Analyst: Google Pays Apple $1B for Default iOS Search

Apple makes US$1 billion a year from Google to be the default Internet search engine on the iPhone, iPad and iPod touch. That estimate comes from Morgan Stanley analyst Scott Devitt who thinks Google pays a flat annual fee for the privilege instead of sharing revenue with Apple.

Google gives Apple $1B a year to control iOS Internet searchGoogle gives Apple $1B a year to control iOS Internet search

Mr. Devitt's estimate stands in contrast to other analysts who think Google has been paying Apple up to $0.75 for every $1 in advertising it collects from search results, according to Business Insider. His reasoning is that revenue sharing is more complex than Apple would like and that the company gets clear upfront payments instead of getting a piece of the action after the fact. It also means Apple gets its money from Google even if iOS users change their default Internet search engine to Yahoo! or Bing.

Assuming Google really is paying Apple $1 billion a year, that's actually a small price considering the popularity of the iPhone and iPad, plus the Internet search giant already controls about 95 percent of the online search market, according to Mr. Devitt.

He expects Google's payment to Apple will increase by about 5 percent a year, and for Apple that's pure profit. Apple and Google haven't, however, disclosed the details of their deal, so the idea that Google is paying a flat fee instead of profit sharing is based on Mr, Devitt's estimates and understanding of Apple's business.

Regardless of how Apple is getting money from Google, it's a safe bet money is changing hands and that cash is going straight to Apple's bottom line,

Apple is currently trading at $482.88, up 7.90 (1.66%).