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Google's US$1 billion to Apple for iOS search rights was a steal

Gregg Keizer | Jan. 25, 2016
Oracle attorney spilled 2014 payment in court last week; Google and Apple want to close the barn door after the horse bolted.

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Credit: wikimedia

Google paid Apple $1 billion in 2014 for the right to be the default search provider on iOS devices, including iPhones and iPads, according to a report by Bloomberg Thursday.

"Is that a steal? Absolutely," said Will Stofega, an analyst with IDC, in an interview last Friday. "Given as much as Apple has captured the high end of smartphones, [iOS users] are the people with more money." And so they're of great interest to any search provider whose revenue depends on ads, like Google.

The news service quoted a transcript of a Jan. 14 hearing in a four-year-old lawsuit in which Oracle accused Google of copyright infringement when it allegedly used Java to build Android.

During the hearing last week, an Oracle attorney spilled the beans about Google's payment to Apple. Although the transcript was available until mid-afternoon Thursday, Bloomberg said, it has since been scrubbed from the federal court system's document database.

The $1 billion was payment for using Google's search engine as the default in iOS, Apple's mobile operating system, the Oracle attorney claimed. She also told the court that "at one point in time the revenue share was 34%." It wasn't clear, Bloomberg noted, whether that share was the amount retained by Google or paid to Apple.

Both Google and Apple filed motions Wednesday asking the court to reconsider an earlier decision to not seal the transcript.

"This information is considered confidential and commercially sensitive," wrote Leslie Fithian, the senior director of the software products legal team, in Apple's Jan. 20 declaration of support for Google's motion to seal. "Apple does not disclose this information to the public. Moreover, Apple restricts knowledge of this information to only a subset of Apple employees on a need-to-know basis.

"If this information is disclosed ... third parties seeking to negotiate terms of a business relationship with Apple might leverage this information against Apple, thereby forcing Apple into an uneven bargaining position in future negotiations," Fithian added.

Apparently, the Google and Apple briefs were convincing, at least in the short term. Computerworld confirmed that the Jan. 14 hearing transcript has been removed from the court case's document list.

The billion dollars was likely only a portion of what Google paid Apple two years ago, said Jan Dawson, principal analyst at Jackdaw Research. "What exactly does that [$1 billion] represent? Is that an incentive fee or also the payment for additional royalties?" asked Dawson in an interview.

For Dawson, the $1 billion was the entry fee, but royalties paid to Apple on Google's search revenue -- perhaps the 34% mentioned by the Oracle lawyer last week -- added significant amounts to the total annual outlay.

 

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