise even more in the next few years. Analysts estimate that Google will pay up to $20 billion in 2022. But that is still a far cry from the $22 billion that Microsoft paid Apple in 2015.
According to the analyst at Goldman Sachs, Google could end up paying Apple $15 billion by 2021 for this “default” placement. That’s a significant increase from the $3 billion paid by Google last year, but is still a small fraction of the total Apple pays Google.
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