Google (GOOG) could be paying Apple (AAPL) as much as $1 billion a year for the right to the be default search engine on iPhones, iPads and the iPod touch. Scott Devitt of Morgan Stanley praised Google in a recent note to investors, Business Insider reported. The analyst said, “the next Google is Google,” noting that the company is continuing to prove itself in an ever-changing market. He believes that Google’s search business has more room to grow in expanding markets and subsidiaries such as YouTube could generate as much as $20 billion by 2020.
Devitt estimated within the note that Google could be paying Apple up to $1 billion just to be the default search engine in iOS, and that figure is expected to increase over the next few years. Earlier reports claimed the two companies were involved in a revenue sharing deal, however the analyst doesn’t think this is the case because it would be too messy.
He thinks Apple would instead be far more likely to do a fee per device agreement for the benefits of upfront payments and easier accounting. The analyst believes this unlikely partnership has helped Google control an estimated 95% of the mobile search market.
As Jay Yarow of Business Insider wrote, “when you consider that Apple and Android are swallowing the mobile market, paying ~$1 billion a year for a monopoly on the most lucrative online business in the world is a no-brainer.”