Why Google is willing to pay Apple $12 billion per year

“Apple receives a lot of money from Google just for making it the default search engine in Safari on iOS and macOS devices. Last year, the Alphabet company reportedly paid Apple $3 billion for the preferential placement,” Adam Levy reports for The Motley Fool. “That number may have tripled this year, according to analyst Rod Hall as reported by Business Insider. Hall says that number will rise to $12 billion next year.”
“Apple has listed licensing revenue from deals like the one it has with Google as the first source driving growth of Apple’s services revenue. That revelation in an SEC filing was a change from last year, when it listed the App Store first. That change suggests licensing revenue is growing extremely quickly for Apple,” Levy reports. “Why is Google willing to pay billions of dollars to Apple to ensure its place in Safari?”
“Apple has a 44% market share of U.S. smartphones and about a 12% share of PCs. But Apple users outpunch their weight when it comes to how much they use Google and click on search ads. Of all Google search ad clicks in the third quarter, 49% came from iOS and macOS devices, according to data from Merkle,” Levy reports. “Apple users represent historically higher value than Android users. Spending in the App Store was nearly that of Google Play spending worldwide in the first half of 2018, according to data from Sensor Tower. That’s despite Android’s massive install base compared to iOS. Apple’s premium product attracts consumers with money to spend.”
“So, not only do Apple users produce about half of Google’s ad clicks in the U.S., those clicks are more valuable to advertisers than clicks on less-expensive Android devices,” Levy reports. “That means advertisers are willing to pay more per click.”
Read more in the full article here.
MacDailyNews Take: Yup. As we explained along ago:
Android is pushed to users who are, in general:
a) confused about why they should be choosing an iPhone over an inferior knockoff and therefore might be less prone to understand/explore their devices’ capabilities or trust their devices with credit card info for shopping; and/or
b) enticed with “Buy One Get One Free,” “Buy One, Get Two or More Free,” or similar ($100 Gift Cards with Purchase) offers.
Neither type of customer is the cream of the crop when it comes to successful engagement or coveted demographics; closer to the bottom of the barrel than the top, in fact. Android can be widespread and still demographically inferior precisely because of the way in which and to whom Android devices are marketed. Unending BOGO promos attract a seemingly unending stream of cheapskate freetards just as inane, pointless TV commercials about robots or blasting holes in concrete walls attract meatheads and dullards, not exactly the best demographics unless you’re peddling muscle building powders or grease monkey overalls.
Google made a crucial mistake: They gave away Android to “partners” who pushed and continue to push the product into the hands of the exact opposite type of user that Google needs for Android to truly thrive. Hence, Android is a backwater of second-rate, or worse, app versions that are only downloaded when free or ad-supported – but the Android user is notoriously cheap, so the ads don’t sell for much because they don’t work very well. You’d have guessed that Google would have understood this, but you’d have guessed wrong.
Google built a platform that depends heavily on advertising support, but sold it to the very type of customer who’s the least likely to patronize ads.
iOS users are the ones who buy apps, so developers focus on iOS users. iOS users buy products, so accessory makers focus on iOS users. iOS users have money and the proven will to spend it, so vehicle makers focus on iOS users. Etcetera. Android can have the Hee Haw demographic. Apple doesn’t want it or need it; it’s far more trouble than it’s worth. – MacDailyNews, November 26, 2012
—
“All men are created equal.”
Well, not when it comes to users of smartphones and tablets…
The bottom line: Those who settle for Android devices are not equal to iOS users. The fact is that iOS users are worth significantly more than Android settlers to developers, advertisers, third-party accessory makers (speakers, cases, chargers, cables, etc.), vehicle makers, musicians, TV show producers, movie producers, book authors, carriers, retailers, podcasters… The list goes on and on.
The quality of the customer matters. A lot.
Facile “analyses” that look only at market (unit) share, equating one Android settler to one iOS user, make a fatal error by incorrectly equating users of each platform one-to-one.
When it comes to mobile operating systems, all users are simply not equal. – SteveJack, MacDailyNews, November 15, 2014
SEE ALSO:
Analyst estimates Google will pay Apple $9 billion this year to remain default search – September 28, 2018
Apple thrives by going upscale: It is Economics 101 – September 26, 2018
Apple’s App Store is destroying Google Play in services and subscriptions – April 18, 2018
Apple takes U.S. market share from Android, dominates with 8 iPhones out of 10 best-selling smartphones – July 26, 2018
Apple’s iPhone X made 5 times the profit of 600 Android OEMs combined – April 18, 2018
Apple’s iPhone captured 86% of global handset profits in Q417; iPhone X alone took 35% of global handset profits – April 17, 2018
Apple App Store users spent nearly double that of Google Play users in Q417 – January 26, 2018
Apple’s iOS continues to attract content apps first, despite smaller unit share – October 30, 2017
Bernstein: Google to pay Apple $3 billion this year to remain the default search engine on iPhones and iPads – August 14, 2017
Higher income U.S. states use Apple iPhones; lower income states use Samsung Galaxy phones – September 27, 2016
iOS users are worth 10X more than those who settle for Android – July 27, 2016
Apple’s App Store revenue nearly double that of Google’s Android – April 20, 2016
Poor man’s iPhone: Android on the decline – February 26, 2015
Study: iPhone users are smarter and richer than those who settle for Android phones – January 22, 2015
Why Android users can’t have the nicest things – January 5, 2015
iPhone users earn significantly more than those who settle for Android phones – October 8, 2014
Yet more proof that Android is for poor people – June 27, 2014
More proof that Android is for poor people – May 13, 2014
Android users poorer, shorter, unhealthier, less educated, far less charitable than Apple iPhone users – November 13, 2013
IDC data shows two thirds of Android’s 81% smartphone share are cheap junk phones – November 13, 2013
CIRP: Apple iPhone users are younger, richer, and better educated than those who settle for Samsung knockoff phones – August 19, 2013
Newsflash: Apple sells premium products at premium prices to premium customers – October 23, 2012