In a note distributed to clients today, Goldman Sachs analyst Rod Hall has estimated that Google could be paying over $9 billion to Apple to remain the default search engine on iPhones and iPads in 2018, BusinessInsider is reporting. The analyst added that this amount could increase to $12 billion next year.
“We believe this revenue is charged ratably based on the number of searches that users on Apple’s platform originate from Siri or within the Safari browser,” Hall wrote. “We believe Apple is one of the biggest channels of traffic acquisition for Google,” he continued.
Goldman’s report models Google’s payments to Apple as a fraction of the money it makes on iOS through paid searches and worked backward from the iOS market share, added a premium and used a rate based on previous Google disclosures.
Last year, Bernstein analyst Toni Sacconaghi estimated that Google was paying Apple $3 billion per year, whereas a court filing revealed that Google had paid Apple $1 billion in 2014. However, neither Google nor Apple has ever shared the exact terms of their agreement.
When Apple talks about Services, it tends to focus on the fee it collects from software sold on the App Store or the money the company makes through subscriptions like Apple Music and iCloud.
According to the Goldman model, however, Google’s fee to remain the default iOS search engine accounts for 24% of the services business, and AppleCare accounts for 17% of the $31.3 billion in services revenue that Apple collected last year.
Goldman Sachs currently has a 12-month price target of $240 on AAPL.