Court Documents Show Google Paid Apple $1 Billion For Safari Default Placement

In 2013, Morgan Stanley and Macquarie Capital estimated that Google was paying Apple around $1 billion annually for the privilege of being the Safari default search engine. Turns out they were right.

According to a Bloomberg report citing court documents and testimony in Oracle’s copyright suit against Google, “Apple received $1 billion from its rival in 2014.”

The following image is from a Macquarie Capital research note in 2012 speculating about the nature of the Google-Apple iOS financial relationship. Macquarie estimated $1.3 billion in annual search revenue from iOS devices. Morgan Stanley imagined a straight per-device payment to Apple, amounting to a total of of $1 billion, without any sort of revenue share.

Of the two theories Macquarie was more accurate, at least about the revenue share. The Oracle trial documents revealed a revenue share of 34 percent between the parties. However it wasn’t clear in the Bloomberg report (or from the court testimony apparently) which one received the 34 percent — my guess is Apple.

Both Apple and Google declined to comment to Bloomberg on the financial terms in the court documents.

A 2015 Goldman Sachs report estimated that in 2014 Google made nearly $12 billion in mobile search revenue, with 75 percent of that from iOS devices. Under that scenario (assuming a 34 percent revenue share to Apple), Cupertino would would have collected more than $1 billion.

Last May Google’s Omid Kordestani said that the Apple deal was “important” to the company and had yet to expire. Both Microsoft and Yahoo were rumored to be formally competing for the Safari business.

Since May 2015 there have been no other public statements about the Google-Safari default search deal. It may well be that the deal was quietly renewed some time last year. A number of financial analysts argued that Google would ultimately be better off not paying Apple for the default privilege and winning “switchback” users (graphic above).

Google’s total traffic acquisition costs in 2014 were $13.5 billion (vs. ad revenues of $60 billion). Google TAC is likely to exceed $14 billion for 2015.

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About The Author

Greg Sterling is a Contributing Editor at Search Engine Land. He writes a personal blog, Screenwerk, about connecting the dots between digital media and real-world consumer behavior. He is also VP of Strategy and Insights for the Local Search Association. Follow him on Twitter or find him at Google+.

(Some images used under license from Shutterstock.com.)