Bernstein assesses the worth of the agreement and cautions that such agreements, including similar ones, could cease to exist if the Department of Justice (DoJ) prevails in the antitrust case .Google pays Apple an annual sum estimated at $18 billion to $20 billion to maintain its position as the predominant search engine on the iPhone. A financial analyst has expressed concerns that this arrangement, along with similar ones, may now be in jeopardy.
Bernstein, an advisory firm that provides guidance to institutional investors, recently released a report delving into the potential consequences for Apple in light of the ongoing civil antitrust lawsuit filed by the Department of Justice (DoJ) against Google in Washington. The suit accuses Google of monopolizing the search and search advertising markets.
One focal point of the case, which commenced last month, is the Information Services Agreement (ISA) between Apple and Google. This agreement is being cited as a prime example of anticompetitive conduct during the trial.
Bernstein’s report states, “We believe there is a possibility that federal courts may rule against Google and compel the termination of its search deal with Apple. We estimate that the ISA is valued at $18 billion to $20 billion in annual payments from Google to Apple, constituting 14-16 percent of Apple’s annual operating profits.”
Experts concur that there’s a real possibility Google could lose the case and, consequently, its highly profitable arrangement with Apple, along with similar deals with companies like Samsung and Mozilla, are also likely to be in jeopardy. the antitrust case
Apple provides limited information about the specific segments within its Services division, but Google does report the money it disburses to Apple as part of its traffic acquisition costs (TAC) for distribution partners. Bernstein estimates that Google allocates 22 percent of its total advertising revenue to TAC and suggests that Apple likely receives approximately 40 percent of this figure.
During the trial, the Department of Justice (DoJ) itself indicated that it believes Apple garners around $10 billion from the Information Services Agreement (ISA) with Google. However, these numbers are derived from external sources rather than being disclosed by Apple or Google, as detailed in the Wall Street analyst’s report.