Report: Google Pays $700M to Apple for Prominent Mobile Search Placement
February 11, 2013 2:48 PM
comment(s) - last by
Apple, Microsoft, and Adobe also gets grilled about high prices by Australian regulators
According to Morgan Stanley (
) analyst Scott Devitt, Google Inc. (
) paid about $700M USD to Apple, Inc. (
) in 2012 to solidify its
monopoly on mobile search traffic
I. The Price of Search Hegemony
continues to shift
towards a more mobile profile, Google -- a company driven by search-related advertising profits -- has moved aggressively to be the king of mobile. By offering its Android operating system "free" to partners Google has established a dominant position in unit sales. And by extending an olive branch to Apple -- the second place player in the market -- Google is ensuring that if a customer uses the default search on their smartphone, they'll probably use Google's mobile landing page.
Google pays an estimated $3.20 USD per iOS device sold to be the default search provider, according to Mr. Devitt's math. That deal grossly eclipses Google's lucrative deal with the Mozilla Foundation, which Mr. Devitt estimates paid $200M USD.
Google pays an estimated $3.20 USD per Apple device to be the default search engine.
[Image Source: Android Headlines]
On the desktop front, many users manually navigate to Google. Additionally, Google's Chrome browser is currently in third place, while Firefox is narrowly ahead in second place in most usage statistics. Both browsers have Google as the default search engine. Overall the two browsers account for about a third of internet traffic
Net Applications, while Microsoft Corp.'s (
) Internet Explorer (IE) hangs on to half of traffic. The default search page in IE
(or the Bing-powered MSN), Microsoft's own in-house solution.
Mr. Devitt estimates that by 2019, IE will have bled more market share to Chrome and Mozilla, and Google will have greater control of the market. However, he also believes that control will cost Google $500M USD in traffic acquisition costs (TAC) to Mozilla.
He also estimates by 2019 Google will be paying Apple $2.3B USD in TAC for iOS, as he expects unit sales of iPads, iPhones, and iPod Touches to soar to half a billion devices a year by 2019.
$10.75B USD for fiscal 2012
; by contrast Apple
made $13B USD
in Q4 2012, alone.
Google's dominant position in mobile and desktop search has drawn scrutiny. Google recently agreed to make certain changes in the U.S. to placate the
U.S. Federal Trade Commission
(FTC), but Microsoft and others claim the FTC let Google off too easy. In Europe Google is looking to settle a similar antitrust spat with more extensive promises and fairness guarantees.
II. Australia Targets Apple With Harsh Words, Parliamentary Probe
In related news, Australia's Parliament is looking to grill Apple, Microsoft, Adobe Systems, Inc. (
), and others over claims that they're overpricing products for the Australian market.
The Australian dollar is generally relatively "strong", which should mean that products there should be more affordable. But Australians are finding that Apple and others are charging similar rates in dollars to other countries, making the Australian products much more expensive, effectively.
Labor government MP Ed Husic, who helped set up the hearing and whose party currently is the second largest in the national government remarked to
, "In what's probably the first time anywhere in the world, these IT firms are now being summoned by the Australian parliament to explain why they price their products so much higher in Australia compared to the United States."
An iPhone on sale at the Sydney, Australia Apple Store; Apple is among the U.S. companies accused of price inflation and tax evasion in the land down under [Image Source: Reuters]
Australia's Labor Party has been dented by the rising cost of living and looks to leverage the hearing to its advantage before the Sept. 14 elections.
A 16 GB iPad (Wi-Fi) commands A$539 ($553.60), almost $55 more than its U.S. cost ($499 USD).
So far Microsoft and Adobe have submitted written statements, while Apple has ignored the Parliamentary complaints altogether. Microsoft and Adobe have defended their pricing saying that there's an inherent cost to imports and that Australia has a higher cost of labor than other markets.
MP Husic is not amused, commenting, "The companies have blamed each other for not appearing. One will say 'we're not going to appear if the other is not going to appear'. So we've cut straight to the chase and said we'll just summons you."
This time if the companies don't send executives to the hearing, they could face contempt of parliament charges, fines or even jail terms. MP Husic takes particularly hard aim at Apple, who he effectively accuses of tax fraud. He comments, "Ask anyone who has sought answers from them about their Australian operations and you will hear a common theme. They will not talk."
"While they generated A$6 billion in revenue, they apparently racked up from what I understand A$5.5 billion in costs. How? They do not manufacture here. They have no factories here."
But it looks like Apple will be forced to finally talk and explain both the high pricing and why it only paid $40M USD in taxes in the lucrative market.
faced similar complaints of tax evasion
in the United Kingdom, another of its top markets.)
This article is over a month old, voting and posting comments is disabled
RE: There are still costs.
2/11/2013 6:28:28 PM
Thing is the patent case against Samsung forced Apple to reveal its margins, which are around 50%.
It's the same profit-shifting Apple, Google, Starbucks etc. have been doing for years. Rather than bleating about it governments need to make it illegal.
RE: There are still costs.
2/12/2013 1:51:14 PM
Yep. Legal costs add up too. Steve Jobs famously said it himself that he would spend every cent of Apple's 100 billion USD to 'right this wrong' in his thermonuclear declaration.
It looks like the billions are adding up. Fighting legal battles abroad is substantially more expensive compared to the United States.
"We are going to continue to work with them to make sure they understand the reality of the Internet. A lot of these people don't have Ph.Ds, and they don't have a degree in computer science." -- RIM co-CEO Michael Lazaridis
IPad Market Share Falls Slightly, Microsoft Surface Sales Weak
January 31, 2013, 1:03 PM
Apple Earnings Worry Investors; Stock Falls 10 Percent
January 23, 2013, 7:06 PM
Inadvertently Leaked Earnings Report Leads to Shaky Trading Day for Google
October 18, 2012, 7:08 PM
Microsoft Loses $6.2B USD on Internet Advertising Bet
July 3, 2012, 6:54 PM
Apple Makes $9.5B USD in Britain, Pays Only 0.16% in Taxes; Google Also Targeted
April 10, 2012, 5:46 PM
Report: DISH CEO Makes Aggressive $2B USD Bid for LightSquared's Spectrum
May 20, 2013, 10:25 PM
Apple Releases Tim Cook's Testimony on Corporate Tax Laws
May 20, 2013, 7:40 PM
Apple's Tim Cook to Talk Profit Shifting, Taxes at U.S. Senate Hearing
May 20, 2013, 1:44 PM
HTC to Double Production Capacity for "One" Flagship Smartphone This Month
May 20, 2013, 10:10 AM
LG Showcases 5" Flexible OLED Technology at SID 2013
May 20, 2013, 8:18 AM
Air Force Expects to Save Over $50 Million in 10 Years by Using iPads
May 17, 2013, 12:26 PM
Most Popular Articles
High School Student Creates Storage Device that Can Charge in 20 Seconds
May 20, 2013, 6:51 AM
Google Announces "Pure" Galaxy Nexus S4 for $649, Android Updates
May 15, 2013, 1:42 PM
Seawater Cooling Saves Data Center Big Bucks, Energy, Despite Jellyfish Issues
May 17, 2013, 3:23 PM
U.S. Federal Traffic Board Wants to Make Drunk Driving Threshold Far Harsher
May 15, 2013, 11:32 AM
Newegg Legal Chief: "We don't Feed the Trolls"; Defeats Bell Lab Shell Comp.
May 17, 2013, 10:11 AM
Latest Blog Posts
Quick Note: Sony "Teases" PS4 Ahead of Xbox Reveal in New Video
May 20, 2013, 12:33 PM
Nokia Introduces Instagram-Like App of Its Own to Help Lumia Sales
May 20, 2013, 7:10 AM
Parents of Pre-Teen Drivers Commonly Practice Distracted Driving Says Study
May 9, 2013, 7:16 AM
Apple's iOS 7 Running Into Internal Delays Due to Massive Overhaul
May 1, 2013, 4:26 PM
Elon Musk Willing to Spend More Money on Widening of 405 Freeway
Apr 26, 2013, 7:28 PM
More Blog Posts
Copyright 2013 DailyTech LLC. -
Terms, Conditions & Privacy Information