Google/Apple alliance gives preferential treatment to both search engines.
The Justice Department formally unveiled its long-brewing case against Google on Oct. 20. A key focus is the deals the internet giant strikes with device makers such as Apple to ensure prominent placement of its search engine.
Those deals account for a large portion of the traffic-acquisition costs paid out by parent company Alphabet Inc., Google which now total more than $30 billion a year and have grown at a rate of 18% annually during the past five years.
Licensing a key part of Apple’s growth and a top driver of revenue growth.
The furthest Apple has ever gone is to credit “licensing” as one of three top drivers of growth of its $53-billion-a-year services business in its quarterly filings. But even that peek is telling; licensing has been either the largest or second-largest contributor to growth within Apple’s services segment for the past five fiscal years.
Hence, the government’s crackdown on Google threatens a very material revenue stream for Apple. It also threatens a key source of lucrative traffic for Google, given the desirability of Apple’s user base.
Value of search engine flow must be valuable given the sums of payments paid.
But Google would hardly be paying Apple an estimated $8 billion to $12 billion a year if it doesn’t feel it gets any benefit from it. And Apple has long touted the long-term growth potential of its services business, which would take a significant hit if the payments from Google disappear.
Potential response to oncoming anti-trust is building proprietary search engine to make up the difference.
Financial Times recently reported that the company is developing its own in-house search alternative to Google.