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Court Records Reveal $1 Billion Google Search Agreement With Apple: Good Deal Or Bad Deal?

23 January 2016, 7:42 am EST By Anu Passary Tech Times
Google apparently paid Apple $1 billion to have its search service incorporated on iPhones. Take a look if the revenue-sharing agreement between the two companies is lucrative for Google or a bad deal.  ( Justin Sullivan | Getty Images )

A court record has lifted the veil on a clandestine much-speculated agreement between Apple and Google. The documents shed light on the fact that Google paid $1 billion to the Cupertino-based company in 2014 for making the Google Search bar a default option in its iPhones.

Rumors pertaining to how much money Google paid Apple to incorporate Google Search in iOS devices have been rife. However, Google has never been forthcoming about the amount.

On Thursday, as we reported, Bloomberg has revealed that it had seen a court document's transcript which confirmed that Apple was benefiting from a hefty fee from Google for keeping the search bar on its iPhones.

According to the agreement between the two, Apple gets a substantial percentage of the revenue the search engine company generates through the former's devices. The transcript reflected the revenue share at 34 percent, but it was unclear if this percentage was received by Apple or retained by Google.

While the transcript has been removed from electronic court records pertaining to the Oracle vs. Google case, the question which piques the mind is if Google is not only shelling out $1 billion but also has a revenue-sharing agreement with Apple — is it a good deal or a bad one?

If Google is receiving only 34 percent of the revenue generated, it has obviously got the wrong end of the stick at first glance. However, if one considers the enormity of the profits and revenues generated through this model, is Google really the loser? In such a scenario, even receiving 34 percent of the pie is a major sum and works out to be a good deal for Google.

As analysts point out, the arrangement makes business sense for both Apple and Google, especially for the latter as it gets to leverage the popularity of a major platform like iPhone.

Such an arrangement makes sense for both Google and Apple and is not terribly unusual he said.

"And since Apple doesn't have its own search engine, at least so far, it seems reasonable that the company derives some revenue from leasing that space," said Ezra Gottheil, analyst with Technology Business Research Inc.

Charles King, the principal analyst with Pund-IT, also feels the deal is favorable for Google.

"Given the overall popularity of Google search, iPhone owners who prefer it certainly aren't being harmed," feels King adding that the $1 billion payment and the agreement on revenue-sharing makes sense for Google as its "revenues revolve around search-related advertising that's increasingly driven by mobile technologies."

Moreover, the iPhone segment would be an area Google would be keen on tapping. Therefore it comes as no surprise that Google has been agreeable to the terms laid out by Apple. If Google is the one giving Apple 34 percent of the revenue — rather than receiving it — then the deal is even a better one!

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