Apple Faces 15% Earnings Drop if Court Blocks Google Deal
Synopsis
Apple stands to lose a huge portion of its revenue due to a court case regarding Google. Currently, Google pays Apple around $15–$20 billion annually to be the default search engine on iPhones and…
Apple stands to lose a huge portion of its revenue due to a court case regarding Google. Currently, Google pays Apple around $15–$20 billion annually to be the default search engine on iPhones and iPads, as well as the Safari browser. But the agreement may be halted.
Google has been taken to court by the U.S. government. They claim Google isn't being fair by paying in order to remain the leading search engine. The final ruling is to be made by a judge named Amit Mehta. If the judge forbids this deal, Apple might lose as much as $12.5 billion alone from the U.S., according to JPMorgan. This could reduce Apple's profits by 10–15%.
The Main Problem
The largest problem for Apple is whether the judge rules that Google cannot pay any firm to be the default search engine any longer. That would be the biggest hit for Apple because roughly 30% of Google's searches occur on Apple devices.
If Apple can no longer make money from Google, it will need to seek alternative means to do so. It could attempt using different search engines such as Bing or DuckDuckGo, but those do not generate as much money, and they haven't been paying Apple that much in the past.
There Might Be a Middle Option
Maybe things are not so bad. The court might let Google continue paying Apple, but only if the users themselves select Google, not if it is the default option.
If it does, everyone will notice an option when they're configuring their phones, such as "Which search engine would you like to use?" If users still predominantly choose Google, Apple will lose only a fraction of its money. But the status quo, with Google being set as the default automatically, would be over.
FAQs
1. Why might Apple lose money?
Apple receives money every year from Google to be the primary search engine on Apple products. Apple loses that money if the court puts an end to this.
2. How much money might Apple lose?
Up to $12.5 billion annually, which could reduce their profits by 10 to 15%.
3. What is the Apple case about?
The U.S. government alleges that Google is violating the law by paying to remain the leading search engine, keeping fair competition out.
4. Can Apple use a different search engine?
Yes, but other search engines, such as Bing or DuckDuckGo, aren't paid as much and aren't used as much.
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At Inspirepreneurs Magazine, covering entrepreneurship, business failures, and the human stories behind the world's most ambitious founders. She writes at the intersection of strategy and storytelling.
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