Google spends $1B a year on iOS search default: analyst

Google spends $1B a year on iOS search default: analyst

Summary: How much would you spend to have your search engine as the default option on the second-largest smartphone platform? Quite a lot, according to one Morgan Stanley analyst.

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TOPICS: iPhone
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Google could be paying Apple as much as $1 billion each year to keep its search engine as the default option on iPhones and iPads, according to a Morgan Stanley analyst.

Analyst Scott Devitt says, "the next Google is Google," in the note. The short version is: YouTube is a cash cow in waiting by being able to make $20 billion by 2020 in worldwide TV spending; and search should expand to other markets as the U.S. and U.K. search share remains flatten out.

Taking a closer look at the firm's mobile business, Devitt estimated that Google may spend upwards of $1 billion on simply having its search engine as the default option on Apple's iOS devices. This figure is set to rise over the years, he says.

Google's traffic acquisition costs (TAC) on iOS-powered devices, such as the iPhone and iPad, will incrementally increase year over year, but will remain around the 5-6 percent mark. This falls just short of $1 billion this year, and will slowly increase over time by a couple of hundred million year over year.

Screen Shot 2013-02-10 at 15.00.35
(Credit: Morgan Stanley)

It's no surprise that Google pays others to include search on its products and services. Google pays around $300 million per year to include its search on the home screen on Mozilla's Firefox browser. It's a good deal: spend a little, generate a bit more in ad revenue. 

Android already controls the mobile market, and Google controls the search market in most regions, notably the U.S., the U.K. and mainland Western Europe. Android already hosts Google search, so spending a little—at least by Google's standards—in plugging its search engine in the second-place platform in the mobile market makes sense.

And, if it gives Google an in-road to other places, notably Japan, Asia and Eastern Europe, Google could take the markets it has yet to show any substantial impact in.

(via Business Insider)

Topic: iPhone

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15 comments
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  • Not the second largest but...

    The mobile platform with 2/3 the mobile web traffic. That is the critical figure to Google.
    Bruizer
  • Youtube is crap today

    Yesterday I tried to search for music videos in youtube, and I couldn't it was full of ads from the superbowl which is 1 week away, youtube is full of ads, I hate it, that's why I use a better service like Netflix to watch tv shows or sport events.
    Gabriel Hernandez
  • Axis of evil: the Apple-Google complex

    Similarly, Mozilla/Firefox is essentially a wholly owned subsidiary of Google Inc.

    But this is small change to Apple. Apple dishonestly dodges 1$billion in tax EVERY WEEK in the US alone -- money which should be spent on schools, hospitals, roads, police, etc, but instead goes to an elite minority of execs and shareholders.
    Tim Acheson
  • Illegal business

    Google is paying another 2 billion to politicians in different countries to cover its rear for illegal activities and destroying small business and stealing their data.

    YouTube is full of piracy and google is only one benefiting from it. If pirate bay is banned or blocked why is YouTube still up and running???
    Owlll1net
    • what illegal activity?

      Haven't really seen any, other that those that got defined as "illegal" after the fact.
      jessepollard
      • After the Fact? As in "Got Caught"?

        Google paid US DoJ $500 Million
        Patrickgood1
    • Only illegal if someone cares

      I think illegal in business only comes up when competition is falling behind. Just as in Apple filling law suits against Samsung. It only matters when your losing. Google has more then enough power to influence even Apple. What does that say about Google's power. Money is control and your a liberal if you don't think that's true.
      jscott418-22447200638980614791982928182376
  • This is why Bing fails

    I think we all know why Bing fails. Microsoft is not worthy of spending billions to pay off device makers and browser makers like Firefox to have Bing as the default. But in all honesty my Windows phone had Bing as a search default. But I too switched to Google. Not really a Google fan. But Google Search is still better. Bing is a nice second opinion like engine. But its not going to step in as first choice for me anytime soon.
    jscott418-22447200638980614791982928182376
    • Bing costs a lot of money

      But it would be strange for Microsoft to pay Firefox or chrome, or others to make Bing default :-)
      AleMartin
      • If Micrsoft did this

        There would be uproar. Perfectly fine for Apple and Google to brown envelope in public however.
        12312332123
  • Dump Google

    When would be a better time for Apple to dump Google off its iOS devices? Like Apple needs another billion.
    Steve Nagel
    • And user what?!

      Bing?! Or create their own search engine?!
      I think is good for both and actually I believe it would be better for apple to use Google as default for free - people wants the best experience and probably Google is the best for now.
      AleMartin
      • No Google isn't

        Duck Duck GO and Bing are better
        Stephan Sevenyoln
  • I hope Apple dumps Google

    If Apple dumped Google for Duck Duck GO or Bing, a whole section of the world would be freed from the clutches of one evil company.
    Stephan Sevenyoln
  • Sad to see the slow death of Microsoft...

    Its strage to see a company get so blinded by its past laurels that it fails to realize its eventual downfall. I wonder why is Microsoft not competing hard; what are they doing with all the cash they have accumulated.

    Whether everyone agrees it or not, but smart people can see that the future of computing is mobile (smartphones, tablets and other smart portable gadgets). Google is doing all they can to get into mobile and dominate it. They use their search revenues and subsidize every other business they are in to make sure their presence is ubiquitous. Look how they have subsidized their Nexus devices, how they sell all their business-apps for cheap to businesses, how they give out free stuff (like wifi, etc.) to schools and communities. All because of their ad-revenues. Like it or not, we will be in a world where we would be bombarded by ads all around, thanks to Google!

    What is Microsoft doing with their cash? It has been 3 years since Windows Phone launched and they don't even have a 5% market share. It is hard for people to switch ecosystems, and that is why Google and Apple are doing all they can to get first time buyers hooked on to their ecosystems. Who is going to use Bing or Xbox Music or Outlook or SkyDrive or any Microsoft services when they are on Android and iOS platforms? If Microsoft cannot get a good share in mobile in next year or so, they are doomed. And judging by their actions they are not doing anything. They come up with Scroogled campgain instead of improving and subsidizing their products. They should use their cash to bring top 250 apps from iOS and Android platforms on Windows; give each app developer thousands of dollars and development support. Give phone buyers a subsidized option to buy Windows Phones; a $100 app-card to purchase apps. Use the cash in all creative ways to build the ecosystem and get people on board.

    I wish Microsoft can compete hard and stand up against Google. I would hate to see a world dominated by Google; because Google is not a tech-company, it is an advertising company that is going to use tech to bring us more and more advertisements.
    kbiyani@...