Why Google Pays Apple Billions of Dollars Annually


Google

Have you ever wondered why Google pays Apple billions of dollars every year? No, it’s not because they’re in cahoots to take over the world (at least, we don’t think so). The truth is quite fascinating and has to do with the way our digital world operates.

Why Google and Apple Need Each Other

You see, Google is the most popular search engine in the world, and they make a ton of money from advertising.

It’s hardly surprising that Google has a virtual monopoly on the global search engine market (as per StatCounter), with over 90% share, given that almost nobody switches their default search engine to alternatives like Bing or DuckDuckGo.

However, for their ads to reach as many people as possible, they must be on as many devices and platforms as possible. And that’s where Apple comes in.

Google

Apple is one of the largest tech companies in the world and has a massive user base. In fact, there are over a billion active Apple devices out there. That’s a massive audience for Google to tap into. But how do they do it?

The answer lies in the default search engine on Apple devices. When you search for something on your iPhone or iPad, the default search engine is set to Google. This means that every time someone searches for something on an Apple device, Google gets a piece of the action.

But here’s the catch: Apple could easily switch the default search engine to another provider, like Bing or Yahoo. So, in order to keep its hold on this valuable audience, Google pays Apple billions of dollars every year to keep Google as the default search engine.

How much, you may ask. As per The Wall Street Journal’s report, the estimated amount for 2020 was around $8-$12 billion.

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Meanwhile, according to Forbes, the figure for 2021 was estimated to be close to $15 billion, and it was projected to increase to $18-$20 billion in 2022.

A win-win situation for everyone

It’s a win-win situation for both companies. Apple gets a cut of the advertising revenue generated by Google searches on their devices, and Google gets access to a massive audience that they wouldn’t have otherwise.

Why I think Google is walking on a tightrope

Google’s billion-dollar partnership with Apple might be in jeopardy thanks to the rise in Microsoft’s popularity over the past couple of months.

Microsoft shocked the world a couple of months ago by integrating ChatGPT into its Bing search engine.

Microsoft’s sudden and aggressive adoption of AI search caught Google off guard, and the success of this approach has caused Samsung to consider switching to Bing as its default search engine.

Apple

In the event that people become more inclined to try Bing, Apple could leverage this opportunity by pressuring Google to increase the royalties it pays.

If Google refuses, Microsoft would be eager to outbid Google and make Bing the default search engine on all Apple devices, thereby accelerating its adoption.

Google has, however, introduced its own AI, dubbed Google Bard, to rival ChatGPT, so we’ll have to keep a close eye on how all this affects the partnership with Apple.

So, there you have it, the secret behind why the Alphabet owned company pays Apple billions of dollars annually. It’s a fascinating example of how the digital world operates and how two giant tech companies can collaborate to create a mutually beneficial partnership.

In conclusion, the next time you search for something on your iPhone, remember that you’re part of a massive ecosystem that spans the globe and that Google and Apple are working behind the scenes to make it all happen.

 

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