Google Search: Why Apple has a lot at stake in the Google vs US legal battle

Google is facing a lot of heat and is currently embroiled in a bitter legal dispute with the US Department of Justice. The tech giant has been accused of allegedly abusing its market dominance and it is an antitrust case. At the heart of the matter is the deal between Google and Apple, which allows Google Search to be the default search engine on iPhones. It was earlier reported that Google paid close to $15 billion annually to ensure Search is the default option. Now, according to a report by Apple Insider, a Bernstein financial report suggests that the deal is much more lucrative.
“We estimate that the ISA [Information Services Agreement] is worth $18B-20B in annual payments from Google to Apple,” says the report, “accounting for 14-16 percent of Apple’s annual operating profits.”

A blow to Apple’s annual revenues?

If Google does end up losing the case, then the US DOJ could very well force the two companies to quash the deal. It will be a blow to Apple’s revenues. However, the Bernstein report says Apple could still continue the deal outside of US or sign with another company.
“Importantly, Google is on trial, not Apple,” continues the report, “and Apple could (in theory) partner with another search engine to be the default (and/or retain the agreement with Google outside the US).”
Microsoft executives were also called as witnesses and suggested that Bing Search was a viable alternative if Apple didn’t have a deal with Google. Apple, on its part, said that it uses Google Search as the default engine because “it is the best” out there.
Being the default search engine on the iPhone is a big deal for Google. The search advertising revenues are one of the biggest mainstays for Google and hence it willingly pays Apple close to $20 billion a year. “We note that Apple controls access to its installed base, which generates $60B + in advertising revenues,” says the report. Accordingly, we believe that Apple would continue to command a commission (in the 25-30 percent range) for providing access to those search advertising revenues.”