Apple and Google’s squalid symbiosis revealed

An Apple analyst reckons Google will pay Apple $3 billion to keep its position as the default search engine on its devices this year.

A research note written by respected Apple analyst Toni Sacconaghi of Sanford Bernstein was seen by CNBC. In it he noted that Google paid Apple $1 billion in 2014 and reckons that will have ramped up to $3 billion this year. He also opined that this may well have accounted for a quarter of all Apple’s operating profit growth over the last couple of years.

On the flip side Sacconaghi reckons Apple devices accounted for around half of Google’s mobile search revenue, which is surprising considering the much greater global installed base of Android devices. In that case you could argue that even forking out $3 billion a year to its biggest competitor is a no-brainer for Google, even if only to reduce the risk of any other search provider getting some competitive momentum.

It says a lot about the effective mobile device duopoly that these two companies have such a cosy relationship. It implies that they have reached a competitive equilibrium in which Apple owns the premium end and Google is welcome to the rest. If they were really competitive with each other then surely they wouldn’t be so pragmatic.

Apple’s business model is focused on high margin for its products and services while Google is all about advertising revenue and thus audience. So it stands to reason that Google would be willing to pay for audience and Apple would accept the money. What this says about the competitiveness of the mobile sector, however, is another matter.