Morgan Stanley analyst Scott Devitt has a rough estimate of how much Google pays Apple to be the default search engine on iDevices. When all is said and done, Apple walks away with a cool billion in pure profit, according to Devitt.
That’s right. You can check out the math here if you’re interested, but the gist of it is that Google (likely) pays a fixed sum per iDevice on an annual basis which, this year, comes just shy of $1 billion (€747 million), Devitt says.
He doesn’t believe Google pays Apple on advertising numbers, but rather a fixed sum per each device.
Investors are reportedly worried that this traffic acquisition cost, or TAC, is going to balloon over time. Devitt says they're crazy (in an elegant manner).
And finally, Business Insider points out that, “for Apple, $1 billion in pure profit is nice, but it's not much considering the company made $13 billion in profits last quarter.”
How is one billion not much, even next to 13 billion?