Apple Inc. (AAPL): Can Internet Browsers Actually Make Money?

Many investors may not consider web browsers as a big revenue driver, and for good reason — companies give them away for free. But some tech companies can — and do — make money some from their free browsers. But as mobile has taken off, some of the old ways of doing things are being challenged by new competitors.

Apple Inc. (AAPL)

Browsing for profits
Chinese tech companies with mobile browsers — like UCWeb and Tencent — make some of their mobile profits through revenue-sharing deals e-commerce sites. UCWeb CEO YongFu Yu recently wrote in an AllThingsD article that Chinese mobile users find advertising “disruptive and invasive” and said that his company’s browser is more of a service platform for users rather than an entry point to the Internet. His conclusion was that U.S. companies should look to the Chinese model of monetizing mobile browsers.

UCWeb Browser. Source: UCWeb.

Though Yu seems positive about the Chinese approach to mobile browsers, U.S. companies do actually make money from their browsers as well, both in mobile and desktop.

Both Apple Inc. (NASDAQ:AAPL)’s Safari and Mozilla’s Firefox browsers earn search royalties from Google Inc (NASDAQ:GOOG). Google pays the companies to use its service as the primary search engine in their browsers — and in some cases pays them quite well. It’s estimated that Google made $1.3 billion from iOS searches last year, and paid $1 billion to Apple to remain the company’s default mobile search engine for iOS. Though its not clear whether this is through a revenue-sharing model or direct payouts, a Morgan Stanley analyst believes Google pays Apple about $3.20 per iOS device.

Others tech companies have worked out deals of their own. Yahoo! Inc. (NASDAQ:YHOO) and Microsoft Corporation (NASDAQ:MSFT) are currently in a 10-year deal for the popular content site to use Microsoft’s Bing search results. Right now, Microsoft receives 12% of the revenue Yahoo! makes from ads on the search results page on its site. But the Wall Street Journal reported last month that since Marissa Mayer took over at Yahoo, the company is looking to end its deal with Microsoft and wants to transition to Google Inc (NASDAQ:GOOG)’s search – a move that isn’t likely to take place until at least 2015.

An uncertain future
Though some Chinese tech companies are trying to change the way browsers make money, companies that are used to the search royalties structure may find it hard to change to another model. While UCWeb may be making money from revenue sharing with websites, it’s likely the company is still heavily involved with advertising as it was just a year ago. Midway through 2012, UCWeb was generating 75% of its revenue from advertising in the mobile browser.

Whether its revenue sharing, search royalties, advertising, or something else, companies are still trying to figure out the best way to make money with their mobile offerings. For browser companies like Apple Inc. (NASDAQ:AAPL) and Mozilla, it seems the search royalties may be the easiest and the most lucrative right now.

The article Can Internet Browsers Actually Make Money? originally appeared on Fool.com and is written by Chris Neiger.

Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Google. It also owns shares of Microsoft.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!