Apple made $1 billion off Google last year by having it as the default search engine in Safari, says Macquarie analyst Ben Schachter in a note this morning.
Schachter wrote his note in response to the fact that Apple seems to be shifting away from Google Maps.
Moving away from Google Maps isn't that big a deal for Google. But what if Apple moved away from Google for search? Would that hurt Google? The answer appears to be no, at least in the short term.
Schachter believes Google searches on Apple devices resulted in $1.3 billion in gross revenue. He believes Google has a 75% traffic acquisition cost associated with that revenue. As a result, Google only gets $335 million in net revenue from searches on iOS and Safari.
If Apple were to abandon Google, the impact to Google would be minor. The impact to Apple might actually be worse, since it would have to rely on search engines that are arguably inferior to Google.
In the long run, though, it could hurt Google since the iPad appears to be taking over the world. If the iPad overtakes the PC in the next 5 years and it becomes the number one way people are searching, then Google will be in trouble.
Here's the breakdown from Schachter on how he got to his number:
Deeper look at the financial impact - We know that Apple TAC is accounted for in the Google.com TAC line item reported each quarter by Google. For 2011, Google reported ~$1.5bn in total Google.com TAC. For modelling purposes, we assume that Apple represented ~66% of this TAC (though we acknowledge that this could be high), or $1bn. At a 75% TAC rate, this means that Google generated ~$1.3bn in gross search revenue through default search placement on Apple devices. In other words, this $1.3bn of search revenue ($335m net search revenue) in 2011 is at risk if Apple moves away from Google. $335m represented ~1% of net Google.com search revenue. Notably, mobile/Apple revenue is among its fastest growing revenue drivers.
The New iPhoto App for iOS Doesn't Use Google Maps
The process of Geotagging our photographs has now become a very common drill for people taking pictures to share with other people. Geotagging lets us see where and when a photograph was taken. iPhoto for the Mac supports Geotagging and allows us to share that personal information with the people we send our photos to. The location of where the photograph was taken will then be shown on a Google Map.
Today, Apple announced, demonstrated, and released iPhoto for iOS into the App Store – compatible with the iPad, iPhone, and iPod touch running iOS 5.1 (also released today). iPhoto for iOS will allow us to Geotag and view the Geotagging of our photographs that we take on the go, however it doesn’t appear to be using Google Maps to show us information about our photographs anymore.
We are aware that a while ago Apple purchased two major mapping companies – C3 Technologies and Placebase. These companies were supposed to have proven useful to Apple as they attempt to dominate the computing world without relying on competitors to make the iOS device lineup great. The absence of Google Maps, which still powers the Maps application for now, in the iOS iPhoto application shows us that Apple has not been slacking on their plans to create their own interfaces.
The maps used in the screenshots above are obviously not of Google Maps and are taken from the iOS iPhoto application. Ironically, iPhoto for Mac OS X still uses Google Maps to show us the information about our Geotagged photographs. It is not yet known what Apple plans to do with this mapping technology, whether they plan to bring it to the Mac or integrate it into the Maps application. If Apple does bring these mapping technologies to iOS and OS X then Google will have more competition to worry about as Apple brings their finalizing touch to the digital mapping world as they have with many other services such as voice dictation.
