A very rich deal between Google and Apple for search in iOS

Steve Jobs shows an iPhone 4 in 2010
Steve Jobs shows an iPhone 4 in 2010

According to the financial services corporation Morgan Stanley, Google might pay Apple about $1 billion a year to be the default search engine in its iOS devices, meaning the various models of iPhone (photo ©Matt Yohe), iPad and iPod Touch. Only three years ago, Google had paid $82 millions.

The figure of $1 billion emerges from a calculation made by an analyst at Morgan Stanley in a report titled “The Next Google Is Google”. Analyst Scott Devitt believes that Google still has room to grow in search services and nowadays mobile devices are a very important factor.

In the past, the agreement between Google and Apple was analized a number of times and it’s possible that actually Google is already paying $1 billion a year since 2011 to be the default search engine on iOS devices. According to most analysts, the deal is a the revenue sharing type so that for every dollar made by Google through search on iOS, Apple receives 75 cents, meaning three quarters.

This type of agreement is in force between Google and Mozilla Foundation, which could obtain $400 million in 2014. Scott Devitt, however, thinks that the agreement between Google and Apple consists in the payment of a fee for each mobile device sold that uses iOS with Google as the default search engine. For Apple, this type of payment would be beneficial because it’s certain and easier to account for.

In any case, it’s an agreement that benefits both companies despite the conflicts sometimes tough existing between them. Obviously, Apple gets a lot of money but it’s also good for Google, which in this way controls 95% of the mobile search market. Microsoft signed agreements with Nokia and Blackberry to have Bing as the default search engine on their mobile devices but even in this market gets crushed by Google.

This agreement demonstrates once again the importace of being the default search engine. Only a small minority of users have the – though elementary – knowledge necessary to choose a different one, the consequence is that paying an amount of money that at first glance may seem incredible makes sense because it actually means buying users.

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