Apple’s deal with Google is a two-way street
The companies have a love-hate relationship that sees billions of dollars flow annually
Tim Cook may hold his nose when he takes money from Google every year, but take it he does—and for good reason.
Alphabet Inc., the parent company of Google, paid about $11.8 billion (U.S.) in traffic acquisition costs to unnamed distribution partners in the 12month period that ended Sept. 30. That happens to coincide with Apple Inc.’s latest fiscal year in which the iPhone maker has cited licensing payments from unnamed sources as the largest driver of growth for its Services business that generated $37.2 billion in revenue for the year, up 24% from last year.
Both companies have long preferred to be vague on the details of their arrangement in which Google pays Apple to be the default search engine on its Safari internet browser. Some $4 billion a year is the most conservative view among analysts who have taken a stab at estimating these payments. Rod Hall of Goldman Sachs believes the true number is closer to $9 billion.
Whatever the exact figure, it is a lot considering that Mr. Cook frequently likes to criticize the advertising-driven business models of his Silicon Valley neighbors. Asked about the incongruity in an interview Sunday with Axios on HBO, the Apple CEO admitted that Google’s search engine is still the best out there. But he also touted the privacy features that Apple has built into its Safari browser, which include private browsing and intelligent tracker prevention.
“It’s not a perfect thing,” he added. “I’d be the very first person to say that. But it goes a long way to helping.”
The implication that Apple takes Google’s money with one hand while making the internet giant’s life harder with the other is an interesting one. Google still seems to deem the relationship valuable enough to keep paying up. The company has cited “changes in partner agreements” as the main reason its distribution traffic acquisition costs have jumped 45% so far this year. For Google, something in this deal still clicks.