Apple and Google have a...complex, but mutually beneficial relationship. In Apple's case, it's a relationship that could earn the company up to US$1 billion from a single agreement this year alone. Analyst Scott Devitt at Morgan Stanley follows Google closely and put out a new report titled "The Next Google Is Google" on Friday. The report highlights a bright future for Google, but it also surmises that the company will pay Apple almost a billion dollars this year for its position as the default search engine on iOS devices.
As Business Insider notes, analysts previously believed that Google and Apple had a revenue-sharing agreement with Apple collecting 75 cents of every dollar Google made on search advertising on iOS devices. But Devitt thinks the revenue sharing agreement is something Apple wouldn't do. He believes the companies instead have a "fee per device" agreement with Google giving Apple money upfront for every iOS device sold.
Devitt believes Apple would seek such an agreement because it hedges its bet against people searching on google.com on mobile Safari's web browser, in which case Apple would not earn a anything on those ads on a revenue-sharing agreement. A "fee per device" agreement would also be easier for accounting purposes.
And while $1 billion (and rising at around 5 percent each year) sounds like a high cost to Google, Devitt points out that that is small change to pay for a virtual monopoly on mobile search. As the default search engine on iOS devices -- when that is combined with Android device sales -- Google controls 95 percent of default mobile search.