In new information analysed in a business post by Bloomberg and exposed by the ongoing legal dispute between Oracle Corp and Google, it is revealed that Google reportedly paid Apple $1 billion in 2014 to remain the default search engine on iOS, the operating system of all Apple products, including the iPhone and iPad.
There has always been reason to wonder about how much exactly Google pays to keep itself the default search engine for Apple users, but this figure is beyond even what many would have expected.
The $1 billion payment is thought to have been made as part of a revenue-sharing agreement made between Google and Apple. This agreement meant that Apple would receive a certain percentage of the revenue which Google made through Apple devices, according to the Attorney for Oracle America Inc at a court hearing on 14th January 2016, in a Federal Court in the US. This agreement, therefore, means that Google is having to give away part of its profits, and also pay Apple more money, to keep customers using its products such as searching and Google Play Store.
Did Google Pay Apple 34% of its iOS Revenue?
The Attorney for Oracle, Annette Hurst, told the Federal Court has told the media that a witness in the case said when questioned, that “at one point in time the revenue share was 34%.” However, it remains unclear from the comments in the transcript whether this represents the amount of revenue kept by Google, or paid to Apple.
The Attorney for Google in the case objected to this information being made public, no matter which way the percentage falls, as he said:
However, the magistrate judge who was presiding over the case at the time of this comment refused Google’s request to keep the information from public view. Though Google claimed that this information was sensitive, and could impede their business activities, the judge saw fit for it to be made public. Following this, Google then asked Judge Alsup to seal and redact the transcript; it put forward the argument that this transcript’s availability could make it more difficult for the company to negotiate similar deals with other corporation in the future.
Google and Apple Had Never Disclosed This Deal
The two companies had always kept the details of their deal confidential, and they maintain that the information exposed during the examination of this court transcript is highly sensitive and should not have been revealed.
Google commented on 20th January 2016:
Not only have Google and Apple always kept this information confidentially, but after the Federal Court hearing, it is reported by Bloomberg that the transcript containing this information, in fact, disappeared at approximately 3:00 pm Pacific Standard Time, despite there being no indication that the Court had made a ruling on Google’s request to seal it from view.
How Important Is Being the iOS Default Search Engine?
Google’s payment to Apple might seem like a lot of money to spend on simply being the default search engine. However, the place as the default service within an operating system is very important in a competitive market. As an example, in 2012, Apple made the decision to replace Google Maps as the default navigation on iOS with their mapping data service: when it was first introduced, this service was criticized for being inaccurate, and for having in general a lower quality that Google Maps, but over time this changed.
Now, over three years later, the default application was used three times as much by iOS users than Google Maps, according to Apple. As you can see in the example below, Google Maps remains more detailed, with some results missing from the Apple Maps application – yet this hasn’t prevented the latter from becoming the most popular choice for iOS users.
For Google, of course, this change meant millions of users who were no longer using Google Maps, and therefore whom Google could not sell products to and advertise to through this application. Though Google reportedly makes $31 billion from Google Android, Apple in fact is valued at making $32.2 billion from just the iPhone, and only in the fourth quarter of 2015.
This comparison illustrates why Google is so determined to be the default search engine for Apple, as the company can widen Google’s exposure and use at a high level. It may be a worry for Google that many iOS users could simply switch to using the Apple Spotlight search engine which also comes as a part of the iOS operating system package which they get with their Apple devices; a comparison of the two search engines can be seen below.
The reveal of the $1 billion payment to Apple for the default search engine spot puts an end to all the rumors which have been circulating for years about the details of the deal between Apple and Google. Many will be surprised by the large amount while others will see it as expected. As the Federal Courts case between Oracle and Google Android continues, other interesting details about Google may come to light. For now, it is clear that Google has made a commitment to being the search engine of choice for iOS users, and this arrangement look likely to continue, as both Apple and Google gear up for 2016.