It has been revealed that Apple Inc. (NASDAQ:AAPL) received up to $1 billion from Google as payment for Apple to retain Google as the default search engine on its devices. Details of this transaction were revealed during a case in which another company, Oracle, is suing Google for allegedly using part of its Java software in the development of its Android platforms without paying.
In a sensational exchange of lawyers of Google and Oracle in the case, details of the deal between Apple and Google have emerged. The attorney for Oracle revealed how Google got into a partnership with Apple with regard to the use of the Google search engine in Apple devices. The attorney claimed that Google and Apple agreed to share proceeds of the profits that Google made from having its search engine made the default search engine in Apple devices. The profit sharing figure that was mentioned was 34% although it was clarified what the 34% profit sharing formula actually meant.
Back in 2014, it was widely believed that Yahoo was working its head off to convince Apple to make its search engine the default search engine on Apple devices. Apparently, Yahoo, with its dwindling financial fortunes, was convinced that getting the Apple deal would work wonders.
Details of how the fight went are scanty but what is clear is that Yahoo never succeeded in convincing Apple to snub Google and take it on as the default search engine on its devices. Some people believe that Yahoo did not manage to cough up enough money to convince Apple to drop Google in its favor. Others believe that Apple decided to stick to Google for a single reason: the quality of service that the Google search engine has been known to provide.
But what is interesting from the details of the suit is how Apple actually benefits from the business model that Google uses. Apple has been vocal in criticizing the advertisement-based model that Google is using. However, it appears that Apple itself is gaining a lot of money from the Google model.
This may explain why during the suit, both Apple and Google have been working hard to convince the presiding judge to block the announcement of the ratio in which the two companies share their profits from the deal. Google attorneys have been arguing persistently that disclosing the amount of money that the company pays to Apple would make it difficult for the company to enter into similar deals with other companies in the future.