While neither company discloses the details, it is widely believed that
(GOOGL) Google pays Apple (AAPL) $8 billion to $10 billion a year for the right to be the default search engine on iOS devices, in Safari and Siri voice queries. That deal could account for as much as 10% of Apple’s after-tax profits, analysts calculate—and the ad dollars that result from the relationship likely account for an even higher percentage of Alphabet’s revenues.
In a research note Wednesday, Bank of America analyst Wamsi Mohan notes that part of the complaint refers to Google’s distribution agreements with Apple as locking up one of the most significant distribution channels for general search engines. The complaint asserts that “Google pays Apple billions to be the default search provider, in part, because Google knows the agreement increases the company’s valuable scale; this simultaneously denies that scale to rivals.” The complaint asserts that the Apple relationship covers about 36% of all general search queries in the U.S.—and that Google estimates that almost half of its search traffic in 2019 came from Apple devices.
Mohan says one potential remedy would be for Apple to offer consumers an option to use other search services. Google argues that this capability already exists—it is relatively simple to simply download a search app on your phone from
(MSFT) Bing, Duck Duck Go or other smaller rivals. But Mohan cautions that any changes in the agreement could lead to revenue and margin headwinds for Apple.
Evercore ISI analyst Amit Daryanani estimates that the Google search deal accounts for as much…