WSJ: Google Search payments to Apple will slow this year

WSJ: Google Search payments to Apple will slow this year
According to one analyst, last year Google paid more than $3 billion to Apple so that Google Search could remain the default search engine on iOS-powered devices like the iPhone and iPad. But Google parent Alphabet has said that its traffic acquisition costs are expected to drop this year, and that category includes such payments to Apple. The latter accounts for such revenue under services, which happens to be the part of Apple's business it is focusing on with the slowdown of hardware sales. In the just released fiscal second quarter, Apple cited licensing as the main driver of a 31% year-over-year hike in service revenue.

Ben Schachter of Macquarie says that the licensing payment that Apple receives from Google practically goes straight to the bottom line, compared with the 15% profit margin that Apple achieves with Apple Music. The streaming music service is subscription based, which means that it too is included under services.

Lower licensing fees from Google would certainly have a negative impact on Apple's earnings. But this deal isn't all one sided. In a previous note to clients written last year, Toni Sacconaghi of Bernstein said that iOS devices account for half of Google's mobile search revenue. The chart at the top of this story shows the arm-in-arm relationship between Google's traffic acquisition costs and Apple's service revenue.

Despite the increased push to increase service revenue, CEO Tim Cook says that device sales are still the most profitable part of its business. Still Apple is said to be planning on offering a new digital magazine service thanks to its purchase of Texture. The latter offers users 200 digital magazines for $9.99 a month. And as Apple Music continues to grow, the company will have to find additional ways to make up for what could be a reduction in licensing fees from Google.

source: WSJ

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6 Comments

1. Nimbus

Posts: 442; Member since: Apr 02, 2018

Google will become a little poor later this year or next year,money they brought from apple devices on their search engine won't be sustainable in long run after apple considering making its profit from services sector now onwards after decline in iphone x,8,8+ sales.Hope apple soon develop its Search engine and youtube alternative just like Microsoft bing search engine and amazon alexa assistant.The 3 billion contract will reportedly get expire soon after one year due time.

2. BlackhawkFlys

Posts: 908; Member since: May 07, 2014

People will still switch to Google as their default search unless Apple locks them to Apple search.

3. Nimbus

Posts: 442; Member since: Apr 02, 2018

You say whatever u want but people love choices so some of them don't prefer to use google apps service but other companies apps services.I just don't like fandroids at all who just keep prefering google apps services all the time for any of different needs over any other platform apps ecosystem services.It's time to change but i prefer no of choices more than 1 or 2 choices available.People like u had made google rich instead of supporting apple,microsoft and amazon apps ecosytem that why they had became dominant in mobile market with their os and apps services.Shame on u i hope people just change their prefrence one day that u had move on with them.

5. sgodsell

Posts: 7219; Member since: Mar 16, 2013

Your right people love choice. However what choice will Apple give in regards to it's searches. How biased will Apples search engine be towards it. Microsoft Bing was geared towards Windows references for searches, especially if you looked up Linux or Android related stuff. How do you think Apple will be when it does searches with it's engine. If it ever did. Even Google is under scrutiny from the EU and America. For not only it's searches for product look ups, but YouTube is has hired 10,000 people to go through the 8 million YouTube videos that are posted every day with the help of AI to go through all the videos to categorize and even make kid friendly content as well. You think it's easy to do what Google is doing right now with just two things. Think again. If it was easy to replace Google's search, and YouTube. Then Apple would have done it by now. But the other part to this is if Apple were to do their own search and YouTube. Then Apples platform would become that much more closed off, and restricted. Do you think Apple would make Search or YouTube for other platforms? Not a chance.

6. Invokana

Posts: 4; Member since: Mar 06, 2018

You said you don't like fandroids but can you specifically explain what's wrong with the Google app services instead? Why it is a shame to make Google rich when apple, ms, and Amazon are also huge companies that are making tons of money from consumers like us? These companies make a lot of money but they also hire a lot of people by giving them jobs so that they can feed their families and stuff. Not sure why the hate just because it's one of the most popular. No offense and correct me if I am wrong.

4. piyath

Posts: 2445; Member since: Mar 23, 2012

Nope. I use bing as of now and it's totally fine. After sometime people forget what search engine they use because bing is that much good now.

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