A research note has predicted that Google might pay Apple around $15 billion to be the primary search engine on Apple devices. The note comes from Toni Sacconaghi, an analyst at Bernstein (via Android Central).
The prediction is based on disclosures made by Apple on public filings. The analyst also conducted a bottom-up analysis of Google’s traffic acquisition costs or TAC payments. The Justice Department revealed in October 2020 that Google paid $8 to $12 billion to become the default search engine on Apple devices.
The analyst says that Google may end up paying more to avoid a bidding war with Microsoft. Sacconaghi also believes that Google may not consider this plan long-term, given that payments could touch $18 to $20 billion by 2022. In this scenario, Sacconaghi believes that Google may negotiate with Apple to bring the fee down.
Apple could lose 4% to 5% of its gross profits if the deal falls apart
While there’s a possibility of regulators intervening in the deal, it is likely to go through smoothly. However, if the deal is blocked, Apple’s gross profits may take a hit by 4% to 5%, per Sacconaghi.
Earlier this year, app makers came together to offer congressional testimony against the alleged anticompetitive practices of Apple and Google. Developers said they fear any small changes to the app store rules that could effectively end their businesses. App developers such as Spotify, Tile, and Match Group (Tinder) were at the hearing. Representatives of Google and Apple were also present.
The two tech giants were also accused of threatening developers. Chief Legal Officer at Spotify, Horacio Gutierrez, said he could recount “at least four clear examples of threats and retaliation” from Apple. Gutierrez further said the retaliation came after Spotify went public about some of Apple’s anticompetitive behavior, including the fee it charges developers.
Both companies have been in the crosshairs of regulators for quite some time. They have also faced regulatory hurdles outside the U.S. The EU recently opened investigations into Google’s Ad Tech business over alleged violations of EU competition rules. Google has also paid hefty fines over antitrust allegations. More recently, the search giant was hit with a €500 million fine from the French Competition Authority.