Why is Google willing to pay Apple $12 Billion per year?
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“Apple receives a lot of money from Google just for making it the default search engine in Safari on iOS and macOS devices. Last year, the Alphabet company reportedly paid Apple $3 billion for the preferential placement,” Adam Levy reports for The Motley Fool. “That number may have tripled this year, according to analyst Rod Hall as reported by Business Insider. Hall says that number will rise to $12 billion next year.”
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“Apple has listed licensing revenue from deals like the one it has with Google as the first source driving growth of Apple’s services revenue. That revelation in an SEC filing was a change from last year, when it listed the App Store first. That change suggests licensing revenue is growing extremely quickly for Apple,” Levy reports. “Why is Google willing to pay billions of dollars to Apple to ensure its place in Safari?”
“Apple has a 44% market share of U.S. smartphones and about a 12% share of PCs. But Apple users outpunch their weight when it comes to how much they use Google and click on search ads. Of all Google search ad clicks in the third quarter, 49% came from iOS and macOS devices, according to data from Merkle,” Levy reports. “Apple users represent historically higher value than Android users. Spending in the App Store was nearly that of Google Play spending worldwide in the first half of 2018, according to data from Sensor Tower. That’s despite Android’s massive install base compared to iOS. Apple’s premium product attracts consumers with money to spend.”
“So, not only do Apple users produce about half of Google’s ad clicks in the U.S., those clicks are more valuable to advertisers than clicks on less-expensive Android devices,” Levy reports. “That means advertisers are willing to pay more per click.”
Read more in the full article here.
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