In the tech world, Google and Apple may be the biggest example of the term "frenemies." While both companies are pretty much at each other's throat in terms of competition, they are still partners on a few deals. For example, Google is paying Apple a ton of money so it can be Safari's default search engine.
According to CNBC, an analyst from Bernstein stated that it's highly possible that Google is paying Apple as much as $3 billion per year for this.
Business Insider got a hold of the Bernstein’s report and confirmed that they also think that this is highly possible.
Toni Sacconaghi, one of the Bernstein analysts, stated that from a known court document from 2014, Google had to pay Apple $1 billion so they could continue being the default search engine in iOS. Keep in mind that this was a couple of years ago.
Since then, mobile traffic and iPhone sales have grown steadily. If you look closely at Google's expenditures for traffic acquisition and Apple's service revenue (especially the licensing revenue), then it's a good estimate that the $1 billion could be $3 billion now.
This suggests that Google is still dependent on Apple when it comes to traffic. A big portion of Google's revenue comes from ads that are displayed on Google's search engine and partnering sites. However, for those ads to continue making money for Google, they need to get traffic. With Apple controlling around 18% of the smartphone market, it's safe to say that Apple controls a lot of mobile traffic.
A few months from now, Apple is going to release a new version of the iOS, which means that a lot of mobile users will be updating to the new version. Here's the thing, Apple can easily change the default search engine in Safari with the coming update. This is not something that Google wants, so they have to continue paying a lot of money to remain the default search engine.
Keep in mind that Apple is not afraid of saying "no" to Google. A few years ago, Google Maps and YouTube were default apps on every iPhone. When Android became a serious threat to Apple, Apple removed YouTube and Google Maps.
On the other side of the argument, Google is the top paying company for Apple. DuckGoGo, Yahoo Search, and Bing can't really afford this price tag. Still, Apple does not really need the money but if they want to hurt Google, then they have that option.
This means that when it comes to the negotiating table, Apple has the clear upper hand. It's worth noting that Bing and DuckGoGo have gotten better in the last few years. On the downside, they still have a long way to go when it comes to non-English searches.
The situation between Google and Apple is a perfect example of an asynchronous competition. Both companies compete and innovate but they are also partners and pay each other in some aspects. The relationship between these two companies would make for a great case study in business schools.
