How Google Pays Apple In 2018
Almost since birth, Google's done business with Apple – be it by listing ads, running GPS maps, or by being a default for search on a smartphone. Apple and Google understand that it's better for business that they collaborate and compete, rather than just one or the other. Today we're going to talk about how Google paid Apple one massive amount of money for one key bit of preferential treatment in their MacBooks, iPhones, iPads, and so forth.
The sources for the following information is varied, and only the FIRST is certain due to a court filing. That court filing appeared in January of 2016 during a court battle between Google and Oracle. As the court transcript revealed and we wrote, "Google paid Apple something along the lines of $1 billion in 2014 so that Apple would retain it as the web search engine of choice in the Search Bar feature on the iPhone."
Google's payment there was for what's known as traffic acquisition costs (TAC). "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," said Bernstein analyst Toni Sacconaghi on CNBC on August 15th, 2017. "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."
The latest per-year estimate for financial year 2018 (FY 18) comes from Goldman Sachs analyst Rod Hall. VIA Business Insider, Hall's investor note suggested that Google's TAC payment to Apple for FY 18 might be around $9 billion, and will likely ramp up to $12 billion in 2019.
That'd mean this was Google's TAC bill each year:
• 2014 $1-billion
• 2015 ?
• 2016 ?
• 2017 $3-billion
• 2018 $9-billion
• 2019 $12-billion
What made Apple's costs ramp up at such a rate? According to Hall's note, "We believe this revenue is charged ratably based on the number of searches that users on Apple's platform originate from Siri or within the Safari browser."
Over at SearchEngineLand there's a timeline which I'll reproduce here in brief. They give all the sources there – most of which were straight from Google at press events. You can also head back to Internet Archive archived Google Zeitgeists for 2001 through 2007. This is TOTAL Google Searches, not just searches generated through Apple products.
Total Google Searches Per Year:
• 1999: 1-billion
• 2000: 14-billion (very approximate)
• 2001: 55-billion (rounded up)
• 2002: 55-billion (rounded down)
• 2003: 55-billion (rounded down) (maybe just copy-pasted?)
• 2004: 73-billion
• 2005: More than 73-billion
• 2006: ?
• 2007: ?
• 2008: ?
• 2009: 365-billion (and more)
• 2010: ?
• 2011: ?
• 2012: 1.2-TRILLION
• 2013: ?
• 2014: ?
• 2015: ?
• 2016: 2-TRILLION (Based on Search Engine Land estimate)
• 2017: ?
• 2018: ?
It's pretty obvious Google's searches are going up each year by multiples of previous years. As more of the world's citizens get smartphones in their hand, searches continue to ramp up. But at which point does this growth level off? Surely there's a point at which everyone is searching the maximum amount they're able, and there's no reason to think any more people would search than searched the year before?
No matter which way you look at the situation, Google and Apple hold eachother's fates in their hands. Or at least a significant amount of search traffic and/or services revenue. Next up: voice searches – and whether the always-on assistant will keep that searches-per-year number increasing at an extreme rate.