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Prediction: Apple Will Not Renew Google As Safari Default Search Engine
Both parties now have incentives to let go of the deal.
I’m going to predict that Apple and Google will not renew their Safari default search deal in the U.S. Both parties now have reasons not to renew.
We don’t know precisely when their deal is up, but we know it’s this year. Previously, The Information reported that Microsoft and Yahoo are independently competing for the Safari business and that Apple’s Eddie Cue is supervising the bake-off. Sources told The Information that Apple’s decision will be based “on the quality of the product as much as the potential money made from search ads.”
In 2011, Macquarie Capital estimated that Google earned $1.3 billion in search-related revenue from its default position on Safari. Of that, Google was supposed to have paid Apple over a billion dollars. In 2013, Morgan Stanley also estimated that Google paid Apple over $1 billion annually for the privilege of being the Safari default.
If these figures were correct at the time, they’re likely out-of-date today. If anything, there’s more mobile search volume and more revenue than in 2011 or 2013. Google’s net profit from Safari is substantially less than the $1 billion it probably pays Apple. Google is therefore probably willing to bet that its net will go up if it walks away from the deal.
Which do you use to search the web on your iPhone?
Google probably assumes that if it doesn’t renew Safari it can win “switchback” users or gain direct adoption for its Google search app in mobile. Google’s willingness to give up Firefox to Yahoo in the U.S. suggests that the company may not fight for Safari. For its part, Apple probably feels that it can switch to Bing (probably) or Yahoo and not alienate users, who could always return to Google if desired.
There’s also the possibility of a “split the baby” arrangement where Apple uses Bing or Yahoo in the U.S. and Google outside the U.S., as Firefox did. Indeed, I think that’s a very likely scenario.
In 2012 (see above), I asked 500 U.S. iPhone users through Google Consumer Surveys how they searched on their iPhones. Most said they went directly to Google (64 percent). However, 26 percent used the Safari toolbar (probably Google). According to StatCounter, Google has an 84 percent mobile search market share in the U.S.
RKG’s Mark Ballard has estimated that ”roughly half of total paid search traffic [is] at stake in 2015 if the Safari search default is really up for grabs across devices.” According to StatCounter, Safari drives just under 26 percent of U.S. internet traffic (mobile + desktop). That’s second only to Chrome and more than IE.
Given pressure to grow revenues and profits, Google likely wants to get out from under that $1+ billion payment to Apple. And I suspect Apple doesn’t believe it’s necessary to have Google as its default engine any longer, as the Siri and Spotlight Bing deals suggest.
If my logic is correct, both parties are willing to roll the dice a bit. If so, Google is probably the one taking the bigger gamble.