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Despite being fierce competitors in the tech industry, Google and Apple have a secret agreement whereby Google pays Apple billions of dollars annually to maintain a secret agreement.
Here’s what you need to know!
Apple's 20% profits through Google
According to a report from the New York Times, Google pays Apple an estimated $8 -$12 billion dollars every year.
This is the single largest payment Google makes for anyone and that accounts to be 14-21% of Apple’s total profits.
But Why?
Google has an agreement with Apple wherein it pays the latter to be the default search engine on the Safari browser for both iOS and macOS, ahead of its competitors like Bing and DuckDuckGo.
Google also remains the default search engine for Siri and macOs spotlight searches.
Why is Google doing this?
Google generates revenue by placing ads on its search platform, which are displayed when users perform searches. Every time a user clicks on one of these ads, Google earns money.
By paying Apple, Google maintains a monopoly in the search engine market. As of April 2023, Google Search has a global market share of approximately 91% on desktop and approximately 96% on mobile devices (including Android and iOS).
This dominance in the search market translates into a substantial market share in search advertising revenue as well.
Is this profitable for Google?
According to Alphabet's latest annual report, Google's parent company, Google search contributed $162 billion to the company's total revenue of $283 billion, which accounts for 57% of the total revenue.
In addition to the financial benefits, with a large user base and default option status, Google can maintain user loyalty and strengthen its brand, making it difficult for competitors to enter the market.
Is this agreement legal?
The legality of the agreement between Google and Apple is currently being challenged in a class-action lawsuit, which alleges that the non-compete agreement between the two tech giants violates US antitrust laws.
The lawsuit claims that the agreement is a significant barrier to entry and expansion for other competitors in the search engine market. However, the case is still ongoing, and a final decision on the legality of the agreement has yet to be reached.
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